International Trade Committee on Oct. 4th, 2011

[Ed Holder, Conservative, London West, ON]

I'm going to stop you there, if I can, because of the time.

Industry Canada defines SMEs as enterprises with under 500 employees. In fact, a small enterprise is defined as having under 100 employees. If it's a goods-producing enterprise, it's under 50 employees. If it's a service-producing.... And if it's a micro business, it's five employees or fewer.

I'm sure you'd respond, but do you even bother with micro business, or is that even a practical—

[Peter McGovern]

To address your number of 1.4 million, a lot of those firms would be factored out, because they could be anybody from a convenience store to a service that's provided locally. In reality that number is much smaller than the 1.4 million.

In terms of the micro businesses, yes, we would work with micro businesses.

[Ed Holder, Conservative, London West, ON]

But if you do, though, then you'd have to move the number back up to 1.4 million again, because the number does include those baby firms, the barber shops, my wife's flower shop, and so on—and that's fine.

[Peter McGovern]

Indeed.

But a micro firm could involve a couple of researchers who are working in the MaRS cluster in Toronto and who have come up with a new cancer patent and want to commercialize it.

[Ed Holder, Conservative, London West, ON]

I have another question for you.

My city of London, Ontario, is the tenth largest city in Canada. I share that with you because we have something like 14,000 businesses in London, Ontario. It's important to us. You put an office in Waterloo and one in Windsor, but in the heart of southwestern Ontario, which is London.... And Waterloo is an hour from Toronto, so your geography in locating them is a little curious....

But what I'm more concerned about is how you tie into EDC. Obviously EDC has a relationship with us. I'd like to understand better how EDC coordinates with what you do.

Thank you very much.

[Peter MacArthur]

EDC and DFAIT come under the same minister, the Minister of International Trade. We work very closely with it. We have advisory boards for each of the key sector industries, such as ICT, and EDC is on that advisory board. It involves a majority of private sector people. They meet every year, and we have board meetings coming up later this month. So, EDC and BDC and CCC sit on that board with the private sector and we look at global strategies. Every year we renew them. I think that's an important aspect of relations with them.

EDC has positions abroad. Some of them are in the embassies and consulates and some are not, but they work very closely with us wherever they are, because we share a common clientele. I would suggest that those relations with EDC and BDC have been improving over the years, especially due to the economic crisis and the increasing demand on us by the small companies that suddenly see the U.S. market as less viable and are looking more offshore than they were before.

As for EDC, it can ensure export finance, which is very important.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Shory.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thanks to the witnesses for being here this morning.

Some of my comments and questions will be a little repetitive of earlier ones. I represent Calgary Northeast, which has quite a few young entrepreneurs and energetic and enthusiastic business people. So I will be focusing my questions on small businesses and the opportunities your office gives them in assisting them overseas. Of course, the minister is right that trade is a kitchen table issue. We do realize that, which is why we have an ambitious free trade plan.

I understand that 98% of Canadian businesses are small businesses. My understanding is that to enter the export business, you have to have some larger business. My question is this: We have all of these small businesses, but do you have any specific programs or a structure, I would say, to target your help to small businesses?

[Peter MacArthur]

Mr. Chair, in answer to the question, we do have documentation, an SME exporters guide. It is available in hard copy and online, and is used by our staff in our regional offices to assist small businesses to look beyond their local market. That's one way of doing it.

We also rely increasingly on Internet portals. There is a very good www.Canada.gc.ca portal, which is not as well known as it should be. There are three sub-portals. One is called “Canadian Business”, and it's for business people. One is for Canadians, with everything including online tax help and that sort of thing. The third is international. It's aimed at foreigners looking to invest in or buy from Canada. I think the committee might be interested in looking at that website, particularly the business one, because it's oriented especially to small business people who are looking to go beyond what they normally do.

We also have economic studies showing that the small exporters that account for the majority of exporters now serve more than two markets on average, which is an increase of 50%, compared to an increase of 30% for the large exporters. So there's a positive trend developing.

[Devinder Shory, Conservative, Calgary Northeast, AB]

In order to pursue our ambitious free trade plan—and you were talking about the Asian markets, particularly China, India, and also Brazil—and realizing the importance of free trade, our Conservative government has signed nine agreements in the last six years, way more than any previous government.

And DFAIT is expanding our commercial footprint in those Asian countries, China, India—and Brazil, as you mentioned—to capitalize on the new opportunities for Canadian businesses. How does the TCS help the Canadian companies identify the qualified contacts? Also, because there could be some issues for Canadian companies doing business in that region, how does your office help them face difficulties when operating in some of those markets?

[Peter McGovern]

Mr. Chair, as I mentioned before, one of the main challenges we face and the major service that we try to provide SMEs is that if they commit to visiting a market, particularly a distant market like India or China, they have a real focus to their visit. One element of our trade sections around the world is that we maintain lists of trusted accountants, trusted lawyers, trusted business advisers who are known to the individuals in our embassies and trade sections, or who have proven track records, or whom we can reliably suggest to a client. We never mention just one but provide a list of three or four. They can choose, within a small list, someone who can work with them on legal matters—even lists of potential individuals who could act as agents for them in the territory.

So that's an element of the service we provide. It's a very important one because, clearly, if you're going to commit to a market, you have to be sure that you are dealing with individuals who have the reputation and the kinds of qualities you need to represent you fairly.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move on to Madame Péclet.

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

Thank you very much.

Thank you for your presentation. It was very interesting.

Are the services you offer also available through private consulting firms? Are there any private consulting firms that provide the same type of service?

It may be easier for some companies to access those services because they have more money. What percentage of small businesses use the services offered by the TSC and what percentage use those offered by private consulting firms?

[Peter McGovern]

Mr. Chair, to answer the question, there are consultants throughout Canada who offer SMEs services similar to ours. But the difference between our services and theirs is that ours are free of charge. We provide those services to whomever asks for them and is ready to export. Consultants always charge for those services.

We are something of a government KPMG. Our headquarters is here in Ottawa, and our national network consists of 18 service points across Canada. We also have an international network with 150 service points. So, we are a very large organization. Our network cannot be compared to anything in the private sector, and we provide Canadian exporters with free services.

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

My colleague was talking about products consisting mainly of water that are very expensive. If companies want to buy factories abroad to offset the high cost of exporting a product, do you help them set up elsewhere?

As for relationships, especially in terms of the new free trade agreements that will be ratified, do you contact companies to inform them of changes to customs tariffs? I know those tariffs are taken care of by the other country's broker.

[Peter McGovern]

Informing Canadian clients of any changes in the market is part of every free trade agreement.

Often, the clients themselves campaign for free trade agreements. For instance, a company that has had input in Colombia and is already competing with American companies will be at a disadvantage if the U.S. has a free trade agreement in place. The company would then contact MPs, ministers, provincial governments, to tell them that it is disadvantaged and that something should be done.

An important element of all free trade agreements is ensuring a level playing field. At the end of the day, the government is not doing the entrepreneurs’ work for them; the entrepreneurs are doing the work themselves. However, we do need to create an environment where international firms are on an equal footing.

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

Do your services also include helping companies set up in other countries?

[Peter McGovern]

At this time, part of our mandate is to help Canadian companies with their investments abroad.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I believe Mr. Hiebert is next.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

It's a pleasure to have both of your here to talk about the excellent work you do at the trade commissioner service.

I come to this from the perspective of having been on the inside and also of looking at it from the outside. Several decades ago I had the opportunity to work at an international trade centre in Canada and also at the Canadian embassy in Washington, D.C., and I've also seen this from the perspective of leading delegations to Commonwealth countries, through the Commonwealth Parliamentary Association, and invariably meeting with trade officers who inform us about the work they're doing locally. So I have to say that I'm very impressed with the work that you're doing, but I still have some questions.

First, Mr. McGovern, you talked about how you used to be with the Team Canada office. I still think there are a lot of Canadian businesses out there that hear about these things in the news and they wish they could be on one of those visits to a foreign country with the minister or the Prime Minister, but they don't know how to get involved. They don't know how to get on the list. They don't know what details are required, what the costs are.

Could you briefly elaborate on what a business would need to do to be involved in one of those?

[Peter McGovern]

Sure. At the present time, we're in the process of examining whether to reinstitute a concerted business mission approach. Our minister is talking to us about it, but if you look at the example of the provinces and the provincial premiers when they go with large trade missions, the work on identifying participants is something that generally gets done between a regional office, a provincial trade ministry, our people, and our embassy. So you take those four groups and draw up a list. One of the challenges in organizing these missions, particularly for SMEs, is that their program or agenda is pretty well booked in advance. So you really have to have a long lead time. The same applies for bigger firms, in the sense that the agendas of most presidents of large companies are booked six months in advance. So to be successful, you really need long lead times to ensure that you can get a full representation of these individuals on these missions.

Another element where we've seen particular success is when we focus on a small number of sectors. So rather than having a broad-brush approach where you have companies coming from all over, and maybe the only thing they have in common is the province they come from, our view is that you should focus it on maybe the ICT sector, or the extractive sector, and that's where you go. That way you can be more selective in the kinds of meetings you arrange. You probably have a slightly better chance of being successful.

But again, the approach and, certainly, the instructions that we're getting from our minister's office, is that this is an inclusive process. It's not organized for the benefit of a small group of firms; it's to get as many companies as we can involved in international trade, using trade missions as a lever. If a firm is interested in travelling and being present in a big or important market, say, India or China, and the minister is there, we would welcome their presence and would like to be able to further their interest in that market. That's the objective.

[Russ Hiebert, Conservative, South Surrey—White Rock—Cloverdale, BC]

Invariably with success, there are also some challenges that occur. Contract disputes, I would imagine, are fairly common.

Does your office get involved in assisting Canadian companies with contract disputes beyond pointing them to trusted lawyers or advisers in a particular country? Do we have a list of nations with whom Canada has signed dispute resolution agreements? Where these contract disputes occur, there are questions of jurisdiction and of which laws apply. International law is often complex. Do we get involved at that level?

[Peter McGovern]

It depends on the type of dispute. I can give you a good example of where the government plays a very important role. For instance, there's RIM's situation in India, where it appeared to us that RIM was being singled out unfairly regarding its market presence. There was a war being waged in the Indian media, promoting false stories about RIM. For instance, after the terrorist attack that took place in Mumbai, suddenly stories appeared saying that the people who perpetrated that horrible act were using BlackBerrys. That was not true at all; they were not using them. It was being done specifically to undermine RIM's presence in the Indian market.

As a consequence, we became involved by having meetings with senior Indian government officials to ensure they knew what the facts were. That's an instance where we did get involved in a situation. It was not about a contract per se, but about assisting a Canadian firm.

In terms of specific disputes, it would depend on what the issue is. If it concerns a contract between partners in a deal and the rule of law pertains in that jurisdiction, then it plays out in their courts. In terms of the actual trade agreements, I'm not sure what kinds of dispute resolution systems they have attached to the agreements. You would have to ask our trade negotiators. Clearly, in the context of the United States, there are situations that arise, but again, these are big when they pertain to a sector like softwood lumber.

I don't know if that adequately addresses the question you've asked.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Monsieur Ravignat.

[Mathieu Ravignat, NDP, Pontiac, QC]

I want to come back to the question I already asked.

In terms of the impact of your activities on Canadian communities, do you publish a report or any documentation to provide Canadians with information?