International Trade Committee on Nov. 29th, 2012

[C.J. Helie]

Yes. We submitted a formal brief to chief negotiator Don Stephenson a year ago.

[Ed Holder, Conservative, London West, ON]

Is there any indication as to how that might be received?

[C.J. Helie]

It was very well received. In fact, he followed up with a conference call with his whole team, and we were able to walk through all of our issues one by one.

[Ed Holder, Conservative, London West, ON]

So there won't be an issue of comprehension as it relates to our participation there.

In terms of the product you represent, notwithstanding all the compliments that colleagues around this table would offer it, what percentage of the product itself is based out of Canada in terms of manufacturing and in terms of the ancillary products? What is that percentage?

[Jan Westcott]

Our industry is fundamentally linked at the hip to the agriculture community. If I've heard it once, I've heard it a hundred times: a master distiller will say that if you don't have great grain, you're not going to have great whisky. Canada produces great grain.

In the east we take grain, corn, wheat, and a little bit of rye and transform that into a finished product. In the west, it's principally rye. One of our plants is the largest purchaser of rye grain in Canada. We are fundamentally connected, as I've said, to the farm community.

Virtually 100% of our inputs come from Canada. Some of our companies have a standing policy that they will only source their grain in Canada. As I said, we have plants in Alberta, Manitoba, Ontario, and Quebec. We essentially source from around the plants. Some of the members sitting here today are from ridings where we source grain.

In terms of our packaging, as we have moved to be international, some of it comes from outside, but the vast majority of our inputs come from Canada. We have to be at somewhere around 90% to 95% of the finished product being absolutely Canadian.

[Ed Holder, Conservative, London West, ON]

Thanks to all of you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Easter, you have seven minutes.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Chair.

Thank you, folks, for coming.

I asked a question earlier of the other panellists. I asked if they knew what the wage structure was. We didn't have that information, but since that time, some information has come to me in a February 2012 International Monetary Fund report: 41.6% of the Indian population earns less than a dollar per day. That's worrisome.

My line of questioning in the last couple of sessions has been along the lines of supporting trade and supporting it strongly, but how are we going to make sure that a trade agreement doesn't just benefit investors? Investors—companies—in this country are sitting on the lowest corporate tax rates in North America by far, yet they're sitting on somewhere around $500 billion that's not being invested, not creating productivity, not buying new technology, and not creating jobs in Canada, and that money can flow wherever around the world when the opportunity presents itself.

My concern is about how we make a trade agreement with India or anybody else and ensure that we strengthen and expand our own middle class in this country and expand economic opportunity within Canada. I agree that we need to see the Indian wage structure come up. We need to see investment in that country. We need to see jobs there as well, but do you have any ideas on how we can do both? We don't need trade agreements just to be able to say, “Well, we signed another one.” It needs to be of benefit to this country. Does anybody have any way to respond to that?

[Jan Westcott]

Well, I guess I'd put it this way....

I don't disagree with you. One of the facets of our business is that we have highly skilled people who make our products. As I've come to know in relation to the people who supply grain to us, for most of the farm community today that is successful and is supplying the high-quality material that we're certainly looking for, the food grade, those are good occupations. Barring unforeseen circumstances, they provide good incomes and good lifestyles for people. Similarly, our plants, for the most part, consist of people who are highly skilled.

Our challenge, particularly as Canada is a mature market, and our other major export markets.... We sell in about 200 countries around the world. We're not strangers to exporting. Seventy per cent of what we make is exported, so we live on exports. The challenge is to get access to those places that are growing. I think that if we can be successful and we can gain access, we know we can sell our whisky. Our whisky is sold all over the world. In some of the most demanding markets, as I said, we do exceptionally well with the leading brands.

I think that if we can get access, we can be successful. We have some challenges in terms of Canada versus some of our whisky competitors. I think we can deal with those. We have some attributes of our whisky to make it particularly attractive to emerging markets. Some people would tell you that other whiskies are more of an acquired taste; we have a whisky that's very drinkable, very mixable, and fits right in.

The other thing I would say, and that everybody needs to understand, is that while this market is phenomenally attractive to the Canadian industry, let's be honest: the Scotch whisky industry is working very hard to have similar access and to make progress in India. I was just in Washington meeting with my counterparts at DISCUS, our sister organization. Our friends in the United States have been to India three or four times, selling bourbon and educating people in India about bourbon. It's a different whisky than they're used to drinking there, but it's a great opportunity. We need to have the opportunity to go there, to be able to talk about Canadian whisky, and to sell Canadian whisky into that market.

[Wayne Easter, Liberal, Malpeque, PE]

As well, it would make it a lot easier if you weren't paying a 160% tariff. I understand that.

Mr. Bajaj, do you have anything you want to say?

[Naval Bajaj]

Just to add to that, when you are specifically looking at how that will help create jobs in Canada, we are looking at a marketplace of close to 1.2 billion people. We all know that India is growing. I understand your comment about a lot of people who make under one dollar, but if you see the growth that has happened—I know that you've asked this question previously—today the average wage of an Indian is close to $1,200 or $1,300, and if you go back 10 years, you'll see that the average wage has tripled.

As for what that shows, do we see any country in the world where the average wage has tripled in the last few years? We see the incomes increasing. That is increasing the spending capacity of every Indian. I am making this point because this spending capacity is resulting in overall growth, which means overall buying of what India is either manufacturing or buying from some other market.

Therefore, who is at a loss if we don't pitch...? This is the right time to increase our Canadian products in India. Let's take an example. I don't have to go far. The Indian market when it comes to whisky is bigger than the American market. If we get access to that and start having our product out there, how many more units might you have to open? How many expansions might you have to do today? I don't know the numbers to tell you, but that's the basic thing.

Another question I was listening to was about the win-win situation. As the president of the chamber, I always make the point that my first interest starts with Canada. Being a Canadian, my first interest is Canada. Though my origin is Indian and I was born in India, today, as a Canadian, my first interest is Canada. In this situation, the win-win is to Canada more than India.

If we look at the stats and we analyze them—and this is the reason that I said we need to take an incremental approach—we know that India is a tough market to enter, but what is happening today is that every country in the world is knocking on India's door. If we just keep ourselves conservative, or stop ourselves, or keep ourselves constrained, we will not be having that market share.

I was part of the Prime Minister's delegation. We had a very successful mission, but after that I was out there for a few days, and within that one week there were four more businesses—with prime ministers or presidents of some other country—visiting India. What does that show? Every day when you open a newspaper you see that some other country's representative and prime ministers and presidents of countries are going to India. Why? Everybody is knocking on the door of that market. I think that the more we delay this process, the more there will be loss to us rather than to India, because India has somebody there to supply them.

I moved to Canada close to nine years ago. I remember that at the time I came here, you didn't see any BMWs among the cars you saw in India. There were a few Mercedes there. I never saw an Audi. I never saw any of those cars. Today you go to the Indian market, and it is full of those cars, and they're outside every house.... It's the same thing as when the GM plant was put in Halol, which is close to Baroda, in Gujarat. How many cars do they sell? I don't have the stats, but if you compare how many cars are being made at the Ford plant, there are no numbers to compare.... It's a huge market.

I think we should understand that it is a market of 1.2 billion people. That is the biggest advantage we have. I think we should expedite this process.

I'm sorry for going on.

[The Chair, Conservative, Rob Merrifield]

No, no—we let you go off on a little tangent. It was fun to listen to it. It was very good.

[Jan Westcott]

Might I add just one thing? We sell—I won't get specific—on average about $400 million worth of whisky every year to 300 million Americans. How much do you think we could sell to 1.2 billion Indians?

[The Chair, Conservative, Rob Merrifield]

So you've done the math.

Just as a follow-up question on that, the Americans would pay the 160% as well, would they not?

[C.J. Helie]

Yes, that's right. The issue really is that both the Scotch and the American bourbon guys are using India as a little bit of a loss leader. They have deeper pockets and can do the longer-term investment more than Canadian whisky makers can.

[The Chair, Conservative, Rob Merrifield]

Okay.

Mr. Keddy is next.

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

Thank you, Mr. Chairman.

I welcome our witnesses.

This has been a very interesting discussion, both with our present witnesses and with the earlier witnesses.

Mr. Bajaj, I think you've said it all: 1.2 billion consumers, with a growing and even burgeoning middle-class sector.

We heard from earlier witnesses in this study that there are 350 million to 550 million middle-class Indians, and that middle class is growing at a rate of about 7% or 8% a year, although everyone has different numbers. The economy has grown at about 6% to 7%, but it takes about 11% growth just to feed and supply that middle class. Without question, there's a tremendous marketplace there, which we share a common language with—one of their official languages is English—and the potential for Canada, which has a good brand reputation there, but not a solid brand reputation, is enormous.

A couple of points were made that I want to try to get more clearly defined definitions of, if I can.

I do want to save a couple of minutes of my time, Mr. Chairman, for Mr. Shory, so you're going to have to shut me off at the four- or five-minute mark.

On the issue of geographical indicators, that's an issue that we're becoming more and more aware of with our CETA negotiations with the European Union, and certainly in regard to their importance for our branding around the world. I think we used to look at geographical indicators as something that other nations imposed to prevent us from selling goods to them, but there's actually a huge branding potential for Canada there. How big of a hindrance is that in the Indian marketplace right now?

[C.J. Helie]

As to what it is, it's a safeguard, because if you're talking about investing money into a market, as soon as you start getting any traction on that investment, what you have to worry about is somebody coming in and copycatting it.

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

That's right.

[C.J. Helie]

So what we found—

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

So it's not a hindrance at all—it's a necessity.

[C.J. Helie]

That's exactly right.

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

Yes.

There was another point raised earlier by the witnesses, but I think it would apply to you folks as well. It's the whole issue, especially with agrifoods and agricultural products, of certificates of origin. It wouldn't be just for agrifoods; it would be the same thing in timber.

I think it needs to be said that Canada has a very expanded and modern certificate-of-origin system that is recognized around the world. This is not an obstacle to trade for us. This is something that we do routinely just in dealing with the Americans. Actually, they forced us to bring it in back in the seventies and eighties. Is that a market advantage for us?

[C.J. Helie]

It absolutely is, because the other thing it does, almost by accident, is that it's a quality-control measure as well, right?

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

Absolutely.