International Trade Committee on Dec. 6th, 2012

[Wayne Easter, Liberal, Malpeque, PE]

The only other thing I wanted to ask was on the investment agreement. One of the concerns we have on the China investment agreement is that it's not reciprocal. How important is reciprocity on these investment agreements with the countries when they're negotiated?

We don't debate them here; they're just tabled.

[The Chair, Conservative, Rob Merrifield]

That's a question on China, not India.

[Wayne Easter, Liberal, Malpeque, PE]

No, you're negotiating one with India too.

[The Chair, Conservative, Rob Merrifield]

If you have an answer, I'll accept a short one if you want.

[Jean-Michel Laurin]

In terms of reciprocity, in the sense of the benefits we give companies based in the other countries, yes, it's important. Obviously, we want those agreements to be fair and equal, but we're especially interested in Canadian companies getting protection for their investments in India.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

I could go on about the rail. I probably know a little more about it than the opposition, but nonetheless, let's.... I could rail away, yes.

Mr. Hiebert, the floor is yours, for seven minutes.

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

Suffice it to say I've also heard about the railway service issues, and I look forward to what the government provides in terms of addressing that issue.

My question relates more to the nature of the exports. You've both spoken very optimistically about the potential for increased exports to India.

I'll start with you, Mr. Lindsay. You talked about paper, dissolving pulp, but you said that lumber had some issues. I am wondering if you could elaborate for us on the issues related to lumber exports.

[David Lindsay]

Thank you, that's an excellent question, Mr. Hiebert. I set you up well for that.

There are a number of issues with respect to lumber in India. We had similar challenges in China. The first is receptivity. If it's not part of the culture to build with wood, first you have to get people familiar with the use of wood and wood products in building homes. A very large and growing middle-class opportunity is coming in India, but building the kind of wood-frame construction that we do is not traditional in India.

Even if it were traditional, because it's a tropical climate the issue of termites and how that wood is sustained in that climate is also problematic. Again, speaking of value-added, we would change the way we prepare and pressure-treat our wood. Dimensional lumber can be modified to be termite resistant, but if the culture is not to build with wood and they are suspicious of softwood lumbers in particular—they've had some problems in the past—then we have barriers of acceptance to overcome.

The next problem is one of cost. Shipping, getting it there, is obviously a cost. India is a long way away, but when you add the extra barriers of tariffs and every municipality adds their additional cost, it becomes prohibitively expensive. There are technical issues in the building culture and tradition.

We have wonderful success stories in China. The government, working with some of our member companies, Canfor and others, have gone to Shanghai and built buildings and subdivisions. They have trained architects and builders in China on how to work with wood and how to build with wood. Now we're starting to create a market for wood products in China. That started 10 years ago. It takes about 10 years, first to get the architects and the designers and then the construction companies comfortable with using the product before they start to make large volume purchases. This isn't an overnight success.

With respect to the use of dissolving pulp, we have Indian companies investing in Canada now to access our fibre for dissolving pulp for rayons and textiles. They are a mature customer for dissolving pulp. They're not a mature customer yet for the use of lumber.

I hope that answers your question.

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

It does. It relates to my next question on the dissolving pulp and rayon products.

You mentioned what appears to be a fascinating use of that technology to create flexible tubing. Would that be Indian technology being exported to Canada, or is that Canadian technology going in the other direction?

[David Lindsay]

I'm about to bump up against my knowledge and competency on this because it was a story that was relayed to me by one of our CEOs. A group of researchers in India is working now with how to bring their textile competencies and capacities together with industrial products.

One of the ideas is.... Those of you who have had to change a pipe in the back of your toilet will know that if it's a flexible tube, you can move it and manipulate it, but if it's a stiff tube you have to cut it to a certain size. The textile people are working with the engineers to figure out how to create large industrial piping for manufacturing equipment and other processing equipment. We're at the early stages of that being an opportunity. If that takes off, they're going to need a lot more dissolved pulp to create those fibres for that equipment.

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

I'll shift my questions to Jean-Michel.

You talked about the survey you do with your members, doubling exports from 7% to 13% in three years, and Canadian companies sourcing up to 16% more within three years.

Do you follow up with your surveys? These are forecasts, predictions, but do you ever check their accuracy? Do you ever look back and ask if they did what they thought they might do three years ago?

[Jean-Michel Laurin]

I didn't do it before coming here. We haven't done a survey in about a year and a half. I'd have to check back against our previous one, which was done right in the middle of the recession. It would be interesting to compare, yes.

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

I'm just curious to know about the accuracy.

[Jean-Michel Laurin]

I haven't done it, but we could certainly do it and share the data with you.

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

If it's true that there has been a doubling of exports, that's fantastic, and sourcing is good as well.

You represent a very large segment. Forest products is a very specific market, but in your area, it could be any number of things. Do you have any idea which markets are looking to expand to India?

[Jean-Michel Laurin]

In terms of expansion, I think you have to consider both direct exports or direct imports, which show up in our trade statistics, and investment, which is a little harder to calculate. You also have to consider services.

I know, for example, in terms of our membership, the sectors that I think have the greatest level of interest. You have forest products represented here. I know that companies in the pharmaceutical sector and those that are supporting that industry are looking at India as a growing market as well.

You have everything related to infrastructure, especially in the water and waste-water treatment sector. We have a lot of Canadian manufacturing companies that make specialized equipment for that sector. I understand that India has some pretty significant and ambitious plans to invest in that kind of infrastructure in the future. They're interested in that market.

You have aerospace and rail products. I think you've heard from Bombardier. They've told you what India means to their business. Other companies in the supply chain are looking to position themselves in those sectors. I think a lot of companies in the food and food products supply chain are already present in India but are looking to establish a stronger presence.

On the auto parts side, I think there's already strong cooperation, but I think there could be more trade and more investment between the two sides.

I should also mention steel. India has already invested in the steel and mining sector in Canada. That's another area where we see a lot of growth potentially happening as a result of an agreement.

[The Chair, Conservative, Rob Merrifield]

Thank you.

We'll go to Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

We've had a lot of testimony on trade deals before this committee. A common message I hear is that Canadian businesses and exporters want a level playing field.

Mr. Lindsay, you've already talked about the quite impressive work that's been done in our forestry sector to get environmentally sustainable certification and to lead the way. We heard from department officials last week that India has thus far been resistant to even including an environmental side deal in our trade deal. I know that this has been a standard feature of Canadian trade agreements.

I'm just wondering what your views would be and what advice you'd give us. Would you suggest that Canada sign a trade deal with India that does not include an environmental side deal that ensures that India will commit to not lowering its environmental standards to attract investment?

[David Lindsay]

I think in the forest sector, there are layers in that question. I won't speak to basic manufacturing and effluents and particulate matter in the atmosphere.

I think where India is more sensitive on the logging side is that they are losing their forests, and they are concerned. As Isabelle pointed out, they are concerned about illegal logging and inappropriate or non-sustainable use of their forests. That's why they brought in a law to not use wood in government buildings.

[Don Davies, NDP, Vancouver Kingsway, BC]

I need to know whether we should or should not sign an agreement that does not have an environmental component. That's what I'm interested in.

[David Lindsay]

I can't answer that question right now.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can you, Monsieur Laurin?

[Jean-Michel Laurin]

It depends on what's in the environmental agreement. I think, as I—

[Don Davies, NDP, Vancouver Kingsway, BC]

India so far is saying that it's resisting having any environmental side agreement component.

[Jean-Michel Laurin]

We haven't taken a position on it. I could consult my members. Nobody wants those trade agreements to lead to a situation such as the one you're describing. There's increasing talk about things such as carbon leakage. There's some debate, even within our own membership, on whether trade agreements are the right place to deal with such matters. I understand that it's an important issue. I could get back to you with a position on it.