International Trade Committee on Dec. 6th, 2012

[Don Davies, NDP, Vancouver Kingsway, BC]

Yes, Mr. Chairman, I have two motions for the committee.

I'm concerned about running out of time at the end of the meeting, so I'm going to move one of the motions now and then one at the end of the meeting. The motion I'm going to move right now is:

That, notwithstanding any previous order adopted by the-Committee, the Standing Committee on International Trade invite the Minister of International Trade to provide a comprehensive briefing on the negotiations towards the Comprehensive Economic and Trade Agreement with the European Union before Friday, December 14, 2012.

I'll just speak very briefly to the motion, Mr. Chairman.

We of course are running out of time in this committee. We only have next week. The minister has said on a number of occasions that he hopes to have an agreement concluded with the EU by the end of the year. This agreement has been referred to by people, including you, as the most ambitious trade agreement Canada has ever signed; making NAFTA look like a relic have been your words, Mr. Chairman.

We know there are a number of very important issues. A leaked document prepared by the European Commission for its trade policy committee indicates that perhaps some very serious concessions from the Europeans' point of view might be made on supply management, intellectual property, government procurement, and possibly investor-state provisions.

The minister has said in the House that the CETA negotiations are in his words “the most open and transparent in Canada's history”, and he has said that he's given briefings to the municipalities of this country.

I would assert that before this deal is signed, we should receive a briefing at this committee as parliamentarians. However, as a parliamentarian who sits on the trade committee, I would note the minister has not appeared before this committee since March of this year and has never appeared before this committee on CETA since I've been here. I stand to be corrected if he's ever come before the committee on that, but certainly he has not since March.

I would move that this committee ask the minister to appear before this committee before the House rises on December 14 to give us a comprehensive briefing. The briefing may be done confidentially if there are steps and measures that are confidential at this point. I know the U.S. Congress and the European Union's trade policy committee have received much more information than we have as parliamentarians on this trade committee.

I would move that motion and ask that we call the minister to provide that very important briefing that's critical to our country and to this Parliament.

[The Chair, Conservative, Rob Merrifield]

Okay.

Mr. Keddy, it's your turn.

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

First, on the process, I'm not going to ask to go in camera. We've got witnesses waiting. This is absolutely disrespectful to our witnesses.

The motion is strictly hypothetical. It's deleterious. It's frivolous. It involves briefing parliamentarians on negotiations that are done in secret. It involves a complete misrepresentation of the fact that the provinces and municipalities have been at the table during this whole process. We'll let Mr. Easter speak and we'll vote on this. If it goes any longer than that, then we might as well go in camera.

[The Chair, Conservative, Rob Merrifield]

Okay, Mr. Easter, it's your turn.

[Wayne Easter, Liberal, Malpeque, PE]

First, Mr. Chair, I certainly support the motion. I disagree with the parliamentary secretary's points, but at least he's allowing the committee to stay in public for the moment. This has become a sore point with opposition members, Mr. Chair, on the point Mr. Keddy raises, on committees debating motions in secret.

I looked at the record for when Gerald and I were both on the fisheries committee. There were 30 motions and none of them were debated in secret. Motions should be debated in public, and we should continue to debate this one in public.

I'm just making that point.

[The Chair, Conservative, Rob Merrifield]

But this one is so if you would make your comments, I'd appreciate it.

[Wayne Easter, Liberal, Malpeque, PE]

On the motion specifically, Don is right. The government has said that it's going to complete this agreement by the end of this year. You said that it is one of the most ambitious agreements ever undertaken and will make the NAFTA look like a relic.

There are some concerns with some of the things that could potentially be happening under these negotiations. We're seeing press reports that claim.... I know when I asked at committee if there was any analysis done, the minister said, yes, there was analysis done but they're not making it available to the committee.

There is a report out there that claims that pharmaceutical costs could be as high as an additional $1.9 billion. I think we need to know this so that we determine our position on whether we recommend that the minister sign or not sign, or what should be negotiated on the pharmaceutical side. I think it would be an advantage to the government if they have a study showing that the costs are not that high, they might gain some more favour with the country. Even if they are that high, if they have an analysis that shows there is going to be greater R and D in Canada and better drugs as a result, you never know, we might agree.

The minister put out propaganda, or a paper that talked about the myths. He made very clear that one of the myths was that the drug costs would go up. Everything we're hearing from leaked EU reports, from news reports, is that the costs are going to be higher.

Did the minister misinform us? I hope not, but I think it's our right to ask the minister to come before the committee and explain himself.

The last point I would raise is that the minister has made it very clear in the House, in response to what we have raised on the supply management issue, that there would be no concessions on supply management. The EU restricted report, which talks about what they're saying on the EU side, and I'll quote it, says, “products under the supply management regime: dairy, poultry, and eggs (98 lines) for Canada”. There is agreement that these products will not be totally liberalized and new market access will be granted in the form of TRQs.

[The Chair, Conservative, Rob Merrifield]

Mr. Easter, just hold on.

On a point of order, Mr. Holder.

[Ed Holder, Conservative, London West, ON]

Is it appropriate now to move that we go in camera? I'm asking the question because this is an elongated session and—

[The Chair, Conservative, Rob Merrifield]

You can't do it on a point of order.

Go ahead, Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Mr. Chair, I'm concerned about those two points. If we're going to do our job for the agricultural industry, we need to know roughly what's on the table. We're not asking the government to state line by line on the agreement, but we have a responsibility as members to find out what the parameters of the agreement are so that we have that information over the Christmas break.

As I've said a number of times, we support the trade agreements. We support moving to trade agreements, but we want there to be a net benefit for Canada. We're beginning to question some of the things the minister told us, or answered in the House, or told us when he appeared before this committee a long time ago for about an hour.

I think Don's motion is the proper motion. I think it shows that we're in fact doing our job to try to find out where the government really is on this agreement that they claim will be signed by the end of December.

[The Chair, Conservative, Rob Merrifield]

Mr. Keddy.

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

Mr. Chairman, I move that the debate be now adjourned.

[The Chair, Conservative, Rob Merrifield]

We have a non-debatable motion.

(Motion agreed to)

Sorry about that.

Mr. Davidson, the floor is yours.

[Paul Davidson, President and Chief Executive Officer, Association of Universities and Colleges of Canada]

Thank you very much, ladies and gentlemen.

I am very happy to be here today.

I will give my presentation in English, but if you have questions, feel free to ask them in French.

This is the first time that I've appeared before the trade committee. It's a great pleasure to be with you.

It's important that higher education be considered a matter for the trade committee, because higher education, as a service that we provide to other students around the world, represents an $8-billion contribution to Canada's economy every year. We have the potential to double that in the next few years. Whether it's a question of labour markets, a question of immigration, or a question of global commerce or science, technology, and innovation, Canada's universities are playing a vital role in meeting the needs of a new kind of Canada. In fact, Canada's universities are assets in achieving virtually every public policy goal that Canada will have over the next decade.

I'm particularly pleased that you're focusing on the question of Canada's relationship with India. I have just returned from a mission to India with the Prime Minister, where he noted that the higher education sector is the fastest growing aspect of the Canada-India relationship.

I want to speak for a moment about this opportunity again. It's a little-known fact that the value of international students in Canada is $8 billion a year. That's larger than the export of softwood. That's larger than the export of wheat. It's larger than the export of aluminum. It's important that the higher education sector be considered as we look at new economic relationships.

The benefit of international students extends beyond large communities to include communities such as Nanaimo, Kelowna, Kamloops, Brandon, Sudbury, Chicoutimi, Moncton, and Wolfville. This is a benefit that's felt widely across the country. In addition to the $8 billion economic contribution, there are about 86,000 direct jobs and about half a billion dollars a year in tax revenue raised. We have as a goal the doubling of the number of international students to come to Canada so we can double that economic impact.

But it's about more than economic impact. It's about the benefit for Canadian students. By living and learning from international students, Canadian students have the opportunity to acquire the global skills that employers are demanding. Moreover, the presence of international students on Canadian campuses alerts Canadian students to the intensity of global competition that awaits them upon graduation, and it creates lifelong networks that will span the world and will continue beyond their time on campus.

I talked a little bit about economic impact and about the benefit for Canadian students. We also have to look at the changing research landscape globally. Canadians can be very proud of the record of investments over the last 10 or 15 years in research in Canada. The result of that investment by a number of governments has been that Canada is now considered in the top four in the world in terms of research capacity. Imagine that. We talk about Olympic champions reaching the podium or getting near the podium. How often have you heard that Canada's research capacity has now moved up to number four in the world?

Higher education and research activities such as the flow of students, academic exchange, knowledge exports, and international research collaboration are an essential underpinning to a successful overall economic partnership with the new economic superpowers like India, and ultimately they are drivers for Canada's international competitiveness.

I want to situate what Canada's universities are doing with regard to three of the big challenges that Canada is facing. The first is the global competition for top talent. Over the years to come, we are going to have to compete on our wits. We need to attract the best and brightest from around the world, and we need to make sure that our students are learning among the best and brightest.

In terms of links to the global commerce strategy, Canada has relied for too long on established markets. We have to develop our reach into new and emerging markets. In terms of science, technology, and innovation, the work that's going on in Canada is contributing directly to new jobs and prosperity for Canada.

By virtue of history, Canada's universities have strong links with Europe, England, and France. By virtue of geography, we have strong links with the United States. But we join Mark Carney and others in saying that we have to be more intentional in pursuing relationships with emerging economies. That's why for the last three years Canada's universities have been focused particularly on India, Brazil, and China. Let me turn to India specifically and just underscore a few points.

First of all, consider the size of the market: 550 million people under the age of 25. That's a university-age population that is larger than that of Europe, Australia, and the United States combined. India has one of the world's fastest growing middle classes, and that means there are huge unmet needs for higher education.

India's own studies suggest that they will need 1,000 new universities in the next decade and 40,000 new colleges. That's not going to happen, so there is huge pressure for Indian students to find places internationally. In India there are hundreds of thousands of students annually of a quality that would see them gain admittance to MIT, Stanford, or Harvard. They're looking for places to come, and we want Canada to be a welcoming place for them.

In 2009, the United States received about 83,000 students from India, the U.K., about 38,000, Australia, about 27,000, and Canada, 4,000. We can get more of those students. I do want to say there has been some good news. Because of some concerted effort on the part of Canada's universities, enrolment from India is up about 40% in recent years, but you can see there's still a long way to go.

I've talked about the global research environment, but in terms of India's research environment, it's making strides. In fact, Thomson Reuters predicted in 2009 that India's research productivity would be on par with most G-8 nations within seven or eight years—now three or four years—and that by 2020, which is not too far away, it will overtake the G-8 nations. That's why Canada's universities, with their increasing activities in international research collaboration, are well positioned to link with this network of Indian researchers and their innovative capacities to work with the world's best minds to solve the world's biggest problems.

Both in Canada and in India, there's a shared interest in work between universities and industry to foster innovation. For universities and industry both in Canada and in India, fostering the global circulation of ideas and gaining access to knowledge faster are key components of a new competitive innovation strategy. For these two countries, which are focused on innovation, the commercialization of research, and addressing capacity challenges in our workforce, there is an immense opportunity for university and private sector stakeholders from both countries to collaborate across borders.

For the last three years, AUCC has been working on a strategy that is sustainable, scalable, results oriented, and aligned. It's generating results, but we have to go further faster. The two areas I want to draw the committee's attention to in particular are: building the Canadian brand and investing in international research collaboration at scale.

Recently there have been media articles saying that international students aren't interested in Canada because it's cold, or that we're not on the map. Well, there's a reason others are doing a better job of marketing themselves, and that is that their governments stand with them in that marketing effort. The Government of Australia has been spending about 20 times what Canada has for about 15 years, and that's generating results for Australia. The United Kingdom is just completing a five-year £35-million initiative to promote itself as a leader in international education, and this is on top of the core funding to the British Council.

The governments of Australia, the United Kingdom, and the United States have supported a sustained branding effort. That's why AUCC and others in the education sector have together formed a marketing consortium that could be a vehicle for such investments.

I hope you're all familiar with the study commissioned by the Minister of Finance and the Minister of International Trade to look at Canada's international education strategy. It was completed this summer under the leadership of Dr. Amit Chakma from the University of Western Ontario. Fourteen recommendations have been placed in front of the government for consideration. AUCC strongly supports those recommendations and looks to the government for a sustained, sophisticated, and sector-led international education strategy.

I've talked about the need for education branding. I would also like to talk about the need to invest in international research collaboration at scale. Again, the U.S., the U.K., and Australia are all significantly outspending Canada to develop the research linkages with India that will lay the foundation for cooperation over the next 50 years.

I will give you a couple of examples. The Australia-India strategic research fund is a joint investment of $66 million over 10 years to enable Australian researchers to participate in leading-edge scientific projects and workshops with Indian scientists. The Obama-Singh 21st century knowledge initiative which was launched in 2009 has a shared commitment of $10 million over five years to support partnerships between U.S. and Indian universities to advance research in areas of mutual priority.

In this connection, I want to signal and salute the Government of Canada's investment of $15 million over five years for the Canada-India research centre of excellence, which was recently awarded to the University of British Columbia in collaboration with the University of Toronto and the University of Alberta as a working consortium.

To close, Mr. Chair, I have a few key messages.

The first is to keep in mind that Canada's universities are under-leveraged assets in promoting international partnerships.

Second, Canada's universities are working together with the broader education sector to promote Canada's brand.

Third, our work is meeting Canada's need for top talent. It is advancing Canada's global commerce capacity and strengthening Canada's ability in science, technology, and innovation on a global scale.

Real progress is being made in the Canada-India relationship through universities, even while the trade negotiations continue. There's an opportunity to achieve much more. It will require government support.

I want to thank you for the opportunity to be with the committee today. I look forward to your questions.

[The Chair, Conservative, Rob Merrifield]

I want to thank you for your intervention. It sounds like a very exciting opportunity as we move forward on education.

With that, Mr. Winterhalt, the floor is yours.

[Todd Winterhalt, Vice-President, International Business Development, Export Development Canada]

Thank you very much, Mr. Chair, and honourable members, for inviting EDC to appear before the committee today. We certainly appreciate your interest in Export Development Canada's activities in support of deepening Canada's trade agenda with India.

Over the past seven years, we have seen Canada's annual bilateral trade with India grow almost 80% to reach $5.1 billion as of the end of 2011. That's up from approximately $2.9 billion in 2005. This growth has been driven by a 140% increase in Canadian exports to India during this time period. At the same time, Canada's imports from India have increased 40%.

In 2011, bilateral trade was largely balanced. Canadian merchandise exports to India totalled $2.6 billion, while imports from India reached $2.5 billion. Despite recent global economic slowdowns in other parts of the world, Canada’s merchandise exports to India over the first three quarters of 2012 showed year over year growth approaching 5%.

India, indeed, is one of EDC's top strategic markets worldwide. In recognition of the importance we place on India as a country of rising trade and overseas investment opportunities for Canadians, we opened our first international representation in New Delhi in 2005. This was followed soon after by a second opening, in Mumbai, in 2007.

EDC has achieved some success in India since establishing our first local market presence. The volume of Canadian business we help facilitate has grown from less than $400 million in 2005 to well over $1.7 billion in 2010. Growth in Canada’s trade and the number of Canadian companies exporting to India and establishing affiliates in the market have consistently kept India as a top strategic priority for EDC. Furthermore, the market’s potential, particularly the development needs in India’s infrastructure sector, features prominently in our five-year corporate plan.

That said, the business environment in India remains challenging for Canadians. India is a complex and very cost-competitive market. India's ranking by the World Bank in terms of the ease of doing business has remained largely unchanged over the past several years at 132nd out of 185 markets. Relativities are important here. Compared to similar lower middle income peer countries, India ranks 34th out of 53 nations.

From our perspective, some of the top challenges include, first, the notable bureaucracy that is endemic across government and the public sector. This is clearly apparent when looking at the time required to obtain permits and approvals.

Second, India's lack of reliable infrastructure means that everything from access to electricity to the entry of goods at port and the subsequent distribution are also hurdles.

Third, doubts about the enforcement of contracts and the ease of resolving disputes reflect a concern about the efficacy of India's legal system. A court decision and obtaining due process can often take more than a decade.

Finally, access to credit remains an ongoing concern for many companies looking to operate in India. Central Bank restrictions limit foreign borrowing. As well, there is a preference in the domestic bank sector for providing shorter-term capital at higher interest rates. This means that planning a financing strategy at the outset of establishing investment in India is absolutely critical.

Despite some very real challenges in doing business in India's business climate, it would be wrong to paint them as insurmountable. We believe that it is possible to mitigate a number of these risks.

To capitalize on India’s growing consumer demand, we often counsel companies to establish a local presence, to be willing to adapt their products and business models to Indian norms, and to show that they are committed to staying for the long term. Partnerships between business and financial players, public and private, foreign and domestic, significantly increase the chance of the long-term success of an export transaction or an investment.

Canadian firms that take the time to understand the market, to develop these needed partnerships, and to adapt their products and processes to accommodate India can be successful. There are a number of real examples: McCain Foods, Sun Life Financial, TaraSpan, SENES Consultants Limited, Woodbridge, and many others. Indeed, at EDC, we are currently aware of more than 160 Canadian affiliates in India that are conducting business in the market across a wide range of sectors.

With respect to investment,

the stock of Canadian investment in India as of the end of 2011 was $587 million, significantly less than the $4.4 billion of Indian investment in Canada.

The stock of two-way investment between Canada and India has actually been declining since its height in 2008 ($7.2 billion in 2008 down to $5 billion in 2011). Dampening the enthusiasm expressed for India by foreign investors over the last couple of years has been the inability of India to move forward on needed government reforms to improve its investment climate. The general global economic downturn has also weakened investor confidence and withheld injection of capital into the market.

That said, hopes have been bolstered by a surprise slate of recent policy adjustments by the Indian government to open previously closed sectors to foreign investors, such as retail—you may be aware of Walmart's involvement now in India—and the relaxation of regulations surrounding the inflow of capital.

Sectors such as infrastructure, retail, and services are expected to create investment opportunities for foreign interests as additional reforms are implemented.

Indeed, overall there is great potential for trade and investment for Canadian companies across a wide range of sectors in India. Niche opportunities exist for Canadians, particularly in the sectors of telecom, health care, education—in strong agreement with Mr. Davidson—automotive, and infrastructure, including clean tech.

For certain, the sale of commodities such as grains and pulses, pulp, as well as metals, for example, iron ore, will continue to rank high in Canada's exports to this market. Where Canadian companies have achieved the most success is through the pursuit of business with India's leading private sector and privately held companies. These companies have rapidly been expanding their global operations, and are stepping forward to develop private sector solutions to some of India’s infrastructure constraints.

To accelerate Canadian opportunities in India, EDC is focused on the following strategies: to develop and deepen relationships with reputable private sector buyers and borrowers in India; to strengthen our financial partnerships in the region, with particular emphasis on enhancing our suite of financial services that support small and medium-sized enterprises; to help match Canadian capabilities to Indian market opportunities through targeted, planned matchmaking events with EDC strategic private sector Indian clients;

continuing EDC's efforts in reaching out to Canadian investors and exporters to discuss their strategic interest in India and promote suitable opportunities; deliver on services with bank partners that create financial capacity for Canadian affiliates in India; continued close engagement with Canada's trade commissioner service, bank partners, the Canada-India Business Council and the Indo-Canada Chamber of Commerce on delivering advisory services and tools for Canadian companies seeking to conduct business with India;

and finally, by leveraging EDC’s project finance and structured finance expertise and our relationships with multilateral agencies, to capture more Canadian procurement opportunities in India’s infrastructure sector as it evolves.

In conclusion, I would underscore four key points.

First, despite India’s many challenges, the country’s continued growth presents very significant trade and export opportunities for Canadian business.

Second, partnerships are and will remain absolutely critical to success in this market.

Third, India’s private sector companies are playing an increasing role in the development of the country. These companies’ supply chains now reach beyond India’s borders to present additional opportunities in a range of global markets.

Fourth and last, Canadian companies that are willing to make the effort to better understand India’s needs and adapt their products and processes will be the longer-term winners of these business opportunities.

I thank you again for the opportunity to be with you this afternoon.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now move to questions and answers. We'll start with Mr. Sandhu, very quickly.

[Jasbir Sandhu, NDP, Surrey North, BC]

Thank you for being here today.

I have a question for Mr. Davidson.

I'm really amazed at the number of students who are actually going to the United States from India, some 83,000. You pointed out that 38,000 are going to the U.K., and 27,000 are going to Australia. Some 4,000 are coming to Canada. What are the reasons for that?

[Paul Davidson]

There are a number of reasons for that.

First of all, as I mentioned, Australia has been investing heavily in a coherent marketing effort to attract students from India. With regard to the United States, it is the global research leader and will always be seen as a destination. With regard to the United Kingdom, there are historical linkages between the U.K. and India, and students and their families think of those locations before they think of Canada. That's why a sustained, sophisticated international strategy that's nuanced to India is going to be pretty important for Canada.

I should add that these figures are changing and they're moving in the right direction. The number of university students from India has increased by 40% in the last couple of years. The number of college students has increased quite dramatically because of a unique program between Citizenship and Immigration Canada and the ACCC, a colleague organization, which has increased the number of students from India quite dramatically.

The bottom line is there is a lot more we can do together.

[Jasbir Sandhu, NDP, Surrey North, BC]

What sorts of challenges have we had in attracting students from India? What are some of the issues? You certainly talked about investment, but are there any other challenges that we need to look at?

[Paul Davidson]

Promoting Canadian excellence is really an important factor. Students and parents in India think of the United States. They think of the U.K. They're incented to go to Australia. These patterns take place over time and over generations.

The opportunity does present itself, because of the number of outstanding Indian students who are looking for a place, to raise Canada's profile in key markets within India, to develop a social media strategy, to develop word of mouth, to be more effective in promoting a coherent brand of Canadian excellence in India and other emerging economies.

[Jasbir Sandhu, NDP, Surrey North, BC]

I'm going to ask Mr. Winterhalt something.

I'm going to jump on the train here. We've heard previous testimony from the canola industry, from the beef industry, from the agricultural industry that the response from the railroads in regard to providing service to them is very poor. We've heard of a recent survey where 8 out of 10 people who use trains are having difficulty getting their goods on time or they're not satisfied with the rail service.

I understand your role in developing export development in other countries, but I think it's also important for us to make sure that our goods are able to get to the other countries in a timely manner.

Would you agree that we need to have infrastructure or a mechanism in place to make sure our products are delivered in a timely manner? What sort of remedy would you recommend to help us convince the railway companies to deliver these products on time to our ports?

[Todd Winterhalt]

Thank you very much, honourable member, for the question.

I would start my response by saying I think it is absolutely essential that both ends of the equation are considered here. We do tend to focus on the opportunity side of the equation, the target market or the destination for a Canadian exporter or investment, and essentially try to bring that opportunity back and match it up with a Canadian capability. I would agree that absent a well-developed infrastructure to be able to deliver those products and services it's very difficult to fill orders at the end of the day.

That said, I would defer in terms of offering a suggestion on what needs to be done. We truly focus on the international space rather than look at what is required in the domestic environment in terms of infrastructure development and things of that nature.

[Jasbir Sandhu, NDP, Surrey North, BC]

What sort of non-tariff barriers are in place in India that are hindering the export of our goods? I mean, $5 billion is not a lot of money in trade there. It's peanuts compared to some of the other countries we're trading with. What are some of the non-tariff trade barriers that are in place? What can we learn from the last 15 or 20 years in regard to expanding that trade opportunity in India? Will this trade agreement alone help expand trade in India?