International Trade Committee on Feb. 27th, 2013

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

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Our time has gone.

Next we have Mr. John Harriss, coming to us from Singapore. So we will suspend as we do that.

I want to thank the witnesses for their input into our study.

We have with us Mr. John Harriss, from Simon Fraser University, who is in Singapore.

Mr. Harriss, I understand it's 5:30 in the morning there. Is that right?

[Dr. John Harriss, Professor and Director, School for International Studies, Simon Fraser University]

It is, indeed. So good afternoon to you, and good morning from here.

[The Chair, Conservative, Rob Merrifield]

I would feel sorry for you, having to get up so early, except that we're in a massive snowstorm here. The planes have been shut down, and you're probably going out to a beautiful day. But we want to thank you for taking the time and getting up so early to be with us.

[Dr. John Harriss]

I hope I can be helpful.

[The Chair, Conservative, Rob Merrifield]

We will yield the floor to you now.

We look forward to your presentation. Then we'll follow up with questions and answers.

Go ahead, sir.

[Dr. John Harriss]

I am sorry; I wasn't clear whether you wanted a presentation from me to begin with or not. I was rather expecting questions first.

But what I have to say, really, is as follows. It's pretty obvious that there should be terrific benefits to both Canada and India from increased trade. The level of trade between two such very big economies is very small at the moment and has been historically. The extent of Canadian investment in India is very small. Indian investment in Canada is a bit more significant and has been increasing. I think we start from the basic position that there must be tremendous benefits from increasing trade connections.

I think it's important to remember that, though the Indian economy is big, the Indian economy historically has not been really a major trading economy. Although India's share of trade and the share of trade in the Indian economy has increased very considerably over the last decade, the country is still rather feeling its way in trade negotiations.

One of the problems that must be faced in these talks is that the bureaucratic capacity in India for conducting trade negotiations is pretty limited. My colleagues talk to me of India turning up at major trade talks with three people, when the Chinese, for instance, come along with 50 people. There are limitations of bureaucratic capacity, and at the moment I think India's priorities are to conclude trading agreements with Southeast Asia and to get through the long-running trade talks with the European Community.

In this context, what are Canada's biggest chips? What is it that we really have most to offer?

It seems to me—and this is what I'm hearing from colleagues and friends in Delhi—that what would really make a big difference, because India has such strong interests in diversifying sources of oil and gas, is if Canada can use our oil and gas resources to help the Indians to diversify their oil and gas sources. The fact that India has had important connections with Iran in regard to supplies of oil and gas is a part of that picture at the moment, of course, given the American concern with limiting contact with companies in countries that have those kind of trading connections with Iran.

It seems to me that is the biggest sort of chip that Canada has to put on the table.

Where are there strong mutual interests? It seems to me they are in the area of energy. There are mutual interests in building trade in agriculture. There are important opportunities, perhaps, for Canadian companies in regard to infrastructure. I'm really not sure about our capacities in this regard, but I know there are tremendous needs in India in regard to power transmission and distribution.

The big problems of the electricity sector in India are not to do with power generation so much as with transmission and distribution.

There are mutual interests in education.

An area like financial services is probably a bit problematic. I think there are opportunities in financial services—and India certainly respects the quality of the Canadian banking sector—but of course this is an important area in which non-tariff barriers will come into play. Canada will have to confront problems relating to domestic regulation of financial services in India.

From the Indian side, there will also be, I think, a very strong interest in the movement of people, the movement of professionals, access for Indian professionals into Canada.

There are opportunities, perhaps, for Canada in some areas of retail, given the commitment of the government to opening up the retail sector. A friend, a former finance secretary of the Government of India, said to me yesterday, “If only Canada could come up with a kind of an IKEA, you know, use some of that timber to provide good furniture and materials for construction”. Given the tremendous boom, of course, in construction in India, there could be a deal, perhaps, with a major real estate company in India.

I think that, in general, it's probably going to be non-tariff barriers rather than tariff barriers that are going to be the sticky areas.

Lastly, what I might say by way of introduction—Mr. Cardegna included in an e-mail to me the possibility of a question about India's business environment—I'm sure that I don't need to tell the members of the committee that India, of course, ranks pretty low on the World Bank's index of the ease of doing business, and very low, indeed, in the area of contract enforcement. Those are facts that are probably pretty well known.

What I think also needs to be recognized is what the same friend I was talking to yesterday, the former finance secretary, describes as the stranglehold that is exercised by a small number of very big companies in India, companies like Reliance, SR, indeed Tata, as very powerful companies that actually do exercise a great deal of influence on the actions of government as importantly as on policy. The advice that my friend was suggesting to me yesterday was that it would be important to avoid areas where powerful vested interests are involved, to avoid areas such as telecom and pharmaceuticals, where the big boys have very strong interests.

The last point, and it really follows from that one, is with specific regard to SMEs, small and medium-sized enterprises. As I understand from what I have read, the Canada-India Business Council, which represents quite a lot of small and medium-sized enterprises, is looking for very significant opportunities through a comprehensive economic partnership agreement.

I think this is a somewhat contradictory kind of situation, if you will, because following from what I said about the importance of recognizing what was described to me as the stranglehold exercised by a small number of very big companies, that means there may well be significant opportunities for small and medium-sized enterprises that are operating in sectors of the economy, areas of the economy, in which the big boys in India don't have very powerful interests.

But as it seems to me, small and medium-sized enterprises in the two countries—last point and I really will shut up then, okay?

[The Chair, Conservative, Rob Merrifield]

Okay.

[Dr. John Harriss]

It seems to me we don't really have complementarity between small and medium-sized enterprises. The sectors in which small and medium-sized enterprises are operating in the two countries overlap, rather than being complementary. For example, there may be opportunities for small Canadian firms in automotive to open up businesses in India, but they've got to compete with some pretty good Indian companies.

[The Chair, Conservative, Rob Merrifield]

No, I think that's right.

[Dr. John Harriss]

Sorry, I went on too long.

[The Chair, Conservative, Rob Merrifield]

You went over a little bit, but that's okay, we're in that kind of mood today.

I do want to thank you for that presentation. Perhaps one of the things you stumbled upon there was maybe we need some BluWood coming out of British Columbia as a new market for India.

But we're going to start with question and answer with Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Dr. Harriss, for appearing before our committee and in such challenging circumstances.

I have seven minutes and I have about three questions I want to get to.

I know, Dr. Harriss, that you've written extensively about globalization and about development. We know that there are pros and cons to increased liberalized trade. There could be increased opportunities but it could be, as stated in your book, that globalization can have dislocating and unequalizing effects. I'm wondering if you have any advice as to how an EPA could be crafted to help include marginalized classes in development. Is this something that can be addressed in an EPA?

[Dr. John Harriss]

That's a very good question. I wish that I thought there would be a way through an EPA of addressing marginalized classes. The great problem of the Indian economy in the context of globalization, as you well know, is the epithet, jobless growth. There has been very little development at all of the numbers of good jobs in India. Of course, that's not to say there aren't good jobs outside in big, big companies, but India has not been developing productive jobs in the way that it needs to.

I think the best way, through an EPA, of trying to address problems of marginalized groups is through looking for opportunities for investment that will give rise to the sorts of enterprises that are going to employ labour. But then India also confronts the tremendous problems of skill development. You may or may not be aware that the evidence is that even lots of kids who have gone through primary education in India can't do a simple subtraction or actually write a simple sentence in their own language. In that context, there are terrific problems of the lack of basic skills.

One of the areas in which I think it is possible that Canada could do things of mutual advantage in the context of an EPA is through investment in India in skill development. I believe the Australians have started doing this with skill development centres.

Sorry, again I've talked too long, but I think that's the main—

[Don Davies, NDP, Vancouver Kingsway, BC]

No, that's fine.

I was talking to Dr. John Curtis in Ottawa a couple of days ago, and he stated that the best trade policy is education infrastructure and investment in skills in domestic populations. It sounds like something that you're touching on.

I want to move a bit to labour because I know you've also studied labour quite a bit. We know that India has not yet ratified the ILO convention on child labour. We understand they're being watched by the International Programme on the Eradication of Child Labour. While India has ratified that convention on children's rights, it has placed a declaration or reserve on article 3.(2) concerning minimum age for work. In addition, I know that labour groups are asking the Indian government to ratify the ILO conventions on trade union rights. I'm just wondering if you can give us a brief description of the state of labour rights in India right now. Are they improving? Are they not improving? What would you tell us about that?

[Dr. John Harriss]

Organized labour has been on the back foot for a long time, of course. Organized labour is subject to terrific problems of political fragmentation. Nonetheless, it has been sufficiently powerful to have prevented government, over the last decade and more, from acting on the advice given by so many economists that India should liberalize labour markets, and the labour movement has been able to hold back changes in the legislation. It's a sign that it's not a completely toothless body. But in spite of that, the big development of the last decade is the tremendous increase in the employment of contract labour—in organized, formal sector companies—contract labour that is often employed through guys who are effectively like Mafia bosses. People employed in that way have virtually no rights at all.

Labour rights are certainly always in question. The courts have sometimes judged very strongly in favour of labour rights. I'm talking of the Supreme Court and of the high courts in the states, but sometimes they have made judgments that have really infringed upon labour rights, so it's a very contested field.

[Don Davies, NDP, Vancouver Kingsway, BC]

You have thirty seconds, I think.

[The Chair, Conservative, Rob Merrifield]

He has about three seconds.

[Don Davies, NDP, Vancouver Kingsway, BC]

Can I just get to child labour briefly? What can you tell us about child labour in India?

[The Chair, Conservative, Rob Merrifield]

I will allow a very short answer.

[Dr. John Harriss]

It’s extraordinarily difficult to control child labour, extraordinarily difficult.

[The Chair, Conservative, Rob Merrifield]

Mr. Shory, go ahead for seven minutes.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Professor Harriss, thank you very much, and thank you for appearing in a half-sleeved shirt. It boosts our morale here in the snowstorm.

[Dr. John Harriss]

Thank you.

[Devinder Shory, Conservative, Calgary Northeast, AB]

What I gather from your testimony is that there are tremendous opportunities in India. There is potential for all kinds of opportunities. We all know it's a fast-growing country.

You made some comments about the synergy, I guess, about energy security: they need it and we have it. You talked about education, you talked about infrastructure opportunities, because India has an ambitious plan on infrastructure and definitely our businesses, our companies can benefit from that. But you made one comment about Canadian investments in India being lower than Indian investments in India. I want you to expand on that. Are there any specific areas that stop Canadian companies from investing in India and can they be overcome?

On the other side, I want you to make a comment on whether Indian companies’ investment in Canada is a good thing. If that is a good thing, how can we facilitate more Indian investments in Canada?