International Trade Committee on Feb. 27th, 2013

[Gordon Bacon]

A bigger percentage—

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Do you see that as a large...? It's 21.5%. Is there an opportunity, then, considering some of the issues that are in front of you? Do you see much growth? What do you see in terms of opportunity for growth?

[Gordon Bacon]

I think the biggest limitation to growth in India is the level of poverty. The lowest levels of per capita pulse consumption in India are among the poorest people; the people who most need the pulses most can't afford them.

Economic growth in India will create economic growth in the pulse trade to India. That's our biggest opportunity, and it is our biggest market. I don't have the number off the top of my head, but probably over 40% of our yellow peas go to India.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

When you see trade agreements that are developed among countries.... You've been involved in all of the nine that we have done and have some experience to monitor that. I guess the thought has always been that if you open trade both ways, it gives opportunities to, in this case, India, and the benefit comes back to Canada also. Is it the lifting of that whole economic value chain higher in a country that will actually help, then, to improve your export opportunities?

[Gordon Bacon]

It's both ends of the spectrum. Yes, absolutely. Again, the number is.... When consumption is lowest among the poor people, creating opportunities that will create some additional wealth will be helpful, but as I've pointed out, we also have the opportunity to grow demand, based on food being part of a solution to health challenges.

I think it's very interesting that some of these global food companies we're working with are targeting South Asia specifically, because they too see growth opportunities at the other end of the market spectrum.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

I have a quick question. I don't have much time left.

Mr. Pinto, on what you talked about, we recognize that the earthquake caused devastation. Those numbers in terms of the need for housing are staggering to someone in Canada. Did it change the building standards for housing in India? If that is the case, how does that affect the ability of those at the lower end to afford housing?

[Mervyn Pinto]

It did change. It was brought to the awareness of the public and the media. As you all know, India has the strongest media, being the largest democracy in the world. It did become more stringent. For the buildings that collapsed during that earthquake, the developers were put behind bars. The authorities were taken to task, so we had the awareness.

To answer your question, yes, the affordability became tighter, but again, that was something the government had to go by. There could be.... As I said, there was an increase, rather than a decrease, in the requirement from 2001 to today, from $19.2 million to $26.8 million today. That's the irony of it.

But you're right: that's the answer.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Would that allow Canadian lumber to be part of the solution?

[Mervyn Pinto]

Unfortunately, no. India only allows lumber used for furniture. Lumber, because as I addressed the cost structure, if using.... BC Wood did put up their showroom in Bombay. We were a part of the inauguration. They tried their best for a good four years to enter the market, but apart from the flooring and apart from the furniture, there was no way that BC Wood could use the lumber for construction.

In India, forestry is banned. India is more used to hardwood. It is being imported from Malaysia and Indonesia. Softwood is slowly penetrating the market, but again, more for furniture systems. It will be years and years before anything could be considered. Too, the pricing threshold will have to be far higher for Canadian lumber to afford entry into the Indian market.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We have about five minutes left, or a little more. We'll split that time between Madame Papillon and Mr. Keddy.

Go ahead.

[Annick Papillon, NDP, Québec, QC]

Thank you to the witnesses for being here with us.

Over the past few years, 35,000 jobs were transferred from Canada to emerging countries, and 2 million IT jobs were outsourced from Europe and North America to emerging countries. It is a complete shift.

Do you think this situation could get worse for Canada following an agreement with India, for example?

Mr. Pinto, what do you think?

[Mervyn Pinto]

India is a major service provider to the world as far as the IT sector is concerned. I would say the CEPA would bring both countries closer. There would be more exchanges of services both ways because Indian companies are now looking at investing in Canada on a large scale, apart from mining, even into IT, as well as the consumer product business.

We all know Essar Steel has taken a stake in Dofasco, and many Indian companies, large conglomerates, are trying to enter the Canadian market.

I am of the opinion it will benefit both countries.

[Annick Papillon, NDP, Québec, QC]

I see, thank you.

[The Chair, Conservative, Rob Merrifield]

You have one minute, if you want one. Please don't feel compelled.

[Marc-André Morin, NDP, Laurentides—Labelle, QC]

Currency in trade is a very important issue. We have a very strong currency, and sometimes we deal with countries that manipulate their currency downward to be more competitive.

Could you tell me, Mr. Pinto, if you have had problems with our currency compared to other countries we're competing with?

[Mervyn Pinto]

Minaean has set up a base in India, and has invested in excess of $5 million in setting up these plants for production of modular buildings and prefabricated structures.

When we entered the Indian market in 2001, there were 32 rupees to a Canadian dollar. Today there are 52 rupees, so you can imagine the pain the devalued Indian rupee is creating for Canadian investors who have invested money in the country.

To bring it back means we have to have that much appreciation in our returns, while transferring the dividends back in future.

Having said that, India is typically a consumer market driven economy. It is unlike other countries we have known. This country does not manipulate its currency, it has an open book policy. The Reserve Bank of India is very strong; it follows very strict guidelines that were laid out by the British when they left, and will use the same policies moving forward.

[The Chair, Conservative, Rob Merrifield]

Okay.

[Mervyn Pinto]

The Indian currency is very tightly controlled but a very open currency that is tied to the inflation governing the country at present.

[The Chair, Conservative, Rob Merrifield]

Okay, thank you very much.

Mr. Keddy, you have a couple of minutes. Go ahead.

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

Thank you, Mr. Chairman.

Welcome to our witnesses.

Mr. Bacon, it's nice to see you again. I'm trying to get a little clarity on a few of the statements that were made and dovetail them a little better.

You said 21.5% of our pulse crop goes to India?

[Gordon Bacon]

If you take a look at total exports from Canada to India in 2012, 21.5% of those were pulses. I will provide clarification to the clerk as to the percentage of our total production that goes to India.

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

Thank you for that.

Do you know what portion of the Indian market that 21.5% represents? Is it 8% or is it 10% or is it—

[Gordon Bacon]

Again, I will provide the clerk with the most recent statistics from 2012, but in past years 50% of India's total pulse imports came from Canada.

I will provide the most updated statistics. I don't have them at my fingertips.

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

There was a statement made—I think it was by you early in your presentation—that the per capita consumption of pulses has actually gone down. Is that because the population has increased dramatically? When we're looking at India, we always hear about the potential for the growing middle class and the requirement for more consumer items and more expensive items. Could you connect the dots on that a little bit?

[Gordon Bacon]

The reason is, again, the poorest people in the country have the lowest per capita consumption. This is one reason the Indian government is trying to increase production. The price is out of reach of many of the poorest people in India. And simply, you've had an enormous population increase, and the supply just simply isn't there. The potential market is enormous; the actual market is limited by the economics of the buyer.