International Trade Committee on May 6th, 2014

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thank you to the witnesses.

Mr. Myers, before I get to your specific comments on some questions, I want to give you an opportunity to respond to what the C.D. Howe Institute said on the role of the private sector. You may want to make a comment on that. I mean, what is holding back the private sector from coming up with the role that it should be contributing?

[Jayson Myers]

I'm not as pessimistic as some people who do the analysis and the economics are because I do see a lot of investment in new products, and there's the fact that our exports are back at pre-recessionary levels. It has taken a long time to get there, but it's not as if we've dropped off the board.

Are there challenges? Yes, there are, but another thing we really need to do—and John Curtis did a superb job of trying to put together an economic framework for analysis behind this, behind the global markets action plan—is to have a much better way of measuring international business activity, because if you can't measure something, you can't improve it.

For example, a few years ago I went to Chengdu, Sichuan, where I had an opportunity to meet the head of the industry association there, who told me that the biggest-selling foreign car in Chengdu was a Canadian car, Chrysler, out of Brampton. That surprised me because I came back—I had a very nice dinner because of that—and looked at our statistics. How many Canadian cars do you think we export to China, according to Statistics Canada? None, and the reason is that they're distributed through the United States.

If we can't measure our trade, imports or exports, I can guarantee we don't have a very clear idea of services trade. What I see on the part of a number of companies that perhaps might have adopted an export strategy a few years ago is that now they're adopting a much more direct investment strategy. Last year, the sales of Canadian affiliates in foreign markets actually exceeded our exports.

So we are seeing those investments. We are seeing an awful lot of international business, but we're not necessarily seeing that here, from a Canadian base. I think that's important to recognize in terms of the support and the trade policy we are pursuing here on the part of government, as well as the business strategy about how to enter new markets.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Mr. Myers, you were a member of the advisory board for GMAP. In that capacity, could you tell us what kind of consultation you had with our government on the direction of the plan? Also, what kinds of key suggestions did you make, and did you feel that those suggestions and the suggestions of your peers were taken on board?

[Jayson Myers]

I think there were four meetings over a period of a year. The first meeting was really to scope out the exercise: what it was all about and what the objectives were, setting the framework for the analysis there. Between the meetings, we were actively engaged with other associations in surveying exporters. I know that there were a number of face-to-face meetings that we were able to put together for officials and for the minister to feed into. This was not just a group of people sitting around a table thinking about what they should do. It was a very extensive consultation, particularly with small businesses right across the country.

As well, from my point of view, I wanted to get across the idea that there isn't an overall view in terms of picking priorities. We can look at new growth markets, but what we really need is a strategy for the United States. The United States is our major market. Europe is another major market with, at that time, a possibility of a huge trade deal. We need a strategy for Europe and that strategy is going to be different from the strategy for the United States, and I think that was something I did see reflected in the priorities there.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Mr. Myers, or maybe both of you can answer this question. This GMAP breaks up the opportunity markets for Canadian businesses into three groups: emerging markets with broad Canadian interest, emerging markets with specific opportunities for Canadian businesses, and established markets with broad Canadian interest.

Could you give a summary of what kind of potential we see in each type of market for Canadian businesses?

[The Chair, Conservative, Rob Merrifield]

We'll start with Ms. Nott.

[Joy Nott]

I think out of those three markets the one that is the most attractive, at least from the feedback from my members, is the established markets that we already have with the broad interest across all industry sectors. Of course, the second most popular, or the one that people seem to be seeing as having the most opportunity, are very specific industry sectors and emerging markets that are very focused on a specific industry sector. I have a large set of members who deal with military and other controlled goods. They're looking at very specific opportunities that exist in some emerging countries where the rest of my members may look at that same country and not really see a lot of opportunity.

It all depends on who you're talking to, at least from our perspective. I'd like to focus on the smaller and medium-sized members that we have because that's where our opportunities really lie. They're focused almost exclusively, in my experience, on the established markets we already know. I think it plays to a lot of the things that both Jay and I have been saying, everything from leadership's hesitation to go into new markets and being risk averse for a whole bunch of different reasons. I know that Europe and the CETA overall is being seen as the next big opportunity despite the fact that the European Union has economic challenges at the moment. It's still seen as the largest opportunity out there.

[The Chair, Conservative, Rob Merrifield]

Thank you.

I'm going to go with the other questioners because your time is exhausted and I think we were going to hear about the same thing.

Madam Liu.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thanks for your time.

Mr. Myers, you were obviously very closely involved in the elaboration of GMAP and you're notably a member of the consultation committee. As you know, GMAP includes an objective to increase export presence of Canada's SMEs in the emerging markets from 29% to 50% by 2018, so in the next five years.

In the first hour of questioning Mr. Curtis expressed a little bit of skepticism about that, although he wouldn't venture further. As part of the consultation committee could you speak to how this goal was determined and what concrete actions will be taken to achieve this goal?

[Jayson Myers]

That's a good question.

I think there was a sense that in any strategy you needed to set a stretch goal or an aspirational goal. So, it's a target. That's very much what we were looking at here, recognizing that there may be various ways of getting there either through direct exports or through indirect exports by building up a presence through supply chains, or in some cases, a direct presence in these markets.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Essentially, you're hoping that will rise to meet the challenge. Is that what you're saying?

[Jayson Myers]

If you don't set a really good aspirational challenge, you don't create the burning platform for the alignment or for business itself.

We were talking before about a small company's business leadership stepping up. I hope, and this was a part of the thinking here, that GMAP itself presents a target and a goal for businesses themselves.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I have another question for you, Mr. Myers, concerning the goals of GMAP. One of the goals was to attract talent to address Canada's labour shortages.

As a member of the consultation committee can you speak to whether there are any representatives from the Canadian labour sector on the committee?

[Jayson Myers]

I don't think there were.

The representation was mainly from the export side or the businesses that were actually doing the business. That's really what the strategy was aimed at, recognizing the need that all businesses have to be able to move people from location to location whether that's coming into Canada or going outside of Canada.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thanks.

Before I run out of time I would like to turn my question to Ms. Nott.

The GMAP speaks to the Canadian trade commissioner service and it's something you are obviously very familiar with. It's a network of professionals from Foreign Affairs, Trade and Development Canada, working in embassies, high commissions, and consulates and regional offices, to support the growth of Canadian companies internationally.

In your opinion, is the current geographical distribution of TCS offices aligned with the current or anticipated Canadian business interests? Do you have any recommendations as to how we could improve the network?

[Joy Nott]

As far as where the trade commissioner service offices currently are globally, I think they are aligned. I think the more pressing issue relative to the trade commissioner service is the fact that—and I'm pretty well known for saying this—it's Canada's best kept secret. The number of SMEs I have talked to that have never heard of the trade commissioner service, misunderstand what it is, and/or think they themselves are not big enough or important enough to use it, to me is problematic. I think a better job needs to be done in communicating what the trade commissioner service is, and who is eligible to use the services, because I think there are too many SMEs that think they're not big enough, not important enough, and would never get the appropriate amount of attention.

On another communications issue relative to the GMAP overall, I think GMAP, to Jay's point, will hopefully be something that spurs SME leadership in Canada to go global. But I think we have the same issue with the GMAP. When I say GMAP, most SME leaders I've spoken to think I'm talking about a GPS. They don't know what I'm talking about.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. Hiebert.

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

It's lost in translation, I guess.

Mr. Myers, you opened your remarks by commenting about the history of exporting in Canada, and commented that we lost 20,000 exporters in the 2000s because of foreign exchange rates. Mr. Curtis also commented on the impact of the risks associated with foreign exchange for small and medium-sized enterprise. I'm wondering if the government can do anything more to help these SMEs address the exchange risks that exist in the world today.

[Jayson Myers]

That's a good question.

To some extent it's not just the exchange rate. I think this is where Joy's expertise is really useful. It's also that small Canadian companies, whether they're importers or exporters, usually take on the border risk as well, so I think apart from overall sound economic and fiscal policies, which are extremely important, there are agencies like EDC, for example, that play, I think, a crucial role in being able to offset some of the financial risk around exchange rate volatility. Other financial institutions do as well.

But what we're seeing on the part of companies doing business internationally.... The exchange rate risk itself, plus the downsizing of customer demand in the U.S. market, may be one reason Canadian companies are not exporting, and maybe have turned to the domestic market, to the resource and infrastructure projects here in Canada, which for many of them offer a far better rate of return on their investments and their sales than trying to continue to do business in the United States. That may be one of the reasons we've seen the number of exporters and the number of our exports to the U.S. decline.

But clearly better border policy.... Two years ago, Statistics Canada did a survey looking at the impact of tighter border measures on Canadian exports and imports. They found on both sides that about 10% or 12% of companies had stopped doing business with the United States solely because of the problems at the border, so clearly we need to do something there.

We have seen a lot of companies try to offset some of this risk by balancing their exports and imports and by taking on, at a time of a high dollar, more U.S.-denominated debt, expanding their capacity across the Canada-U.S. border, or internationally.

Services that enable them to make these decisions and to flexibly change their business organization are important. That again is where some of the regulatory problems come in, because they can be a real sticking point in being able to get that flexibility.

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

I'd like to hear Ms. Nott answering the same question about exchange rates. As well, do you have any comments about the initiative between Canada and the U.S. to thin the border? It was announced several years ago by the Prime Minister. I believe you were at the announcement, Mr. Myers.

Ms. Nott?

[Joy Nott]

I would echo everything that Jay just said and provide you with one example.

There's a Canadian company that for over 50 years imported musical instruments from Asia, primarily China, into Canada and had their North American distribution hub based just outside of Toronto, in Scarborough. Given some bad experiences and some other factors that played into it, currently—I think the decision has already been made—they're looking at taking that distribution hub and moving it to the United States.

I think a lot of progress has been made with regard to thinning the border between Canada and the United States. We can't control the sense, at times, of what I'll call U.S. patriotism. We go through ebbs and flows of Americans being what I'll call tolerant of imports and then other times when they become less tolerant of imports, even from Canada. I think it's that uncertainty that has led to so many Canadian companies, even small companies, which at one time might have used Canada as their distribution hub focal point, now having their goods manufactured outside of Canada and shipping them directly to the United States and setting up distribution hubs in the United States, and when need be, exporting from the United States up to Canada to feed the “domestic market”.

[The Chair, Conservative, Rob Merrifield]

You're absolutely right on that. In fact you've probably opened up another discussion that the committee should look at some time in the future. But, nonetheless, I certainly want to thank you for being with us. Your presentation on this subject has been very valuable.

We also want to thank the committee for their excellent questions.

With that, our time is gone, so we will adjourn.