International Trade Committee on May 15th, 2014

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

I think you commented positively on linking trade with aid in your earlier remarks. Although historically those have been separated in recent years—some people say for good reason—you don't want to tie what would normally be humanitarian aid to a particular country with trade relations, contracts, treaties, and that sort of thing. Are there pros and cons to this, or is it clearly a one-sided positive relationship to link trade and aid?

[Cam Vidler]

I think it's important to start from the understanding that development aid has a fundamental overriding objective, which is poverty reduction in developing countries. That's essential. That shouldn't change.

The idea of tying aid, saying we're going to help you out only if you're buying Canadian products, doesn't wash internationally and it doesn't wash in Canada. The Canadian business community doesn't want to see the government move in that direction. However, Canada has significant stores of expertise in areas like agrifood, financial services, microfinance, infrastructure, engineering, and significant capital sitting in pension plans and investment funds that could help achieve a lot of the development objectives in these markets. Oftentimes they're not being connected to those opportunities.

We're looking at ways that we can help better connect that expertise to those opportunities. If there's an international company or entity that can do it better, by all means, but we want to make sure that Canadian companies have a level playing field to be able to get involved in those projects and, ultimately, improve development outcomes.

[The Chair, Conservative, Rob Merrifield]

You have about five seconds, so I don't think you can do justice on a question or an answer, so we'll go to Mr. Tremblay.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Mr. Vidler, thank you for coming to testify before the committee. It is going to help us in our study.

Looking at the last decade, your report points to a poor performance by Canada. What do we have to learn from the last decade that will allow us to reverse the trend?

[Cam Vidler]

Mr. Chair, I think we've learned that we can't rest on our laurels. Minister Fast has been very clear to say that he understands that.

I like to use hockey analogies because they are so popular when we talk about trade in Canada. In the first period, if you look at the post-NAFTA period, say the first ten years, we were up. If you look at Canada's share of global trade, it was growing a lot, but I think we got a little bit passive about that. In the second period we sort of sat back, thought we could keep the lead, and the other teams put up a big fight and we fell behind. Essentially, we're in the third period right now and we need to rally and we need to come back. I think the message of the past ten years is that we need to take a look at all the tools we have, all the policy levers we have. I think there is a general consensus in Canada, across all of the parties, that trade is going to be a fundamental part of our future prosperity. We need to basically fire all pistons and use all the tools we possibly can to get this back on track.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Still on the same topic, but in the area of research and development, I want to mention the 2012 report from the C. D. Howe Institute. It says that Canada’s performance in productivity in the last decade was one of the worst. In the OECD, that is. It points to insufficient and ineffective support for innovation from the private sector.

At what point do innovation and research and development become necessary for your members? And what must the government do to improve R and D in Canada?

[Cam Vidler]

Mr. Chair, I think the member makes a very interesting and important point here.

The report that we did largely looks at what we can do to overcome some of the foreign barriers, but in the first few pages we do point out that there are a lot of things we need to be doing at home. Earlier I mentioned transportation infrastructure being one, but innovation and productivity growth is essential. If we're going to be able to be competitive in global markets, we need to be highly productive, we need to be offering high quality products at low cost, and that requires much more focus on our research and development and on skill development here in Canada. Some of the steps the government has taken on innovation, as well as skill development, hold a lot of potential, I think. We would encourage the government to continue to take steps to enhance the innovation climate here in Canada and connect companies to skill sets that are going to be needed for innovation.

[Jonathan Tremblay, NDP, Montmorency—Charlevoix—Haute-Côte-Nord, QC]

Could you give us your opinion about exchange rates and national currency fluctuations in trade agreements? They have a significant influence and I am sure you have an opinion on the matter. Could you please tell us about that?

[Cam Vidler]

If I understand the question correctly, exchange rate obviously affects the competitiveness of Canadian products in the markets, particularly if there's a lot of Canadian value that's being produced and priced in Canadian dollars.

That said, the high Canadian dollar of the past decade did not hit all industries in the same way. Some industries that would expect to have been substantially affected by a high Canadian exchange rate did quite well, actually. I think that points to that issue of innovation you mentioned: companies and industries that can innovate are able to still compete with a high dollar.

Another point we make in the report is that the high dollar should in fact encourage companies to invest abroad as well, because it would make it easier to acquire assets. We're actually quite concerned—and this is why we think this is more of a systemic issue of Canadian companies being willing to go abroad—because we didn't see a large growth in our outward investment during the time when our dollar was high.

[The Chair, Conservative, Rob Merrifield]

Okay. Very good.

Mr. Shory, you are next.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you, Mr. Chair.

Thank you to Mr. Vidler for coming back to the committee.

In your recent report, Turning it Around: How to Restore Canada' s Trade Success, I found a paragraph, and I'll quote:

Studies on the impact of trade promotion repeatedly find that it is a cost-effective way to increase firm internationalization. In the Canadian context, for instance, companies using federal trade promotion services export 18% more than comparable firms. They also export to 36% more markets. Assuming a proportional relationship between the trade promotion budget and incremental exports, every dollar spent stimulates $27 of exports.

I want you to make a comment. How is the federal government's GMAP impacting the number of companies taking advantage of the implementation of economic diplomacy? Also, what barriers to trade does this new strategy address that companies have experienced in the past?

[Cam Vidler]

I think it's probably too early to tell what the impact of the GMAP has been in terms of company exports. If those studies are in fact true—and I think they've been looked at by quite a few different experts—we would expect that the expansion of a trade commissioner presence in markets like China and India should be helping to stimulate our exports.

I would like to point out again, though, that our overall trade commissioner presence in the world, and the overall funds being allocated to that, have stayed at the same level, in fact, as they were in 2007. That's not even taking into account inflation, in which case you might actually, in real terms, be looking at a less resourced trade commissioner service than we had almost seven years ago. I would caution that we're seeing a renewed export growth because of actions taken by the government with respect to the trade commissioner service.

I know you had a second question that has escaped me at the moment.

[Devinder Shory, Conservative, Calgary Northeast, AB]

My second question is, what barriers to trade that companies have experienced in the past does this new strategy address?

[Cam Vidler]

I think it takes on some that have long been identified as barriers to entering foreign markets. By referring to the tools we have, the trade commissioner service, Export Development Canada, the Canadian Commercial Corporation, Business Development Canada—all of which are a big part of the global markets action plan.

It talks about taking care of the information barriers. In other words, information about what your export requirements are: what steps you have to take; what kinds of market opportunities exist abroad; how companies can establish relationships with local partners, suppliers, customers they don't know beforehand; how they can finance the risks associated with exporting—whether that's exchange volatility, political risk, and counterparty risk. Also, overcoming cultural barriers; overcoming issues related to changes in government policy, so ensuring that we have strong advocates for Canadian companies to host governments where they're doing business—all of those types of barriers are certainly part of the target barriers that the GMAP addresses.

[Devinder Shory, Conservative, Calgary Northeast, AB]

You mentioned in the past that you had worked for CIBC, the Canada-India Business Council, and you did some looking to India, I believe. Of the issues you identified in that research, do you see that any of those issues could be addressed in this GMAP?

[Cam Vidler]

Yes, I think the GMAP does address a lot of those issues, and certainly in the Indian market, I would say the whole range of issues I just mentioned apply, and perhaps apply even more acutely.

The point that the chamber wanted to make with this report is not that the GMAP is identifying the wrong barriers. It's certainly identifying the right barriers. It's talking about the trade promotion services and the economic diplomacy that can be done to overcome those barriers. Where we think it could be improved is by having more ambitious, concrete changes in those directions, so ways of strengthening our approach to addressing those barriers. In a sense, it scopes out the right issues, but we think we need to pay a lot of attention and put the “action” part in the global markets action plan.

[The Chair, Conservative, Rob Merrifield]

Your time has gone, Mr. Shory.

I would like to let the committee know that our witness, Lorna Wright, has just arrived.

We'll suspend the committee at this time, and we thank Mr. Vidler for his testimony.

We also have our next panellists all set to go. We will proceed with the second hour and we'll give it a little more time because of our not being able to hear Ms. Wright’s testimony in the first hour.

If that's fair, I think we will suspend.

Thank you, Mr. Vidler, for a very interesting panel. I appreciate your visiting our committee.

[Cam Vidler]

Thank you.

[The Chair, Conservative, Rob Merrifield]

With that, we'll suspend.

[The Chair, Conservative, Rob Merrifield]

I call the meeting back to order.

We have a bit of a change to this panel. We have three of our guests. We have Lorna Wright from the first panel, who was delayed by a flight. As members of Parliament, we've been there many times, so we understand very well.

We will start with you, Ms. Wright. You're from the Export Development Canada professorship in international business at York University. Thank you for being here.

Also I will introduce, from the Information Technology Association of Canada, Mr. Gupta, president and chief executive officer, and as well, as an individual, Keith Head, Professor of Sauder School of Business, University of British Columbia.

We'll start with you, Ms. Wright. The floor is yours.

[Dr. Lorna Wright, EDC Professor of International Business, Director, Centre for Global Enterprise, Schulich School of Business, York University, As an Individual]

Thank you very much.

My apologies for being late. Just in time seems to work for the auto industry, but when you apply it to the airlines, it doesn't work quite as well.

Thank you very much for giving me the opportunity to be here today to comment on the GMAP.

There are many things that I like about the document, and there are some things that I think could add to its impact. I should mention that my comments will be coming from the perspective of an international business educator, as someone who spent 20 years working outside of Canada in various capacities, and someone who is now trying to do exactly what the GMAP is trying to do: get more of our SMEs taking advantage of the opportunities beyond our borders.

One of the things that has impressed me about the GMAP was the amount of consultation that went into its production. Stakeholders were not only consulted, but actually listened to, and the resulting plan shows this. The consultation is to continue with the proposed advisory council and its two standing subcommittees on emerging markets and established markets. I think that's one of the strengths of this plan.

But what I was most happy to see in the GMAP was its focus on SMEs. They are the backbone of our economy, and there is enormous room for improving their export performance. Only 10% export. Of those that export, the majority do so to the United States, with less than one-third exporting to Europe, about 21% exporting to Asia, and to other parts of the world, much less.

However, if we look on the glass-half-full side, looking at growth in exports to Asia, Canadian SMEs outpace our large companies in China, India, Hong Kong, and five of the ASEAN markets.

The third point that I liked about the GMAP was the fact that the plan prioritizes markets. I haven't seen that done before at the government level, and it's an important step to take. However, when I look at the list, it's a long one. Are they all priorities? Can we really focus on all of them? Do we perhaps need to categorize them further as top priorities and secondary priorities within each of the regions?

I was also glad to see “improve and coordinate branding and marketing of Canada” in the plan. For too long we've been too modest, and finally it's not un-Canadian to boast a little bit, to show what we've got.

As a last point, the recognition that this plan must be “agile and adaptable” is critical. Events in the world move quickly these days, and we have to be flexible enough to take advantage of the new opportunities that present themselves. Reviewing periodically to recalibrate if necessary is also good to see included.

However, some areas that I would like to have seen given more emphasis in the plan are services, which are a huge part of Canada's trade that deserves more prominence in the GMAP. There are services in the 22 priority areas listed, but I think they should be given more prominence.

One of those services is education. When I checked Canada's international trade and services by category on the DFATD website, I couldn't find education. Is it lumped in with government services? Maybe, but if you don't see it, what doesn't get measured usually doesn't get counted. International students add greatly to Canada's economy. I'm happy to see that there is also an international education strategy, but I would like to see a closer link between the GMAP and the international education strategy; otherwise, I see them becoming siloed. Embedding a trade commissioner in the international education strategy is a good step, but I'd like to see more. Don't forget that international students, on returning home, often rise to positions of influence, and when faced with international procurement decisions, will turn first to the country they know best, Canada. I've seen that happen with other countries; I'd like to see it happen more with Canada.

Still on the education point, the GMAP focuses on our current business people, understandably. But what about the next generation? Let's think ahead and have them better prepared. Partnering with universities and colleges would be a good plan to link the present and the future, and EDC is doing that now. Witness my professorship, the EDC professorship in international business at Schulich.

I'd also like to see some emphasis in the plan on accessing multilateral lending agencies, for example the Asian Development Bank. We've always done very well at the ADB on consulting services, but not nearly so well on the far more lucrative goods, works, and related services. Are there ways that the GMAP can help SMEs enter the supply chains of companies bidding on these projects, and also help our larger companies? That would be extremely beneficial to Canada.

Also—probably it's top of my mind since I'm speaking on this at the APEC meetings in Beijing next week—mobile commerce. I didn't see that at all in the GMAP. Mobile commerce is a step on from e-commerce, and this is the way the world is going. Some recognition of it, with help for SMEs to access the latest technology, would be good to see in the GMAP.

The GMAP is very good at giving a strategy, but it also needs the implementation. A strategy is only as good as its implementation. Adding more resources to the trade commissioner service is a good start. Beyond that, I see several areas to focus on. First, how are you going to get information out to the SMEs? There's a lot of information out there coming from all sorts of sources, and the SMEs that I talk to are bewildered about where to start to look. If they're new to cross-border business, they often don't even know the questions to ask. Those with some experience under their belts still find it arduous to wade through all the different sources. A one-stop shop or portal with a user-friendly interface that you could market as the place to go to get all the information, with links to all the appropriate agencies, would be a great help.

As to the education of SMEs, almost anyone who talks about Canadian business mentions its conservativism and risk-averse nature. Cross-border business by its very nature entails risk, but it's manageable risk. SMEs need to overcome the fear factor if they're to succeed internationally. They need to know how to manage this risk, and this can be helped with education. The education can be done through forums, seminars, mentoring, accelerators. These are some of the things we're trying to do at Schulich Centre for Global Enterprise.

The other point here is that among the top six or seven factors that are found in numerous studies to be the reasons a company isn't doing business internationally are that they don't understand the business culture, they don't speak the language, or they don't have the management expertise. These are all factors that can be addressed in seminars or by mentoring, but they can also be addressed by linking SMEs with business students who do have these skills, who can be hired on a project basis, as interns, or as full-time employees.

That leads me to partnering, not only consulting but partnering with other organizations with the same aim. There are a lot of us out there with the same aim of getting more SMEs doing business outside of Canada, the CME, I.E. Canada, the chambers of commerce, my own Centre for Global Enterprise. This partnering can provide synergies and make scarce resources go further.

The GMAP needs to have a plan to follow up, to track individual companies. Without this, there may be a good start but there may not be follow-through on the part of the companies. This was one of the problems with the old Team Canada missions. There was almost no follow-up. A lot of the companies went out and kicked tires. It looked like there were some things happening, but once they got back to Canada they forgot about it.

Finally, we need a holistic view of trade. Trade is a two-way street. It's imports as well as exports, and more and more these days it's being part of the global supply chain. I didn't see that notion of the global supply chain reflected to the extent it should be in the GMAP. And another part of this point on a holistic view of trade, although I think it's probably beyond the scope of the GMAP, is that it would be very helpful if there were more coordination among government departments. I often saw what appeared to me to be DFAIT—as it was then—and CIC at cross-purposes, with DFAIT trying to promote trade and investment and CIC trying to slow it down via visa roadblocks.

I believe one of your earlier presenters mentioned import regulations being under the Ministry of Public Safety and not always aligned with export regulations. With companies these days often being both importers and exporters, we need to align them.

Then there are the interprovincial trade barriers. It's better than it used to be, but we may soon be in a situation where it's going to be easier to trade with Korea than between Ontario and B.C., which is very confusing for foreign companies.

In conclusion—am I still within my allotted time?

[The Chair, Conservative, Rob Merrifield]

You're a little over, but I'll let you conclude.

[Dr. Lorna Wright]

Okay. I'll just offer my list of key success factors for SMEs to be successful internationally: good product or service, building relationships and reputation, maintaining a technical edge, being strategic, developing local knowledge, and being adaptable. On the government front, I see the GMAP moving forward on doing exactly that.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

We'll now go to Professor Keith Head, another professor, from the University of British Columbia.

The floor is yours.

[Dr. Keith Head, Professor, Sauder School of Business, Strategy and Business Economics Division, HSBC Professorship of Asian Commerce, University of British Columbia, As an Individual]

Hi. I'm very happy to be here, and thank you for inviting me.

How much time do I have?