International Trade Committee on May 29th, 2014

[The Chair, Conservative, Rob Merrifield]

I'd like to call the meeting to order. We have the privilege of having the minister with us this morning, and we want to thank the committee for being here. We have the potential of being interrupted as we move into this meeting, but we will deal with that in due course. We are here on Standing Order 108(2), a study on the positive effects of the global markets action plan. We have the minister here to answer any questions you might have. We'll lead off with his presentation to the committee and then we'll get into questions and answers.

Welcome, Minister.

[Ed Fast, Conservative, Minister of International Trade]

Thank you, Mr. Chair. Good morning, everyone. Bonjour, chers amis. Thank you for the invitation to appear before you today. I am joined by Susan Bincoletto, who is our chief trade commissioner for Canada. l'm delighted that the committee has chosen to undertake a review of our government's global markets action plan. This morning I would like to provide you with some background on this landmark plan and also fill in a few details.

It's no secret to anyone here that Canada has been and remains a nation built on trade. We are one of the great free-trading nations of the world. Trade is equivalent in size to some 60% of Canada's gross domestic product, and one out of every five Canadian jobs is related to exports.

One of the first initiatives our government undertook to expand international trade for Canadian businesses was the global commerce strategy. It was a comprehensive plan for expanding Canada's trade network, strengthening our competitive position in our traditional markets, and extending our reach to new, emerging markets. The strategy generated significant success, helping to pave the way for our government to sign numerous trade agreements.

But in a fiercely competitive global economy, Canada must remain nimble and agile. We must keep challenging ourselves. To do just that, our government's economic action plan 2012 committed to building on the success of the global commerce strategy by consulting extensively with Canada's business community to identify new markets, new strengths, and new opportunities.

The result of our consultations is the global markets action plan, or GMAP as we call it. This plan, which I released at the end of last year, is Canada's new blueprint for creating jobs, economic growth, and opportunities for Canadians through international trade and investment.

Under the GMAP, the Government of Canada will concentrate its efforts on the markets that hold the greatest promise for Canadian business, and focus on the sectors of our economy that hold the greatest promise for export growth. We will do this through vigorous trade promotion and effective trade policy.

As we concentrate on priority markets and sectors, the global markets action plan will also entrench the concept of economic diplomacy as a driving force behind the Government of Canada's trade promotion activities throughout its international diplomatic network.

Let me be clear. Placing economic diplomacy at the heart of our broader foreign policy plan is not in any way intended to undermine or compromise Canada's robust development and humanitarian programs, or our peace and global security initiatives.

We do expect our government representatives abroad to promote all of Canada's values and interests, including our economic interests. At the forefront of these efforts is Canada's trade commissioner service. These are Canada's trade professionals, posted across Canada and all around the world, executing the trade and investment promotion activities of the GMAP as a core component of our broader foreign policy plan. Our trade commissioners provide market intelligence, on-the-ground support, and act as troubleshooters in markets that Canadian companies are interested in exporting to.

I recently announced that more than 25 trade commissioners will be embedded in industry associations across our country. Their role is to inform Canadian companies about the tools that our Canadian government has made available to them as they explore export interests around the world. Our embedded trade commissioners will also act as a bridge between businesses and government programs, policies, and agencies such as Export Development Canada, the Canadian Commercial Corporation, and the Business Development Bank of Canada.

Our embedded trade commissioners will also gain better insight into the evolving export needs of Canadian industries and ensure these needs are reflected in the services they provide to our businesses.

Another trade promotion tool I want to touch on is the wide array of trade missions that our government leads to our priority markets.

Sector-focused trade missions are one of the many ways our government supports Canadian companies, particularly SMEs, to explore and succeed in foreign markets. Trade missions are about opening doors, about finding partners, engaging with key decision-makers, fostering long-term relationships, and identifying new trade and investment opportunities.

In fact, I just completed a trade mission to China this last week.

The mission was focused on the sustainable technologies industry, one of the priority sectors under the global markets action plan. During that mission, I announced that we will open another four Canadian trade offices in China, bringing to 15 the total number of points of service Canada offers to Canadian exporters and investors in our second-largest trading partner, China. Over 100 of Canada's trade commissioners will be deployed throughout China. In short, we are committed to aligning Canada's resources with our priority markets. Next month, I'll be leading a trade mission to South Africa and Tanzania with a special focus on the extractive sector, infrastructure, and renewable energy and power.

Equally important to our trade strategy are incoming trade missions. This Sunday I will be welcoming in Vancouver a delegation of my ASEAN ministerial counterparts and senior officials. We're very much looking forward to deepening our trade ties with our ASEAN friends—those will be countries in Southeast Asia such as Cambodia, Vietnam, Indonesia, the Philippines, and Malaysia—and we're looking forward to showcasing the very best of what Canada has to offer. I'm also pleased that business delegates from Turkey will be here in Canada next week. As you know, Turkey is also a priority market under the global markets action plan.

Now, those incoming trade missions to Canada are among the tools we use to connect our SMEs to global markets. I would just note, with regard to small and medium-sized enterprises or SMEs, that the GMAP recognizes that SMEs are the backbone of Canada's economy. We currently have somewhere in the order of one million SMEs in Canada. Many of them have the capacity to export, but only about 40,000 of that one million do so. The number that export beyond North America is even smaller, much smaller. So, our goal under GMAP is to increase the number of SMEs that export into emerging markets from 11,000 to 21,000 companies. I know that's a tall order, but these are the markets that today offer the greatest growth opportunities, and it is critical to our long-term prosperity that our SMEs step up to the plate and now begin to explore export opportunities beyond North America.

The last pillar of the GMAP that I wanted to mention is our commitment to negotiating trade agreements and investment agreements with other countries, which will free up trade between us and our key trading partners and provide more security and assurance for those in Canada who want to invest abroad.

When our government first took office in 2006, Canada had concluded free trade agreements with only five countries. That was a short eight years ago. Today we're approaching concluded trade agreements with 43 different countries, and there are many more to come. Last October we signed the agreement in principle for our free trade agreement with the European Union. When that agreement comes into force, it will mean that Canadian exporters have preferential access to more than half of the entire global marketplace. As the world's largest trading bloc, the EU represents over $17 trillion in economic activity every year. The value of the EU's annual imports—imports alone—exceeds Canada's total annual economic output.

In March we also announced the successful conclusion of a free trade agreement with South Korea, Canada's first free trade agreement in Asia. This agreement will boost Canada's economy by $1.7 billion a year, and just as importantly, Canadian businesses will now be able to use Korea as a gateway to the larger, rapidly growing markets of Asia, where we're also pursuing free trade agreements with India and Japan and within the Trans-Pacific Partnership.

Investment protection agreements are also important as they provide Canadian businesses with greater confidence and assurance when they invest abroad. Two days ago I announced the coming into force of the Canada-Benin Foreign Investment Promotion and Protection Agreement, which is Canada's third in Africa. That brings to 27 the number of bilateral investment treaties Canada has in force around the world.

In closing, I want to state that our government's ultimate goal is a world in which all can share in the prosperity, opportunity, and choice that international trade and investment deliver. The GMAP is Canada's contribution as we all work toward that goal.

Thank you. I welcome your questions, Mr. Chair.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

You sound like you've been flying high and been very busy. It's very good and impressive.

Mr. Davies, the floor is yours as we open up questions.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman.

Thank you, Mr. Minister, for being with us today. Again, welcome to the committee.

Minister, I want to commend you for your recent efforts to increase our trade presence in China. While we know that trade agreements can provide the framework opportunities to increase economic activities, as you have pointed out today, trade commission offices provide the real, on-the-ground services that help Canadian businesses realize that potential and actually often make the sales.

However, there are an increasing number of commentators, including the Canadian Chamber of Commerce, who point out that our trade commissioner's staff have been under-resourced over the past eight years. Cam Vidler, the director of international policy for the Canadian Chamber of Commerce told this committee two weeks ago, and I'll quote him:

The trade commissioner service is at the heart of Canada's economic diplomacy, and they need to have the resources and skills set to get the job done right. Despite rising service requests, budgets and staffing are at the same level as they were in 2007 and are set to stay flat for the foreseeable future.

Given the vital role that trade commissioners play in realizing our trade ambitions, Mr. Minister, can you tell this committee why they're not receiving increased resources from your government?

[Ed Fast, Conservative, Abbotsford, BC]

That's a good question, Mr. Davies. Let me answer that in two ways.

First, our government has made a very clear commitment to Canadians that we will return to balanced budgets. We are tracking to do that. That requires discipline, and we've been able to do that within a low-tax environment. We made a commitment to return to balanced budgets without increasing taxes on Canadians. We believe we are well on our way to achieving that.

Within those constraints, we're of course looking to do more with less. In other words, we're trying to become more efficient and deploy our resources to those areas of the world where we get the biggest bang for the buck. Obviously, as required and as warranted going forward, we will always be looking forward to new opportunities to place additional resources in the markets that matter, so that we can address the sectors that matter to the Canadian economy, but I can assure you that we are doing our very best within the current constraints that we have to honour the commitments we've made to Canadians to make sure that we deploy our trade commissioner resources in the most effective manner.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Now, Minister, of course Canada is in a competitive world, and many other countries are seeking to tap the very same markets that we are. So it's instructive, I think, to compare our investments and trade assets with our competitors'.

I'll quote the Canadian Chamber of Commerce again. Two weeks ago, they told our committee, “As a share of GDP, the United Kingdom now spends twice as much as Canada on its trade diplomats.”

They pointed out that Australia dedicates 50% more resources and trade promotion than does Canada. The demand is clearly there. The recent Chamber of Commerce report elaborates and states, and I'll quote again:

Recent developments suggest that resources are increasingly being spread thin.... Much of this demand has come from emerging markets,

—the markets you referred to, Mr. Minister—

where trade commissioner requests grew by 15 per cent over the past year. In China and India, they increased by 37 per cent and 25 per cent, respectively. The target in the Global Markets Action Plan to double the presence of small- and medium-sized businesses in these markets by 2018 will only add to this pressure.

So, again, logically the demand in our trade commissioner services, in their view and ours, should be met with increased resources in order to ensure success. So are there any plans that you have to try to meet that increased demand with the increased trade commissioner presence to realize that potential?

[Ed Fast, Conservative, Abbotsford, BC]

I think I just answered that question, Mr. Davies, but what I will say is this. It's not just about how much money you spend; it's about how you utilize those resources. As I've travelled around the world, I've visited dozens and dozens of our key trading partners and I've had a chance to meet our trade commissioners on the ground. I've also had a chance to meet thousands of their clients over the last three years. I can tell you that the trade commissioner service of Canada is admired all around the world.

I believe it's the best tool of its kind in the world. We have received kudos for the work that our trade commissioners do in the field and for the services they deliver to Canadian companies on the ground. Is there more we can do? Of course there is. As time goes by, we're going to make sure that we put the resources in the field that are required to maximize Canada's potential in terms of its export interests.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

Now, I just want to turn to SMEs for a moment if I may, Mr. Minister.

The Chamber of Commerce also pointed out, in their report, the shutting down of the virtual trade commissioner service, which was an online, streamlined, one-stop shop for the trade commissioner service.

I also have spoken to many businesses and exporters, who tell us that it's very helpful for them to have a one-stop shop, particularly for SMEs who don't have big departments. They don't have the staff, the time, or the resources to have a presence in other markets. They want our government to provide them with a streamlined location, preferably online, where they can get the information they need to access those markets. They say that this service, the virtual trade commissioner service, was crucial for SMEs, who find it “difficult to navigate the trade promotion ecosystem.”

The report of the Canadian Chamber went on to say:

Often, they have to visit multiple websites, and speak with several representatives in different departments, before finding the relative solution to their problem. This can be enough to deter them from seeking services in the future.

Can you give us a brief explanation, Mr. Minister, of why the virtual trade commissioner service was closed, if we really want to help SMEs to tap into export markets?

[Ed Fast, Conservative, Abbotsford, BC]

Thank you for that question.

The global markets action plan has provided us with the perfect opportunity to re-evaluate the programs we have and re-evaluate the resources we have. It gives us an opportunity to redeploy resources in a manner that drives a bigger bang for the buck when taxpayers invest.

I'm going to pass it on to Ms. Bincoletto to explain to you the rationale behind the virtual trade commissioner service and what we're doing.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you.

[Susan Bincoletto, Assistant Deputy Minister, International Business, Chief Trade Commissioner, Department of Foreign Affairs and International Trade]

Thank you, Minister.

I should say that what we're trying to do is modernize the way we access SMEs. We are currently leveraging other government departments and organizations like EDC, CCC and BDC, as well as NRC. They all dabble in the same space of working with small and medium-sized companies. They have various websites and digital tools to connect with SMEs.

What we're doing through various MOUs is trying to develop another frame, so that we can provide a single or more comprehensive window to track what the needs are for SMEs. There's a life cycle. Some need financing. Some need contracting. Some need contacts. By working better together, which is also something that the Chamber of Commerce has said—better coordination among government institutions—we're trying to work to have a better, easier, seamless face to help SMEs. That's why it's kind of the next phase to improve government resources for the benefit of SMEs.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Mr. O'Toole, the floor is yours for seven minutes.

[Erin O'Toole, Conservative, Durham, ON]

Thank you very much, Mr. Chair.

Thank you, Mr. Minister and Ms. Bincoletto, for joining us this morning. We appreciate your remarks, and we appreciate your efforts, globally.

Minister, I want to seize first on your great breakdown of our government's focus on SMEs, small to medium-sized enterprises: one million, but only 40,000 exporting, and a vast majority of those only looking to the U.S.

We heard, a couple of weeks ago, from Dr. Head, from the University of British Columbia, and Dr. Wright, from York University, who suggested that the growth of SMEs and their export opportunities was critical, and how the focus on SMEs as part of the global markets action plan was a profound departure from the past, where there was more of a scattergun approach taken to trade missions.

Would you care to comment on how SMEs are particularly a part of the global markets action plan?

[Ed Fast, Conservative, Abbotsford, BC]

Yes. Thank you for that question.

We have quickly realized that our large Canadian companies, the multinationals, have the resources to penetrate new markets and have the resources to expand their presence in markets that matter. What we realize is that our Canadian small and medium-sized enterprises are woefully unaware of the tools that their federal government has made and continues to make available to them to be successful, as they look for export opportunities outside of Canada and outside of North America.

The global markets action plan recognizes that, and that's why there's such a special place in the GMAP for SMEs. They are going to drive much of our future export growth around the world. That's why we want to make sure that we also develop a plan, which we're in the process of doing, to promote the tools that the federal government, and by the way, the provincial governments as well, make available to SMEs, so that they can safely start to explore those new markets they probably should have explored many years ago.

I've long ago come to the conclusion that Canadian companies are highly risk averse. They're very cautious, probably more so than companies in some of our key trading partners, and it takes quite something to push them over the line to where they say, “Okay, we’re going to actually take that next step and start to explore these new markets and start to develop our export potential”.

I believe the global markets action plan is a very significant step in the right direction to do that, but it's not going to be only me as international trade minister and my ministerial colleagues and our MP colleagues who will be responsible for promoting those opportunities for SMEs. We're also going to work with the industry associations across Canada, to make it very clear to them that we want them to be our partners as we communicate with our SMEs this incredible world of opportunity out there that they haven't yet tapped into.

[Erin O'Toole, Conservative, Durham, ON]

Thank you.

Coming from business as I do, one thing I like about the global markets action plan is the prioritization, so that the priority, as you said, Minister, is to have a bigger bang for your buck. When you set priorities on countries and sectors and opportunities, whether it's a for-profit or a non-profit, priorities and a strategic plan are critical.

The same witnesses I quoted also said that with the previous approach, there was very little follow-up and very little long-term impact from just a mission with a number of politicians and that sort of thing on it.

Can you talk about how this allows a prioritization of economic, diplomatic, and trade commissioner resources—like in China, as you said, with the 15 trade offices now there—how that helps focus our spending and our priorities?

[Ed Fast, Conservative, Abbotsford, BC]

In the consultations that led up to our formulating the new global markets action plan, we were able to consult with virtually every industry association across Canada. We were able to consult directly with companies that had expressed an interest in exporting, that are presently exporting, and with some that haven't yet exported. It very quickly became apparent that Canada's resources were being spread too thin. We needed to prioritize and we did that in two key areas.

First, we prioritized the markets that matter the most to Canada. If we are expecting to be engaged fully in every country in the world, we just don't have the resources to do that and we won't achieve success. So we've narrowed down the number of countries on our list of priorities. Typically, they are countries in which Canadian companies have already experienced success; countries whose economies are emerging, that are growing rapidly; or they may be countries to which we haven't had access but represent large markets, like the European Union. We have now negotiated an agreement that for the first time will provide real access to Canadian companies that so far have been shut out of that market.

We have done the same thing also in terms of the industry sectors. We want to make sure that we focus on the sectors in which Canada has real strength. We've limited that number to 22 key sectors, and that's where trade promotion activities will be focused.

[Erin O'Toole, Conservative, Durham, ON]

Thank you, Minister.

My final question is this. You're the last of 12 witnesses we've heard from specifically on the global markets action plan. We've heard from dozens in the last few months on CETA, on TPP, and others. I'm looking here at an invitation to an event called the Panel, which next week will explore economic diplomacy and Canada's global markets action plan.

The only MP on the panel is Ms. Freeland, the Liberal trade critic I understand, who has never attended a trade committee meeting, including our last few weeks on the global markets action plan. We very much appreciate the participation from our friend Mr. Pacetti, but has Ms. Freeland, as the trade critic for the Liberal Party, inquired or written your office with respect to the global markets action plan? She's appearing on a panel and talking about it, but I haven't heard...or she hasn't been hearing from Canadians on the plan itself.

[Ed Fast, Conservative, Abbotsford, BC]

Mr. O'Toole, I do note that Mr. Pacetti is a member of this committee. From everything I've heard, he's been a very productive participant on this committee and his input is valued. But you are correct that my trade critic actually has been notably absent, and not only from this committee. I have never once received a question from her, in the House of Commons, on trade—not once. I don't know why that is.

I can tell you that in terms of our government, we consider trade and investment to be the twin engines of economic growth for Canada. This will drive our long-term prosperity, which is why this government, for the last eight years, has made trade such a priority for Canadians.

[The Chair, Conservative, Rob Merrifield]

Thank you.

I think you're about to get questioning from Mr. Pacetti—

[Don Davies, NDP, Vancouver Kingsway, BC]

Mr. Chairman, I have a point of order, just briefly.

[The Chair, Conservative, Rob Merrifield]

It had better be brief.

[Don Davies, NDP, Vancouver Kingsway, BC]

The minister just said “my” trade critic. I think he meant to say “the Liberal” trade critic.

[Voices]

Oh, oh!

[The Chair, Conservative, Rob Merrifield]

Okay.

Go ahead, Mr. Pacetti. The floor is yours for five minutes.

[Massimo Pacetti, Liberal, Saint-Léonard—Saint-Michel, QC]

Thank you, Mr. Chair.

What a segue. Yes, I am the Liberal member on this committee.

Your colleagues around the table have decided that I have only five minutes, so perhaps you could try to keep your answers limited. I have a couple of questions.

Thank you for coming, by the way, Mr. Fast. It is appreciated.

I want to ask a question on the SMEs. I totally agree with regard to the SMEs not being able to have the opportunity to export, for various reasons. I have friends in accounting practices who have a lot of connections with small businesses, and the challenge is always the resources, financial and human.

Ms. Bincoletto, you spoke about EDC and BDC working together. My feeling is that as long as BDC is charging 4% or 5% extra for loans, and EDC is asking for extra paperwork, and BDC is asking for extra paperwork, small businesses will not start exporting. It just means more resources they'll have to put out before they get even one dollar back in profit or investment.

Do you have any comment, Mr. Fast?