International Trade Committee on Oct. 7th, 2014

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

On your organization's website, your CEO and president John Manley made a comment about the Canada-Korea free trade agreement:

The agreement represents a turning point in Canada's long-standing efforts to build closer economic ties with Asia-Pacific markets. It demonstrates to other important economies in the region that Canada is a reliable and serious partner. And it offers a base from which Canadian companies can reach out to other fast-growing markets.

To what extent will Canadian companies be able to take advantage of South Korea's supply chains throughout the Asia-Pacific region as a result of the Canada-Korea free trade agreement? Also, how do you see brand Canada becoming more visible, not just in South Korea but in other Asian countries?

[The Chair, Conservative, Randy Hoback]

That's a great question, but unfortunately we don't have time to listen to the answer.

We're going to move on to Ms. Liu.

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

Thanks, Mr. Speaker, and I'm happy to have another round.

I would like to ask Ms. Citeau more questions about the agri-food sector.

Can you tell us what gives us our greatest advantages in the Korean market?

[Philip de Kemp]

If I understood the question correctly as far as some of the best advantages for the Korean market, we missed a few things along the way when we talked about the possibility of, depending on the various sectors, increased jobs or what have you. Certainly in our industry, and perhaps in a lot of others in the agrifood industry, the ability to increase your capacity utilization for a plant that's already there, whether the workers are there or you're going to have to increase the workers, is huge. It is a powerful tool when it allows you to decrease your variable costs or your fixed costs. It gives you some marketing options for some of the countries you are already dealing with that you are not going to have to be as reliant on perhaps, as we use Korea as the gateway into Asia, hopefully, because that is the first one. That's huge, certainly in our industry, because obviously malt is treated as a commodity, as are some of the other ones.

The other thing is that perhaps down the road, in my view anyway, it's going to send a clear signal to other countries that look to Canada for food security, particularly perhaps Japan, whether we have an economic agreement with Japan bilaterally or through TPP or what have you. Just having this agreement in place and ratified quickly is going to send a very strong signal to other countries that want, at least in the agrifood sector, to deal with Canada.

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

Thanks for that answer.

Do you have any comments on other members or other parts of the value chain, such as the packaging industry, and value-added industries such as transformation, and what effect this trade agreement will have on those sectors?

[Martin Rice]

We have a very well-developed exporting industry. It's transportation; it's logistics at ports, the trading houses, which are significant in cities like Toronto and Montreal. They have a huge role and significant value added, which will grow as a result of this agreement.

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

You wouldn't have any projections in terms of job growth at the moment, but do you have any idea of how big that growth would be?

[Martin Rice]

We do have a figure.

I think Ms. Citeau mentioned a $400-million figure, which we see ourselves getting back to after, say, five years and we're on the same terms of trade as our competitors.

We do have a figure to indicate the increased value added in jobs, from a study we had done for us. I'd be glad to maybe provide that to Ms. Citeau to pass on to you and the committee.

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

Thanks.

Ms. Campbell, perhaps on a lighter and more local note, you mentioned the television and video game sector. I am an MP from the region of Montreal, and Ubisoft is a very large employer of some of my constituents.

Do you have any details on how the video game sector could benefit from this deal?

[Dr. Ailish Campbell]

Quickly, I think the Montreal gaming cluster is an incredible asset for Canada. I was quite taken that President Park, in her state visit to Canada, mentioned the Montreal video gaming community and mentioned the Cirque du Soleil. Clearly she's someone who enjoys Canadian entertainment, and we should be happy to provide it.

I think with our multicultural society, we provide a unique backdrop and creative inspiration for children's programming, which I know that I and my family really enjoy.

I don't have any specific numbers for you, but I think the fact that the president of South Korea herself highlighted the Montreal cluster and the ability to partner with Korean companies.... I would just highlight that it's going to be very important that we have our statistics right so we're measuring this trade, although certainly we know the jobs in that cluster will be preserved and potentially expanded the more we can export content to Asia.

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

Thanks.

I have a lot of questions for—

[The Chair, Conservative, Randy Hoback]

I'm going to cut you off there, Ms. Liu. We're getting right to 10 o'clock and we have to suspend for about five minutes to get our witnesses.

I want to thank the witnesses for being here this morning and presenting.

Colleagues, we will suspend for five minutes and then we will get on with the second round.

[The Chair, Conservative, Randy Hoback]

Let's get round two on the go.

First, I'd like to thank the witnesses for being here this morning and sharing their knowledge and wisdom with us. You have 10 minutes each, and we'll start with Mr. Lindsay from the Forest Products Association, please.

[David Lindsay, President and Chief Executive Officer, Forest Products Association of Canada]

Thank you very much, Mr. Chair.

Thank you very much, Mr. Chairman. My name is David Lindsay. I represent Forest Products Association of Canada, and we're very pleased to be here. We thank the committee for the opportunity to present to you. The forest industry, as many of you around the table I have spoken with individually know, is a large and important part of the Canadian economy. We're in virtually every province and we directly employ some 235,000 workers. The forest industry is located mainly, as you can imagine, close to where the trees are, so in largely rural and remote communities.

We're perceived as a resource industry, which is factually correct, but most of our work happens in the mills and requires skilled and semi-skilled workers to process the wood into marketable products, so we're actually part of the manufacturing sector of Canada. We contribute 12% of Canada's manufacturing GDP. We're a sizable part of the economy both as an extraction industry of a green renewable resource and as a part of the manufacturing industry.

We went through some difficult times in the economic downturn of 2008. We actually started to slip in 2006 and 2007. The U.S. housing starts dropped precipitously and people discovered things like iPads and the Internet, so newsprint use has been dropping over the period of the last decade.

We have therefore concluded as an industry that Canada still has one of the largest and best managed forests in the world. We are a green and renewable resource, and we have something to contribute to the bioeconomy and the economy of the globe. Therefore, we embarked on something we call Vision2020 to determine how we can take advantage of the great resource we have in Canada. I won't go into a lot of detail on Vision2020. Suffice it to say we have committed to generating $20 billion of new economic activity by the year 2020. In order to do that, we need to have innovative products, new markets, and new customers looking to fill the demands of the growing, emerging middle class of the emerging markets, and we need new products to help the domestic consumption here in Canada as well.

We're a large exporter and the export agenda is a big part of our Vision2020. We've actually been quite successful in the Asian market. Canada's largest export to China today is forest products. We export about $4 billion worth of forestry products to China, and that market is continuing to grow. We're very supportive of opening up markets and additional trade to help create those jobs in rural and remote parts of Canada and help contribute to the economy, and therefore we're supportive of the Korean free trade agreement.

The challenge for the forest industry is that we have a very large diverse forest across the country, so we're trying to make sure that we're taking full advantage of it. The Korean free trade deal is very important to us and particularly in our western provinces. Last year, the Canadian forestry industry exported about $500 million plus worth of exports of wood, pulp, and paper to the South Korean market. That makes South Korea the fourth largest customer for Canadian forest products, with the United States being the largest, and China and Japan after that.

We see it as a great opportunity to continue to expand our sales into South Korea. Currently the Korean market imports $6 billion worth of forest products from around the world, and Canada is getting only about 9% or 10% of that. There's a huge opportunity for additional sales into the Korean market, but free trade agreements alone do not create sales. We need to work very hard as an industry to compete in that market, and we need the continued support of both the federal and provincial governments in our trade offices making sure that we have a good country profile and we're seen as a reliable supplier into that market.

We've got a good relationship with the trade offices and the British Columbia FIIs.We've got a good network of interactions and connections with the in-market activities of South Asia and look forward to growing them in Korea.

Another point I would have to emphasize is if you can't get the product off the loading dock to the ports, to the markets, that creates difficulties with being seen as a reliable supplier so the transportation infrastructure of Canada is very important to our trade agenda. Eighty percent of our product used to go to the United States. It was very much north-south. Now our American market exports are about 60% and our east-west trade is growing. As a country we need to think about our transportation infrastructure as part of our trade agenda. We need to continue to maintain our positive profile as a reliable country and a reliable partner. We need to continue to innovate new products and look for new ways of using the forest fibre as a green, renewable resource. The free trade agreement with Korea is very helpful to our agenda, and we look forward to making new jobs and new economic opportunity and contributing to Canada's GDP by expanding those trade opportunities.

Thank you very much.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Lindsay.

We'll move on to Mr. Suk, please.

[Mike M. Suk, Director and Spokesman, Korean Cultural Heritage Society]

Good morning. My name is Mike M. Suk. I'm from Vancouver, British Columbia, and I represent the Korean Cultural Heritage Society of British Columbia. Established in 2000, the KCHS is a non-profit organization that serves communities in B.C. by organizing community-based multicultural events that showcase the dynamics of Korean culture and heritage. This year, our 13th annual festival held in Burnaby attracted over 26,000 members of our community and established it as one of the largest multicultural festivals in the Lower Mainland.

One of the most rewarding experiences in being involved with the KCHS is that I have the privilege of connecting with citizens who cover the full social and economic spectrum of the approximately 80,000 Korean Canadians who call B.C. their home. From this community-based context I'd like to offer my perspective on the Canada-Korea free trade agreement. Overall I believe the CKFTA is a significant step forward for Canada. In less than 60 years South Korea has made its mark on the world stage. Cutting-edge industries have developed in Korea. Korea has also emerged as an influential tastemaker in Asia. I believe companies in Canada, through joint ventures with South Korea, will gain favourable access to other high-growth emerging markets in Asia.

In terms of immediate returns, as you know, British Columbia is a trading province with a wealth of agricultural goods, natural resources, and professional services for export. Well-positioned companies and professionals in Canada will be able to take a lead and gain immediate benefits from the FTA, which is a great thing for everyone in our province. Having said that, what's more relevant and critical for this deal to me and my community is not just focusing on these major industries but that the government paves the way for young professionals and entrepreneurs to venture into the emerging industries of tomorrow.

One of the pressing issues of the day in my community is the lack of exciting jobs and opportunities for young professionals and entrepreneurs. In a very real way we are losing talented young professionals every year to countries around the world. New graduates are increasingly forced to find career opportunities oversees. I believe the free trade agreement poses an opportunity to be implemented in a way that increases the bandwidth of opportunity for young Korean Canadians with bilingual abilities and the cultural acumen to build profitable businesses and exciting careers here at home. In the long run this will result in, I believe, a stronger growth-oriented community base. One of the most immediate things I can see happening locally on the job front, if Canadian companies are incentivized, is that new graduates can fill cultural voids acting as liaison for companies importing and exporting goods. Valuable international work experience like this will set the foundation for these young people in turn to start their own companies one day and hire and inspire other Canadians to follow.

As small an issue as this may seem, and as local a subject, I believe it is a very important one to address as it deals with the future of our nation's workforce. Canada needs to retain its talented youth and inspire them to lead the future. I ask members of this committee to keep this in mind, to see that the FTA is directed on good domestic policies reflecting the best interests of our local businesses and jobs and also encouraging entrepreneurs to foster new business opportunities.

Thank you.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Suk.

Mr. Lee.

[David Lee, President, Kocani Biz & Edu]

It is my honour and pleasure to be a witness in front of the members of the standing committee on international trade. I am Korean Canadian, president of Kocani Biz and Edu, a Korean-Canadian business interest consulting company. I have a Ph.D. in economics, but I majored mainly in the international trade field.

In Vancouver, the gateway to Asia, I opened a class of international trade and started to teach how to do good business between Canada and Korea for Koreans who speak English and Korean. When I heard the news that FTA negotiations between both nations started in July 2007 I made up my mind to open the class. I thought that if an FTA were concluded, the Korean community in Vancouver would get a good chance to improve the community's economy. To boost business transactions between two countries many Koreans will be needed.

An FTA will create thousands of jobs and opportunities for Canadians by opening new markets to Canadian exporters in every province and territory. More than 2.78 million Canadians working in the industrial goods sector, in chemical and plastics, information and communication technology, aerospace, metallurgy and minerals, medical devices, and textiles and apparel, as well as in agricultural and agrifood products, wines and spirits, fish and seafood, and forestry and the value-added wood products, will benefit from more trading opportunities and the duty-free access to South Korea.

B.C. especially will get more benefit from the agreement because of geographic proximity. B.C. exported $1,186 million worth of goods to Korea in 2013. Most of them were raw materials like bituminous coal, copper ores and concentrates, wooden telephone poles, fence posts, and other wood in the rough. In the near future, the amount of other items exported will increase because of a duty-free agreement.

In less than seven years Canada has concluded FTAs with NAFTA, Israel, Chile, Costa Rica, EFTA, Peru, Colombia, Jordan, Panama, and Honduras. With 13 more countries Canada is negotiating FTAs. Except for NAFTA, trade with the other countries is not big. Compared with those countries, business deals with Korea will be bigger and bigger as time goes by.

I mentioned the benefits of the free trade agreement with South Korea from the position of the Canadian side. I hope that war doesn't break out between Canada and Korea because I am staying on the Canadian side. Just kidding. Sorry.

The Canada-Korea free trade agreement provides preferential access to an important market in Asia. The agreement is Canada's first free trade agreement in the dynamic and fast-growing Asia-Pacific region. As part of the most ambitious plan in Canadian history to open new markets, the Government of Canada is working to create deeper economic ties through trade and investment agreements in the Asia-Pacific region.

The Canada-Korea free trade agreement's most visible benefit is the ambitious obligation undertaken by Canada and South Korea to eliminate tariffs. When the agreement is fully implemented, South Korea will eliminate duties on 98.2% of tariffs lines and Canada will remove duties on 97.8% of tariff lines. On average, South Korean tariffs are three times higher than Canada's: 13.3% versus 4.3%. Tariff elimination will be particularly advantageous for Canadian businesses exporting to the South Korean market. For Canadian consumers, the elimination of tariffs under the agreement will reduce the cost of imported product and result in lower prices and more choice.

The Canada-Korea free trade agreement will level the playing field for Canadian exporters and investors. It will secure Canada's position in the South Korean market, where competitors like the United States and the European Union are already enjoying preferential access due to the U.S.-Korea FTA and the EU-Korea FTA. Without the agreement, Canadian businesses would continue to face a disadvantage in areas ranging from industrial goods to agriculture and other agrifood products, fish and seafood products, forestry and value-added wood products, services, and investment.

The Canada-Korea free trade agreement looks to the future to provide opportunities for Canadian workers, businesses, and investors. It ensures that if South Korea reduces or eliminates restrictions on other foreign-based service providers or investors, Canadian companies and investors will automatically receive the same preferential treatment. It also ensures that if South Korea provides additional flexibility to goods from other countries on many regulatory matters, including, notably, standards and taxes pertaining to vehicles and parts, Canadian goods will automatically be granted the same flexibility.

In my personal point of view, some Canadian products will be more welcome in the Korean market than U.S. products. Koreans believe that Canadian products have good qualities and are made under good natural circumstances. Also, as Canadians, we can enjoy good quality Korean products, like automobiles, cellphones, computers, TVs, refrigerators, washing machines, and other electronic appliances with discounted prices because of duty elimination. That will improve our quality of life.

As one of the Korean War babies, I will never forget the sacrifices of Canadian young soldiers during the Korean War. From 1951 to 1953, 26,791 Canadian soldiers took part in the Korean War and 516 gave their lives to the Korean Peninsula. Many wounded soldiers stayed in hospitals and received significant care.

Koreans think of Canada as our friend, our blood alliance. That means Canadian products will be welcomed, will be familiar, and loved by Koreans.

I hope the agreement will be approved by the two nations' parliaments as soon as possible so that both countries can enjoy the benefits of the FTA. Then, two countries can go further to firmly tie their economic relationship and develop together.

Thank you for listening to my presentation with my bad pronunciation.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Lee, that was great.

Mr. Davies.

[Don Davies, NDP, Vancouver Kingsway, BC]

Thank you, Mr. Chairman, and thank you to all witnesses for being with us.

Dr. Lee, can you give us any insight or information about the perspective on this agreement in Korea? In particular, do you think that there is the capacity in Korea to agree to this agreement before January 1 of next year?

[David Lee]

Are you asking about the capacity of Korea?

[Don Davies, NDP, Vancouver Kingsway, BC]

We know that in Canada we want to get this agreement ratified before January 1 because the U.S. trade agreement with Korea has tariff reductions every January 1. We'd like to get Canadian exporters taking advantage of lower tariffs as soon as possible. I'm just wondering if you know anything about whether the Korean government has the ability to get this agreement ratified before January 1.

[David Lee]

Yes, I think so because the only people who are against the FTA are....As I mentioned, we can export cars, or something like that, made by Hyundai and Kia. I think there may be a 6% decrease in the price of the car, so then you can export more cars. The benefit of exporting cars is great. We think there may be a gain of 14% for the purchase of something like that. So I think some can make more money.

[Don Davies, NDP, Vancouver Kingsway, BC]

I had another question too. We've heard people say that, of course, this is Canada's first trade agreement with an Asian country. We've heard that South Korea is a gateway economy to the rest of Asia. This agreement will not only have benefits for Canada and South Korea but it may help Canadian companies, that are doing business in Korea, access other markets in the Asian region. Do you have any comment on that?

[David Lee]

Yes, definitely.

If a Canadian company makes a partnership with a Korean company, it's very easy to go to China, and not only China, but also east Asia. I don't know about Japan, because Japan doesn't want to import some products. You can go directly to China, but I think making an FTA with China and the Canadian government would take too long, so before doing that, you could just access the market in China, a huge country.