International Trade Committee on March 23rd, 2015

[Jim Reynolds]

The government has put in place some of those basic foundation blocks. There are pretty encouraging developments in terms of focusing on SMEs, and providing them with funding. I salute those efforts. What we need to do is to start to build on them. As Neil said, we have to create awareness. I'll give you some examples.

Locally, in Kitchener-Waterloo, a fairly senior person at an international accounting consulting company heard me talk—we're on another board together—about some of the issues with SMEs. He found this interesting, and after about three months, he came to me and asked if I could set up a meeting with the TCS.

I was able to put him in contact with our TCS representative and he went mad. Later, he came back said he had no idea the TCS could do this since he thought that it was there essentially to organize trade missions.

This occurred at a big international company that is more than familiar with the EDC and the BDC. The staff are familiar with the TCS but they really weren't aware of it's capabilities at the local level.

I think every accounting company has an SME practice set up. Perhaps one of the ways to reach exporting SMEs effectively is to go to other organizations that are already there or interested in it, where there is a receptive audience which can get some synergy out of it, and to start to talk about what can be done. You go to one major accounting company, and boy, if you make a great presentation there, they can filter that out across all of Canada, and I don't mean sticking with the majors, but going to the local firms.

That's one area; the other is at the university level.

York University has their own chair now for SMEs; they just hired an individual for that. I don't know too much about it, but they want to reach out to their graduates.

I know that the University of Waterloo has a big focus on creating new SMEs among students who want to start their own business in systems engineering and design. They help their graduates start their own businesses, become SMEs, and then foster them along.

It's a question of raising awareness. I feel very confident that Canadian business will respond. There's definitely a reluctance, as Neil and others have said. Canadians aren't sure if they can compete internationally, so they tend to stay at home. They're not as aggressive going out there. But if we make them aware and help them understand what's available, I think we're going to see some very good results. I don't think it's up to the government to send out mass mailers, flyers, or websites. Those haven't proven to be all that effective.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Shory.

We'll go on to Mr. Morin.

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

Thank you, Mr. Chair.

Mr. Reynolds, you spoke earlier about the large number and great variety of small and medium-sized businesses in which it is possible to recruit in order to increase exports. You also spoke about the lack of data on the nature of those businesses. In some sectors, some relatively large companies, with hundreds of employees, do not export, and probably never will. Then we have some mini-companies, with one or two employees, that specialize in developing game software, for example, or all kinds of other cutting-edge areas.

If we know neither the nature nor the potential of companies, we do not know who we are dealing with. We may be trying to reach someone, but we do not know who we are looking for.

Is the lack of data in that area not one of the major problems?

[Jim Reynolds]

You have me at a bit of a disadvantage. I don't have the translation device; I apologize.

[The Chair, Conservative, Randy Hoback]

Why don't we stop here a minute.

Mr. Morin, I'll give you a chance to repeat the question.

[Jim Reynolds]

I'm very sorry about that. I do want to understand and answer your questions.

[The Chair, Conservative, Randy Hoback]

Mr. Morin, perhaps you could repeat your question for him. I won't penalize you for any time.

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

I was talking about the large number, the vast pool, of companies. I do not want to discuss the actual number, but it is a huge one.

If we have no data on those businesses, there is no way of knowing whether they are producing for a local, very specialized market and will never export, or whether they are tiny companies that are also very specialized, but who may have a customer in Europe, Asia, or the United States. If we have no data about them, how can we reach them? Would not the first thing to do be to make a list?

[Jim Reynolds]

Yes. I agree with your question. It's a very good question. I liked it a lot.

In terms of the ability to understand how many businesses are in this one million, those are the government's statistics that come out. Those are the numbers we've been given. We're not sure just how detailed or how finely cut that database is that's available. So the question you've asked is one that we've been wondering about as well. At this point, we don't have the answer.

There has to be some massaging of the database to get there; otherwise, we're not exactly targeted in. That's partly why I was suggesting that in a communications strategy we look at who else is involved in the SMEs and who wants to help SMEs. Typically they're in the private sector or the institutional sector: the Canadian Chamber of Commerce, the Better Business Bureau. There are two organizations—I can't remember the names, but one is in Montreal and one is in Quebec—who do an excellent job of bringing in the SMEs and making them aware of opportunities.

We almost have to reach out and get some synergies through the other organizations. I'd love to know the database numbers as well.

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

I can give you an example. The best manufacturer of electronic circuits for electric guitar pickups works by himself from his home. He has two or three subcontractors who make components for him and 90% of his products are sold in the United States. That is what exporting is for him.

Next door, you might find, say, a manufacturer of roofing beams for farm buildings. He has 200 employees, but he sells only in the local market.

If the government has no data that can identify each kind of company and the markets each is producing for, it seems like a game of blind man’s buff.

[Jim Reynolds]

I think you're right, in many ways. The two companies you talked about both have huge potential for Canada. You know about them. Other people somewhere will know about them. But those organizations may not know about the trade commissioner services, what Canada has to offer. In the case of the farm parts manufacturer, they may not be interested in exporting, or they may not know how to do it, how to engage. They may think it's a big challenge.

That's where the communication and engagement is really important. I agree with you 100%. I see that locally. People just aren't aware.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Reynolds.

Mr. Gill.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Thank you, Mr. Chair.

I also want to thank our witnesses for appearing before the committee and helping us with this study.

My question is to both of you. Can you tell us some of the countries that your businesses currently export to or are doing business with?

I know, Mr. Reynolds, you mentioned that 80% of your business is into the United States. Are there any countries other than the States that you are doing business with?

[Jim Reynolds]

It's more a question for Neil.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Mr. Lang.

[Neil Lang]

I would say currently that about 80% of our product is going into northern Europe, mainly Germany, Norway, Denmark, or Sweden. There just happens to be a focus of demand for our particular product there.

The other driver we have from an export perspective is into China. Especially in the major cities and the major port cities, there is certainly a big focus on cleaning up the air and the ports. Shipping is probably the largest polluter in port cities, so there is a big focus there on green technologies for marine applications. Those are our two major export focuses.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Can you share with the committee your personal experience in terms of some of the hurdles your business faced when you first started wanting to export to other countries?

[Neil Lang]

I think there are two big challenges. I think from a product side and a market side, the biggest challenge is getting the first installations, the first proofs of concept in those markets and having an installation in the market where potential customers can go and see it and feel it. There's also the matter of building up a reputation. Word of mouth is pretty strong in most industries. One customer wants to talk to one or two other customers who have already bought your product. I think that was key.

The second piece was that they wanted to understand how you were going to service those customers. We're a Canadian company over in Vancouver. If they have a problem with our product, how are we going to make sure that we can look after that effectively and get it fixed for them? That was probably the second thing. In Europe, we manage that by working with integrators. We work with large electrical integrators such as Siemens and ABB. We partner with them to deploy our product into the market.

In China we've done it slightly differently. We have what we call value-added resellers, skilled agents who can provide service and maintenance work to our customers so they feel comfortable that their product risk is managed. From a product side, that's been the biggest thing.

I think I've already talked a couple of times about the financial side. Before people sign a contract with you and put down the deposit, they want to know that it's guaranteed or that our company is guaranteed to deliver and that if we don't deliver our product then their money is secure and safe. They want the LCs and so on and so forth from first-tier commercial banks to back that up.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Do we have some time?

[The Chair, Conservative, Randy Hoback]

You have a minute and ten seconds.

[Parm Gill, Conservative, Brampton—Springdale, ON]

Both of you mentioned that you've had some dealings with the TCS, EDC, and maybe BDC. In your opinion, how well are these government agencies positioned for helping SMEs make the leap to exporting?

Maybe, Mr. Reynolds, you want to go first.

[Jim Reynolds]

Sure. With regard to the TCS, I think they're very well positioned. They've reached out. They're aware of us. We're aware of them. They recently set up through the TCS's Atlanta trade commissioner a technology innovation session that was taking place in a large automotive company in Mississippi. They went out and got six booths at the show. Actually they paid for three and divided each one into two and brought six companies down from Canada. So they're moving to develop that.

There was a session in Waterloo about a month and a half ago at the University of Waterloo, and they brought in their representatives from Mexico, Atlanta, and Detroit.

The others, the EDC and BDC, are not 100% ready at the SME level yet in terms of being able to deal with them.

[The Chair, Conservative, Randy Hoback]

I'm going to have to stop you there. I'm sorry, Mr. Gill, but your time has expired.

I apologize, Mr. Lang. I know you probably wanted to answer that question.

I want to thank both witnesses for appearing here.

Mr. Lang, make sure you wear some sunscreen when you go out tonight, so that you don't get too much sun on your forehead. Hopefully, you'll send some of that warm weather this way. We know it's coming sooner or later, hopefully sooner rather than later.

Colleagues, we'll see you on Wednesday.

The meeting is adjourned.