International Trade Committee on March 25th, 2015

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

Sure.

[John Kalbfleisch]

In terms of transportation, we've had a couple of port strikes probably in the last five years in Vancouver. When we're getting probably 40% to 50% of our incoming supplies from China, any port slowdown or strike has a significant impact on our supply chain and our ability to deliver to our end customers. We have to ensure a free movement of goods; we cannot afford to have port slowdowns. There was a trucking issue last year that caused a disruption.

Actually, the entire west coast of North America is seeing quite a slowdown in freight transport through their ports. In fact, we've seen an increase in our supply chain in terms of the lead time needed to ship from China to Vancouver; it's increased by one week over the past 12 months. To me, that's unacceptable.

It's also rumoured—I've talked to people—that the productivity at Canadian ports is much less than other ports in the rest of the world. It's something that we need to look at and make sure that the flow of goods and the productivity of the port is world class.

[Ernie Lynch]

I'd like to make a comment on one particular facet of infrastructure, and that is the highway system. We come from a very busy part of southern Ontario. This is the Mississauga region where the 401 intersects with the 407. The 401 is going to be widened through our section of Meadowvale to 12 lanes, which we have no objection to; in fact, we're welcoming it, because it's been progressing slowly to the west. It's now as far as Mavis.

I'm going to take this opportunity to mention that over the past two years we have lobbied with the provincial government that when they widen this to 12 lanes, they are going to leave this particular flood plain where it goes through at the Credit River as a paved goat path, and just repave what they have. It's a huge dip, and for such a critical piece of federal infrastructure to be left in the hands of the province....

I think the feds and the province need to work together to make that first-class, flat, level bridge going across, like the Romans did a thousand years ago, and allow freight to move through. It's a big problem in the GTA for gridlock, and over the 50 years that this piece will be in place, it will drain the economy by billions of dollars in wasted fuel and time.

[The Chair, Conservative, Randy Hoback]

Thank you, Mr. Lynch.

Mr. MacAulay, you have five minutes. Welcome to the committee, by the way.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you, Mr. Chair.

I want to welcome the witnesses. I'm a substitute on the committee, but export is certainly very important where I come from in Prince Edward Island.

Mr. Kalbfleisch, you mention in your presentation about taxes on small and medium-sized businesses. I'd just like you to expand more on that, and also on the problems you have in attracting the workforce. You mentioned workers and the trouble to bring qualified workers to your business. I'd like you to expand on that.

[John Kalbfleisch]

Sure. From my standpoint, if you look at setting up a new factory, for example, there are a lot of subsidies that are offered by a lot of countries that Canada, typically, doesn't offer when you're looking at where you're going to place a factory, which we should be aware of and understand.

In terms of R and D tax credits, I know the federal government has been looking at changing the R and D tax credits. They had a panel get together. It looked like they were slanting towards more software-based companies in terms of their approach for applying tax credits, and I think that's a mistake. They need to understand that manufacturers generate a lot of jobs in Canada. We do a lot of R and D in our company. We have 75 people in R and D. So making sure that we have a competitive R and D tax credit is critical.

I can give you an example. In Turkey, they have technology zones where you can hire engineers and they actually pay no federal income tax, so it draws a lot of key technical people wanting to work in these regions. Also, it's easy to recruit foreign workers into Turkey; they have a well-defined process that you can bring people into. I'm just referencing Turkey because I spent about a month there in the last 12 months looking at whether we should be expanding our operations there.

Those are two examples of where I think we can be more competitive from a tax perspective.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Can I ask you, sir, if that could be an incentive for you to move to Turkey and do work there instead of here? Is that what you are indicating to the committee? If they have more attractive subsidies—

[John Kalbfleisch]

Whenever you do foreign expansion, you have to look at how you want to set up your supply chain and how you want to do development. If we were looking at expansion in the Middle East, it's a large market and we have a large install base, so we would look at not only potentially acquiring a company to set up a factory, but also adding R and D resources in that factory to support the local market.

So yes, it would be an incentive to invest in that country.

[Lawrence MacAulay, Liberal, Cardigan, PE]

It's something like the airplane construction industry...[Inaudible—Editor]...in Canada; at least it used to be, anyhow.

Mr. Lynch, before the meeting you mentioned to me that you were aware of the blue mussel industry in Prince Edward Island, which is very important—

[Ernie Lynch]

I am indeed, yes.

[Lawrence MacAulay, Liberal, Cardigan, PE]

—particularly to my area and to people I know very well. I have visited trade shows in China, for instance, and some of the products are displayed properly, but then we look at what goes on in the lobster industry. I was asking where we could find lobster. It just seems to me that we are not promoting these products properly.

If you can, I'd like you to expand on what we need to do. Is it more money, or more information? Do the companies have enough information about the countries? I suspect it's not as valuable, or valuable, to present the lobster as we like it; you have to present it as the country that is going to purchase the lobster likes it.

I'd just like you to expand in that way, if you could.

[Ernie Lynch]

As far as promoting Canadian products is concerned, there is what the government can do, but there is also what the companies can do, and I'll speak to both.

John mentioned being on a plane: it should be on Air Canada, for instance. Why not use Air Canada, when you have a person captive in a seat for however many minutes it takes to go through the safety regulations, etc., to give a commercial on products coming from Canada? It could be lobster. It could be mussels. It could be hydraulics. We'd like to see that, of course. These are the kinds of things that could build awareness of Canadian products.

On the company side, companies should be coached—and this would bring up the topic of mentorship—on how they could do something. We can get assistance in hiring export managers, as an example. In our particular case, a few years ago we wanted to focus on Latin America, so we hired a Latin America sector coordinator. She is from Ecuador, and her Spanish is perfect. She works from Toronto, travels to Chile, Mexico, or wherever we need to go, and speaks—

[The Chair, Conservative, Randy Hoback]

I'm going to have to cut you off there, Mr. Lynch. I apologize.

Your time is done, Mr. MacAulay. I'm sorry.

We'll move on to Mr. Richards for seven minutes.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

We appreciate your being here today, both of you.

I have a few questions, if we have time for them all. The first thing I wanted to ask you about is one of the things our trade minister has been.... Besides all the hard work he's been doing overseas to try to open up new markets for Canadian businesses, which has certainly been very successful, as you both know, he has also been travelling around our country to hold what he calls Go Global workshops. I don't think I heard either one of you mention them specifically in your remarks. I wonder if you know about them.

Essentially, the Go Global workshops are designed to provide information and encouragement to small and medium-sized enterprises to think about accessing new markets. Obviously, we are opening up markets, and we want to see enterprises, particularly small and medium-sized enterprises, be able to take advantage of them. I am wondering if either of you have been able to take advantage of any of those workshops or know of people who have, or if you are aware of them. What are your thoughts on those Go Global workshops and what they can offer to help businesses expand into some of the new markets that we are opening up?

[Ernie Lynch]

I did actually mention them in my opening remarks, although it was a bit muddled. I'll just revisit that.

There have been three in our region. I visited two and I spoke at one, on a panel. They are good events, but we need to have more notification that they are taking place. I think the stakeholders—the EDC, BDC personnel, and there's also CME—need a little bit more time to reach the people who really need to attend these events.

At the one that I did speak at, I looked around the room and there were bankers and insurance people and a lot of other types of people who were more service-oriented, but not enough exporters. They are there. We just need to dig and find them.

I think if we look at the services that are offered and companies that have not exported yet, they just need a little bit of coaching, a little bit of mentoring, to get there. The Go Global initiative is a strong one. I think it just needs a little more publicity to get the right people out to these meetings.

[Blake Richards, Conservative, Wild Rose, AB]

Great. That's very good feedback and it's much appreciated. So it sounds like a good initiative that you think just needs a bit more publicity.

[Ernie Lynch]

Yes.

[Blake Richards, Conservative, Wild Rose, AB]

That's good feedback. I appreciate that.

Mr. Kalbfleisch, I think it was you who mentioned the new agreement with the European Union and the one that just came into force with South Korea. I wonder if you could comment a little further on what kind of an impact you think those two deals—what I would call very significant and obviously groundbreaking trade deals—can mean for your companies and/or broadly the industries that you're involved and for small businesses.

I'll let you go first, Mr. Kalbfleisch, and then Mr. Lynch, perhaps you'd like to comment as well.

[John Kalbfleisch]

Sure. I think from our standpoint, obviously the European Union is a huge market. Having the ability to have your goods pass duty-free into the market is a very good outcome. We had the luxury in the telecommunications powering where we didn't have any duty applied when we were exporting from Canada already. We are selling a bit of our products in Europe right now, mostly to industrial customers, but from my standpoint it's going to make Canadian corporations more competitive. Any time we can reduce the amount of duties applied to our goods in foreign markets is key for us to export and be more cost-competitive on a global scale.

[Blake Richards, Conservative, Wild Rose, AB]

Thank you.

Mr. Lynch, did you have anything you wanted to add on that?

[Ernie Lynch]

I do feel that the South Korea one will open markets for us. We already had some preliminary discussions with trade commissioners, actually, on work that we could be doing there. We're also pretty excited about Indonesia. We have a list of clients that we want to be doing business with in Indonesia.

[Blake Richards, Conservative, Wild Rose, AB]

Excellent. Thank you.

There's one last thing I want to touch on with you, if either or both of you have a comment on it. Both of you have spoken quite extensively about the trade commissioner service. You're both obviously aware of the announcement last week by the Prime Minister in terms of the expansion of that.

The other thing that was announced prior to that was the export market development program. That's obviously designed to provide some matching contributions that would be non-repayable to companies that seek to export to emerging markets for the first time. The aim of the program is to reach somewhere between 500 to 1,000 exporters per year and help to cover things like market research, participation in trade fairs, business development trips, and the like.

Obviously, you both have companies that are well into exporting, but is that something that you feel, had it been available to you at the time you were starting out...in developing some new markets or maybe even some that you're looking to move into in the future? Is that something you feel would be helpful to an organization like yours, or to a new business getting started?

[Ernie Lynch]

Extremely helpful, I would say. We have had assistance in the past in going to exhibit at foreign trade shows, and it's not inexpensive, especially for an SME. You could spend easily $20,000 to $30,000 to do a show, no small potatoes for an SME. That's to take two or three people; if you want a crew of five or six people, then the costs increase. If you can get that assistance from somewhere...and I understand that it is matching, so we're not....

I'm a little concerned that, you know, as this initiative moves forward, they do need to be careful about the companies that do sign up for it, that they are actually a good risk, that they are going to produce, that they have products that actually will sell, and that they're going to the right markets with the right initiative but also with the right ability to follow up and actually ship product at the end of the day.

[Blake Richards, Conservative, Wild Rose, AB]

That's fair. I appreciate that.

Mr. Kalbfleisch?

[John Kalbfleisch]

I would agree with what Mr. Lynch said as well, but—