International Trade Committee on April 20th, 2015

[Gali Bar-Ziv]

Our experiences with the trade commissioners have been very positive. It is touch and go, but overall it's been very positive. They gave us some research papers. They made some introductions. At times they sent letters on our behalf. It didn't always work, but that's okay. Some of them have been very proactive and always on the ball. Many times we need invitation letters to have people from different countries come to Canada to see us. They are always there. We feel from a service oriented perspective, this is probably the best that we can have. Thank you to the Government of Canada for providing that and having that type of facility for us. I'm genuinely saying that.

[Glen Hodgson]

I'll give you a different kind of answer.

First of all, I think it's absolutely appropriate to fund the TCS from public resources. In a country like Germany, for example, the trade development services are paid for by a levy on business. There are very different models across countries. In this case, because they are out there as early pathfinders trying to find business for small companies, I think it is entirely appropriate to fund it from the tax base.

There is no doubt about the individuals. They are dedicated, competent, and professional. If there is a challenge, it is in their mandate.

One of the things I did at the back end of my career at EDC, before I joined the Conference Board, was to develop a concept called integrative trade. It was from my engagement with Foreign Affairs and the TCS, which had a strong mandate to promote exports, but they didn't seem to understand that there was a linkage between exports, imports, trade, investment, goods, and services. EDC got it. We spent a lot of time supporting the entire business model of Canadian companies trying to do international business, so I intervened with some research, and we had a lot of engagement.

Foreign Affairs has really moved to that kind of model, and there is a high degree of alignment now between DFATD and EDC around this sort of integrated concept. I think the TCS folks get it now, and hopefully they are being incented to be as active in helping firms invest abroad.

Frankly, one of the solutions in Europe may unfortunately be that you need to get inside fortress Europe. I am not sure that CETA is actually going to solve all the problems with regulation, because the agreement is not that comprehensive. It doesn't cover every aspect of regulation, so that's a challenge you may have to confront at some point.

I think now DFATD understands that you have to really be prepared to engage in all fronts of international business. I think that model has now been accepted.

[Dionne Laslo-Baker]

From my perspective, the trade commissioners have been incredibly beneficial, and not only the trade commissioners. When the trade commissioner position disappeared in California, we actually went to Rob Arthurs and Will Fox, who work with the trade ministry, I believe, and they've been incredibly beneficial. Whenever I need something, I've been reaching out to them to get their input.

In fact, Will was able to introduce me to Maria Shriver's foundation, and we ended up doing some celebrity events with her.

There are interesting ways in which they have assisted us in working, especially in California on the west coast.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you.

Mr. Hodgson, I'll try to get some benefit from your experience. In the past, we have heard from some witnesses that a large percentage of SMEs are not aware of government programs like Go Global and all these services, and if they are, they are aware of only a few of them. From your long experience with EDC, I'd like you to comment on the progress of EDC in helping Canadian companies now, compared to when you were there.

[Glen Hodgson]

Oh my goodness, that's a great question.

The year I joined EDC, 1994, I believe they did $11 billion in what is called cover. They provided risk tools to $11 billion in Canadian exports. I believe last year they did $90 billion. Anybody who has seven or eight times growth in a decade or more is moving in the right direction.

EDC has come very far in serving all members of the export community. I think the model is more or less right. We have the model right. They are not dependent upon the taxpayer at all. They are actually able to pay dividends back, so that the state is investing in EDC, and EDC is giving back.

They are also partnering with all the banks. They have come a long way. They are working with the private sector, private lenders, and private insurers. Without being there at the coalface every day, I don't know about the details, but I think Canada's trade finance system stacks up exceptionally well compared to almost anybody else in the world, and small businesses are benefiting from that.

[The Chair, Conservative, Randy Hoback]

We'll go to Mr. Morin. You have five minutes.

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

The Asian Infrastructure Investment Bank promises to be one of the most important international financial institutions on the planet, and could possibly finance a large part of the infrastructure-related deficit in Asia, which is estimated at $9 billion. Canada, as opposed to Germany, France, Italy and the United Kingdom, has not managed to join the institution.

Do you think that this will be a handicap for us in the future?

[Glen Hodgson]

That's a great question. I was in Toronto last week and was asked the same question at three different events.

I was part of the Canadian delegation that created the EBRD back at the fall of the Iron Curtain in 1988-89; I've actually gone through that.

You should appreciate that if the Asian infrastructure investment bank gets off the ground, it's going to take three to five years to get functioning. Personally, I think Canada should be there. I think we should be talking to our American neighbours and saying, “One way or another, we can be your eyes and ears. We can ensure that we have the right governance structure, the right investment structure, and the right principles in the bank.” I was at a dinner last night with a representative from the German Bundesbank. We talked about this, and about why France, Germany and Britain are there; they see the role that China is going to play in the world going forward. We want to have an institution that reflects multilaterals and all interests.

If I were sitting in Finance Canada and somebody asked for my advice, it would be to make sure that the Americans understand fully why we're doing this. I think we have to skate to where the puck is going, and the puck is going to Asia. Appreciate the fact that it's going to take a number of years before the bank makes any dent in the infrastructure deficit in Asia.

In the interim, we have to keep using the World Bank, the IFC, private capital markets, and the Asian Development Bank, where Canada is already engaged.

That would be my response to your question.

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

I'm going to continue in the same vein.

My question may be a leading one, but my impression is that Canada stands behind the American position, which seems to be to try to slow down an event that will happen at any case in light of China's economic power. I find the American effort to put a brake on that somewhat futile. Canada is not behaving wisely by taking up the same position. Ultimately, our businesses would be at a disadvantage compared to French, German and Italian businesses that specialize in infrastructure.

What do you think of that?

[Glen Hodgson]

To my knowledge Canada hasn't expressed a view yet as to whether it is investing in the bank or not.

You're absolutely right that the Americans are having a hard time with governance around multilaterals, the World Bank, the IMF, and other global institutions. They have not actually brought into force the major changes in those institutions that were negotiated a number of years ago.

I think that for the moment we're still sifting through all the information, but in my view Asia is the future. For the next 20 years, the Asian economies are going to grow much faster than the rest of the world, and there will be massive business opportunities to develop in Asia.

You can always join at a later date; you don't have to be there at the launch date. But countries that aren't members will find themselves shut out of infrastructure investment opportunities

[The Chair, Conservative, Randy Hoback]

You have about 45 seconds.

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

The Americans have expressed some criticism about the lack of transparency of Chinese institutions. If Canada were to join its voice to that as quickly as possible, could it in that way exert some influence on the development of acceptable standards?

[Glen Hodgson]

This will not be a Chinese institution.

I understood the question well because I was a federal public servant for 23 years. I understand French fairly well.

This will not be a Chinese dominant organization. I think the fact that other G7 countries have already stepped up means that they're going to be looking for the best possible standards in terms of governance, transparency, and business practices within the institution.

I don't think we have to be in a hurry to take a decision as a country, but I do think, and the advice I would give if I were sitting inside the finance ministry is, that it's probably in Canada's long-term interest to be there from as early a date as possible.

[The Chair, Conservative, Randy Hoback]

Mrs. Grewal, please. You have five minutes.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Thank you, Mr. Chair, and thank you to the witnesses for your time and your presentations.

My question is for Mr. Hodgson. Canadian firms, and SMEs in particular, face an uphill struggle expanding into the emerging markets where the business culture, regulatory environment, and the language can be particularly challenging. Even with a trade agreement with the global markets action plan, the government is seeking improvements to the trade promotion and support services efforts of the trade commissioner service.

Last year, we opened four new trade offices in China that will bring Canada's trade network support to 15 locations, and a hundred trade commissioners. As well, 15 new offices in Brazil, China, India, Mongolia, Qatar, and Turkey have been opened in recent years to promote trade, and investment, and innovation with these fastest-growing markets. Relations on the ground there are of course very important in terms of who to talk to, who the decision-makers are, and how to get things done.

Mr. Hodgson, in your opinion, with the growth in value-added trade and global supply chains, how important are trade offices in emerging markets? How can we best realize the high growth potential of emerging markets?

[Glen Hodgson]

Thank you for the question.

I think the reallocation of finite trade promotion resources to the high growth emerging markets is actually critically important if we're to succeed. We've been so dependent upon the U.S. market for so long, and it's wonderful to have the CETA, the free trade agreement with Europe, which is going to take the next 18 months to ratify, but all of our research points to Asia in particular as the future. At some point you have to reallocate your trade development effort to reflect where the game is going, where the puck is going.

It's challenging because you do have finite resources. It's not like we can add another 500 trade development officers at DFATD. You have to be very careful where you're taking the resources from, but we think the reallocation towards emerging markets is an important step in the right direction.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

My next question is for Mr. Stebbins.

Mr. Stebbins, I understand that Archipelago Marine Research Ltd. has undergone significant and sustained growth over the past 30 years. The company has evolved from a dedicated services organization, operating almost exclusively in local markets, to a global services and technology provider, offering expertise and technology in support of sustainable fisheries management throughout coastal U.S., Europe, and Australia. Where specifically are you doing business? How important are international markets to the company's bottom line?

[Shawn Stebbins]

The company is organized into three business divisions. Two of them are local. One is the marine environmental services that are done in the local British Columbia coastline. The other one is providing onboard observers on commercial fishing vessels, which is also local.

To answer your question with respect to our electronic monitoring technology, international markets are absolutely critical. If we don't sell internationally, there's not enough of a market locally. Even if we added the east coast of Canada, which we haven't yet, we wouldn't have a large enough market for this technology. So they're absolutely key.

How to access them is challenging. It's taking a bit of time because most of what we do is sell to governments. The governments are slow to make significant policy changes, and moving towards electronic monitoring on commercial fisheries represents a significant policy change. It's been quite a few years that we've been doing work in Europe on a pilot scale and waiting for them to move towards full implementation. I think we've been there six years now. We're just waiting now and we're thinking that Scotland, potentially England, and the Netherlands either later this year or early next year are going to make a more significant move. Those are absolutely key businesses for us to keep things rolling.

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

Well, Mr. Stebbins, I understand that Archipelago is moving to international—

[The Vice-Chair, Liberal, Chrystia Freeland]

Sorry, Ms. Grewal, we've hit five minutes. Is that okay?

[Nina Grewal, Conservative, Fleetwood—Port Kells, BC]

That's fine.

[The Vice-Chair, Liberal, Chrystia Freeland]

Thank you very much.

As you may have noticed, Randy has transformed himself. He had to step away, so he's asked me to be your chair for the last 45 minutes. Randy and I share an intense interest in farm implements and their trade into eastern Europe.

Next up is Murray Rankin for five minutes.

[Murray Rankin, NDP, Victoria, BC]

Thank you, Chair.

I want to go back to DeeBee's SpecialTea for just a moment. Dr. Baker started to talk about something that is of great interest to me, and it was captured a bit by Ron Cannan, as well, and that is the issue of the organic equivalency agreement with the EU.

I think I heard you say—correct me if I'm wrong—that you're facing an obstacle, because raw materials seem to be fine, but when it comes to value-added products, those are problematic. I heard Mr. Hodgson say that CETA may not be able to address that problem. We have fortress Europe as our problem. I've heard from many people in the organic food sector that this agreement may not do anything to help.

I wonder if you could elaborate on what you said a moment ago and see if we can get some insight in to where you seem to be stuck.

[Stephen Baker]

I think it's a problem for producers within Canada, because it makes them want to take their lines down to the U.S., because the U.S. has an equivalency agreement with the EU. They watched us have our agreement, and then about six months later saw our stumbling blocks and made sure that they dotted their i's and crossed their t's. We went in under good faith, but unfortunately they took advantage of it.

As I understand it, going forward the EU wants to bring their organic wines into Canada, so it may be a timely thing. We don't want to open our doors to their organic wines unless they're going to open their doors to our organic producers.

[Murray Rankin, NDP, Victoria, BC]

I was just reading about your business and about how you offer low-sugar, nut-free, organic, non-GMO, gluten-free, Kosher, and vegan frozen treats. You'd think that would be okay with the Europeans, right? What's missing from that picture? It's crazy.