International Trade Committee on April 20th, 2015

[The Vice-Chair, Liberal, Chrystia Freeland]

Please, Mr. Stebbins, go for it.

[Shawn Stebbins]

It's a question that's quite relevant for us right now. We're doing a number of projects in the U.S. We have a long history—I guess it's probably a six-year history—of our staff travelling across the border to deliver services and sometimes products, and we've certainly encountered a number of stumbling blocks along the way. Thankfully, we've successfully negotiated them through trial and error. We've figured out what works and doesn't work.

When working with the U.S., you can read up on everything that's available to figure out how to do things properly, but you don't really know what's going to happen until you get to the border, because it all has to do with the border guard who's asking you the questions, what their thinking is, and how they're going to react to what you're doing. We sent somebody down on Thursday, and fortunately I guess we're starting to figure it out, because she got a two-year working visa. We were quite thrilled with that.

In connection with the U.S., the other thing that was challenging was finding an immigration lawyer who is knowledgeable and reasonable to work with. It has been quite a challenge. Ironically, the one we found most recently through Google seems to be quite good. I think we've finally had some success there.

I have just one more thing to add. In starting up our company in Australia, Australia was relatively easy to work with and was clear on what their visa requirements were. We found good support down there. We managed to have one of our long-term staff here immigrate there and get a three-year visa. He's actually going to take out citizenship, so that was quite successful.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you.

[The Vice-Chair, Liberal, Chrystia Freeland]

Thank you for those great questions. I think we're all especially grateful that you followed up on the women and banking comment that we were all very interested in.

Mr. Carrie, the floor is yours for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you, Madam Chair. I'm not usually a member of this committee, and I'm finding it really interesting.

I'm the MP for Oshawa. We build cars and we export them, so some of your comments today are really great to hear, but some are also quite challenging.

Mr. Stebbins brought up the Buy American policy. I wanted to talk a bit about protectionism.

Mr. Hodgson, you mentioned it as well in terms of the regulatory challenges out there.

Mr. Stebbins, what do you find in regard to this whole idea of protectionism? How is it affecting your business? Are you seeing new strategies by governments out there? We've heard about the regulatory approach. Are you seeing a lot of protectionism? Are you finding it difficult to get into some of these markets?

[Shawn Stebbins]

It can range from the very obvious to the very subtle. We've experienced it in Europe a bit as well, but the U.S. has a small company set-aside that's reserved, ironically, for female-run businesses, as well as other small businesses, so as for us going in and competing against other local businesses, we can quite quickly be removed from the competition because we're from outside the U.S.

For the most part, fortunately, that only applies to smaller contracts. With any of the larger ones we've been involved in, they've waived that clause, but what we have seen is some decision-making that defies logic. We can't help wondering if, in the background, part of the reason for it is that there are local companies they want to support.

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Hodgson, maybe I can continue with you for a bit. Over the years, I've seen Canada being the boy scouts. We tend to go into these things with real good intentions, but I think we get shafted sometimes when we're trying to move things internationally.

I remember a lot of early discussions with Korea. You mentioned the non-tariff barriers. With the regulatory things that they had down there, I'm curious. If we look at an example such as Korea, did we learn anything from Korea? Do you perhaps see any strategies from other countries that Canadians should be aware of?

The third part of my question is about the conflict resolution mechanisms out there. How do you see them working internationally?

[Glen Hodgson]

Okay, let's talk about Korea first. I think the biggest learning from Korea is that it's very hard for Canada to get a better deal than the Americans are going to get. I think that's the bottom line. We were there, we were negotiating, and we had push-back from some sectors—such as those that operate in your riding—but the Americans got ahead of us and we are now playing catch up trying to get as good a deal as the Americans.

The Koreans are clearly very skilled at using subtle barriers to entry for goods coming from North America, but the American government found a way to satisfy most American industry in getting a deal. As we go forward, maybe the biggest lesson for me is that it's going to be very hard for Canada as a stand-alone entity—knowing that we are so integrated within the North American economy—to get a better deal. Maybe we should be thinking about doing something on a pan-North-American basis as we talk to other parts of the world.

I think with the WTO around it's going to be very hard to ever have a global trade negotiation again. It's just so complicated. The governance rules are so complicated. I can see a world in which large regions talk to large regions. The fact that we've made progress with CETA was really...it'll be good for us for a while. We know there are barriers to a U.S.-European agreement; things like cultural transfers are there. I wouldn't be at all surprised to see the Americans come along—because they're 10 times bigger—and get a little better deal than Canada got within Europe. I don't know a lot about conflict resolution, but I do know that it was a centerpiece of the NAFTA deal, for example, the FTA. Of course, the Americans can always find a way to get around it if they have to, but it's not an area of expertise for me personally, or for the conference board.

[The Vice-Chair, Liberal, Chrystia Freeland]

You have 45 seconds left.

[Colin Carrie, Conservative, Oshawa, ON]

Are you aware of any common strategies that you see out there? You mentioned the regulatory way as the new way of getting around some of these things. Do you see any other techniques some of these countries are using?

[Glen Hodgson]

I'll focus on North America.

I very much like the fact that we're talking to the Americans about reducing the barriers at the border and about trying to make progress in terms of regulatory alignment and common sense there. This was a fairly major agenda driven out of the Privy Council Office here and the Oval Office—the president's office—in the United States. For strategies beyond that...I think in North America we are on the cutting edge when it comes to thinking about freer trade. The Conference Board is a big supporter of free trade in almost any form, almost any place. That's a wealth created for our economy.

[The Vice-Chair, Liberal, Chrystia Freeland]

Okay. That's a nice note on which to end your five minutes, isn't it?

Okay, Ms. Liu, please.

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

Thank you for your testimony and for coming in today. I think it's been very informative from the part of all witnesses.

Dr. Laslo-Baker, thank you also for mentioning the role of women entrepreneurs, because it's something that I hear a lot about in my own riding. In fact there are an increasing number of women entrepreneurs, and yet there are still challenges. You mentioned some of the challenges that I also hear echoes of in my own riding, so that's very important. You also mentioned the challenges of juggling family life and work life; they're not the same. I think something like looking into a national child care strategy would be something that we could find consensus on around the table.

I want to talk about something that Mr. Hodgson spoke about around, and this is a recurring theme in committee when we negotiate these free trade agreements. We have problems or challenges in making sure that SMEs can use these free trade agreements and turning SMEs into export champions. We know there are lots of barriers for SMEs. One barrier among many is the rules of origin regulations. I learned that many SMEs decide to pay the old tariff rates as opposed to taking advantage of the new tariff rates because of the enormous barrier this poses. There is also the question of intellectual property concerns and whether SMEs will have available, adequate resources to defend their own intellectual property.

Those are two barriers among many. Could you propose some solutions, or have you thought about some ways the federal government could remove those barriers?

[Glen Hodgson]

There isn't a silver bullet for solving a lot of those detailed problems. We think the federal government did the right thing by removing tariffs on imports. That was critical if you accept the integrative trade model where imports are important to exporting. Reducing the costs and the barriers for imports, or even for exporters, and getting that barrier out of the way was an important step forward.

For IP there is no magic solution. I'm well aware of businesses, as they start to trade with emerging markets, who are very fine when they think about what things they can afford to lose. Those are the things they'll trade or position in the market. The other parts of their value chain, and their production chain, they just won't let leave to Canada. There really isn't a single, one-size-fits-all solution here. It becomes very tailored by sector, by firm, or by nature of the product or service you're providing.

Maintaining control over IP I would argue is probably the single most important thing that a business can do. Don't give that away.

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

Do you have any idea of how many SMEs choose not to export because of IP concerns? Do you have any anecdotal information on that?

[Glen Hodgson]

I haven't seen anybody doing research in the area actually coming up with an estimate. You're going to cross this bridge at some point. When you arrive there, how do you maintain control of your intellectual property as an investor, as a trader?

[Dionne Laslo-Baker]

You protect as you begin your innovation. Right from the outset we were protecting our intellectual property by looking into patent applications, which we're in the process of doing, as well as trademarking in Canada, the United States, Asia, and Europe, from the outset.

So just thinking about it early on, I think, is important.

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

That's very interesting.

My colleague Marc-André mentioned Canada not signing on to the AIIB. I think as you mentioned and is underlined in your report it's essential to consider Asian markets. Again, those are where the new opportunities are really found.

In the next minute, could you possibly talk about what Canada's trade strategy in Asia should look like?

[Glen Hodgson]

First and foremost, being part of the Trans-Pacific Partnership is the cornerstone. I think it's really critical that Canada be there at the outset, that we not use domestic challenges as a reason not to be there at the table, knowing that some of our partners are negotiating from a very strong basis.

I think we've accepted in our foreign policy that China is the rising star in the world and building a constellation of other countries around that, but fundamentally we have to be engaged in Asia on every front. Europe will probably have a hard time growing at more than 1% on a sustained basis for the next 25 to 50 years. European countries are aging very quickly. We're not quite as old, but we have the same tendencies, whereas Asia is where the dynamic population growth is and where the integration is going on. You can see that the numbers are gradually shifting. Canadian companies are figuring out that they have to be in Asia in a big way.

But I think TPP is kind of the next step, finding a way to engage all the countries around the Pacific Rim. I don't know how big a market that is, but accessing about another billion people on a tariff-free basis would be a great step forward.

[Gali Bar-Ziv]

Do you mind if I steal 30 seconds?

We do business in Asia, especially in China. I think most people don't know how to do business in China and Asia. Forget the tariffs, forget the regulations; it's how you do the business.

I'm sitting in a shop with someone, closing a deal that just took six months to negotiate, and they want to change all the terms at the moment of signature. What do you do? I'm sick; I've just come back from Mexico and I'm throwing up. What do you do? You sit for four hours and you say no, no, no. They try to convince you that this will make you rich, that it's so good, and that you have the greatest thing in the world. That's doing business in Asia.

In order to reverse it to the original terms, I had to go back to my relationship, a relationship that took a long time to build, with dinner after dinner of not talking business but just making them like you.

To me, that's the most difficult thing in Asia. We like to talk business. They don't want to talk business. It's a different reality, a different culture. Once we learn that, we'll start to be successful.

Thank you.

[The Vice-Chair, Liberal, Chrystia Freeland]

I think that is a lovely note on which to conclude those sets of questions.

Normally when we have only one panel in this committee we tend to wrap up around now. Do I have the consent of the committee to do that?

[Some hon. members]

Agreed.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks for building these relationships.

[The Vice-Chair, Liberal, Chrystia Freeland]

There you go.

On behalf of all of us here, thank you very much to all of our witnesses. As usual, it was great to hear from Mr. Hodgson, but I think it was particularly inspiring for all of us to hear from these great Canadian entrepreneurs.

[An hon. member]

Hear, hear.