Thank you, Mr. Chairman and members of the committee. It's nice to be back. I was here probably four or five years ago talking about some aspects of trade.
The topic today is small business in international trade. I don't want to be the skunk at the garden party, but I thought I would start with a commentary that I wrote in The Globe and Mail about a year ago called “Governments need a surgical approach for helping small business”. Canada is small business-based economy—the data indicating that is there, which I took from the Startup Canada site—but I think the focus on small or medium-sized businesses is probably the wrong focus. I'd like to see us focus on growth-oriented companies. I came up with an expression in this commentary, “growth-oriented enterprises”, or GOEs, as the focal point.
In the commentary I talked about some of the data. There's a large productivity gap between Canada and the United States, and unfortunately a lot of that is attributable to small firms in Canada. So it's actually a negative factor, I would argue, in the functioning of our economy. I'm concerned about the fact that maybe we've done almost too much, that we've loved our SMEs to death when it comes to the tax system and other aspects of public policy intervention.
I would argue that we have to be really smart about how government intervenes to support small business. I like supporting small business. I spent a decade of my career at EDC, which I think has the model about right. It's very effective, but in a very efficient way. Maybe I could just read the last paragraph of my commentary as my first point.
Rather than supporting SMEs because of their size, governments should re-focus their energy and scarce resources on other more important business attributes, regardless of the size of the business: high growth potential; the capacity to innovate; a demonstrated ability to launch new products and services; and the willingness and expertise to tackle new growth markets successfully.
There's the starting point. I like small business, but I think what we're really looking for is companies with strong growth potential going forward. At the Conference Board we've done a lot of research over the years on small business and international opportunities. In fact, I brought two such studies just as examples. We probably have a dozen or so studies. I've been at the board for 10 years now, and in my decade we've done lots of research on small business and on Canada's fit into globalization. We have, I would hope, the strongest private sector research organization called the Global Commerce Centre doing a lot of research on Canada's fit into globalization.
We did two studies about six years ago, one called “Canadian SMEs and Globalization: Success Factors and Challenges”, and another, “Survival of the Fittest: Which SMEs Internationalize Most Extensively and Effectively?” The bottom line is that there is a prima facie case for supporting small companies, but you really have to think hard. You have to think hard about how our scarce resources can really be most effective.
I thought I would close my opening remarks with just a couple of comments on free policy advice for organizing the federal family in support of small business. First of all, going global is not for everybody. What the research shows is that firms succeed if they have key attributes going in: if they have international experience, if they have what is almost like the right ecosystem or culture. Do you have a cultural fit? Do you understand what you're getting into? Have you had experience in the past doing international business? Are you building up expertise and management capacity? You need to ask that before you even get into the attributes like finding partners abroad, finding customers abroad, and having adequate capital or risk capital. I would argue that there's almost a pre-screening required before we encourage firms to go global.
I had a chance within EDC to look at a lot of international business practices and actually do deals. I was the government relations director and then the VP of policy and then deputy chief economist working for a guy named Stephen Poloz—you may have heard of him. Steve was my boss for three years. We learned a lot about global value chains, about how business is done today. One of the things we focused on was trying to encourage Canadian companies to fit into the value chains of bigger enterprises. Rather than a B-to-C relationship, where you go from a business to a customer, you think of a B-to-B relationship, fitting into some value chain around the world. You can always find customers abroad directly, but more and more Canadian firms are having success when they fit into the global ecosystem and actually become part of global value chains.
I'm a big fan of the trade commissioner service, of EDC and BDC. In fact, I think we have the business model more or less right for all three, but you can always find ways to refine it and do better. I can recall the days when we actually used to pay small companies to go abroad to trade fairs and there were various government programs. I'm not sure there was a lot of value for money in that. I do like the focus that's been brought at EDC and BDC. We know Jean-René Halde very well. He's the president at BDC. He's really focused on high growth potential companies. I think that's a sweet spot for the conversation, thinking not about more money, but actually how to take the resources we have and focus them much more.
We should be proud of the fact we have two strong state banks in Canada in the BDC and the EDC, and an effective trade commissioner service. For me, it's all about refining that around growth opportunities: do the pre-screening, figure out which firms have the attributes to potentially succeed, and then provide the support from core government and the crown corporations to make them really effective.
I think I'll stop there, Mr. Chairman, with my opening remarks. I would be very happy to respond to questions from the members.