International Trade Committee on May 4th, 2015

[Joy Nott]

Yes, it's very risky.

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

Where is the comfort zone, right?

The United States has been our biggest ally and will continue to be, and when you go past that, what are all the other roadblocks? I spoke to a constituent this morning and it was the same thing. They wanted to get more comfortable in Canada first before they expanded, and others weren't aware of the potential, so connecting with the trade commissioner service...as you said, they're fantastic. Once they've made that contact....

I don't know if maybe it's the Canadian psyche, but generally, we're less risk takers. There's nothing wrong with being conservative, I must say, but—

[Don Davies, NDP, Vancouver Kingsway, BC]

Point of order, Mr. Chair.

[Some hon. members]

Oh, oh!

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

—on the other hand we have to continue to encourage Canadians to take that step.

Just one last question, Ms. Pohlmann. As far as your numbers go, looking at the chart, out of the 109,000, are approximately 60% of those then exporting?

[Corinne Pohlmann]

No, approximately 20%, 21% are involved in exporting.

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

Import-export, I should say.

[Corinne Pohlmann]

Yes, importing and exporting. It's around 60%, 62%, where they're involved in either one.

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

When you said those who aren't, there are about, the other 40%, 16,000 potentially.

[Corinne Pohlmann]

Could potentially be exporters, yes.

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

Mr. Turi, thank you for your presentation. You talked about funding for SMEs and easier access.

Can you elaborate on the dollars you're talking about, and how would you see the funding.... You mentioned it could be government operated, or through some other organization.

[Philip Turi]

In order to move the needle here, we need to think strategically around tailoring the funding to projects and companies that have the highest export potential, regardless of the size, so a little funding can go a long way, depending on the company.

In terms of the correct model for delivery of this, my group at CME has gone through GOA, the global opportunities for associations program, which is a federal fund for national industry associations. That funding goes towards the SMEs in our membership to help them travel abroad on trade missions. Companies typically get around $1,500 to $2,000 to travel on these trade missions. It's nice because it helps to defray some of the costs, but it really doesn't move the needle.

A lot of the companies that travel with us, sometimes it's a first step into a market. They've established some connections and that has led to sustained market penetration. For other companies, it was one mission. They went there one time and it really didn't lead to anything.

In terms of the delivery of this, the concern would be that if the government were to administer this, the administration costs could be significant and the concern is that we want as much of the money going to companies as directly as possible, providing obviously that they're meeting certain criteria, that they have high export potential projects, and that they can sustain the projects over a period of time.

That would be the concern around the government administering it. That was the reason behind the suggestion of a delivery partner, whoever that is, whether it's another government agency or what have you. It's going to take quite a bit of resources to administer this thing.

I can tell you, our experience with SMART, and doing it over eight years, it has taken quite a bit of time to get it up and running. It has to be easy and efficient for companies to access. As was said earlier, companies shouldn't have to engage a consultant to develop their proposal to apply for this funding. They should be able to do it themselves. If they need to access someone for assistance, then that's fine, but if we set it up such that companies are going to have to go and pay someone to apply, no one's going to apply.

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

Let's just say it's a balance of trying to find the proper administration.

[The Chair, Conservative, Randy Hoback]

Ms. Liu.

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

I'd like to start with Mr. Turi, and I want to ask a question that's kind of tangential to exporting. I want to ask a question regarding manufacturing R and D because we recently got statistics from StatsCan on the manufacturing sector.

We found that between 2011 and 2015, R and D spending by manufacturing firms declined by 13.5% from $7.4 billion to $6.4 billion. We see that Canada is actually losing ground compared to other countries in manufacturing R and D.

Does that have any effect on our capacity to export?

[Philip Turi]

Most definitely. Looking at the most recent budget, it was a good year for manufacturers with respect to the accelerated capital costs allowance, which will allow for further investments in machinery and equipment, and write that off over a period of time.

The challenges are there with respect to investments in R and D in the manufacturing sector in particular. That's why some of the things announced in the budget were critically important. Those investments in things like R and D have to move in lockstep with investments in growth export promotion.

Why has there been a decline in that R and D investment? There are a whole host of reasons. The point is that companies need to start doing more of it. Access to capital has been an issue. Obviously, there are a whole host of subsectors within manufacturing that are still recovering from the last recession, but I know that companies will take advantage of some of the positive announcements in the budget last week, and that should lead to increased investment in R and D.

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

Good, so I guess we'll wait and see.

I want to talk to Ms. Nott as well.

You talked about the importance of having a strategy that takes into account imports and not just exports. What would that strategy look like? What would be some of the main aspects of that strategy?

[Joy Nott]

I can't really comment at this point on specific industry sectors because we have members from all over. I could take up your whole day talking about different examples of what that would look like.

I've been in international trade myself for almost 35 years and when you actually sit down at a table where it's two business people—no government people in the room—pounding out a deal, what usually ends up happening is an exchange, a little bit of this for a little bit of that. It's a give and take. I think that any kind of an international trade strategy where we focus solely on exports and we're not really looking at what our trading partners are trying to accomplish by signing a free trade agreement with us is doing us a disservice.

I think that when we are encouraging SMEs and when the trade commissioner service is out there, we should not only be dealing with companies that are directly exporting but we should be trying to engage trading partner to trading partner and basically coming up with win-win scenarios.

Take Korea and beef as an example. We have beef that they really want. What are they really looking at doing and what are they targeting to come into Canada and how do we facilitate that? We should take a different tone with our trading partners as opposed to we're here to export and we don't want to talk to you about what you want to import into our jurisdiction.

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

So would that be a change in approach essentially?

[Joy Nott]

A big change.

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

That's really helpful.

I want to move on to you, Ms. Pohlmann, because I know that you wanted to add something about Don's question on the movement of people and I just wanted to give you a chance to speak on that.

[Corinne Pohlmann]

When it comes to movement of people of course there is a lot of discussion around how easy it is to move people in and out of Canada. Some of the challenges our members have faced when it comes to the trade-related movement of people have been things along the lines of service people who were coming into Canada going into another country in order to service a piece of equipment belonging to them.

Some of the issues that come up are more about clarity of rules. It's really an important part of this. The businesses will do what they have to do but they need to understand what they have to do. Often it's very confusing if it's this type of worker, or if it's this type of executive, or if it's this type of person who you're bringing across the border. There are all different types of rules and it can get very complicated. I think that's where clarity has to be brought into the picture.

Even between Canada and the U.S., we have very different rules when people cross. Even when just a service person crosses the border, it's a different rule in the U.S. when a Canadian goes into the U.S., than when an American comes into Canada.

As a company, you're just trying to move your people to make sure that the equipment is getting fixed as quickly as possible, but you have to understand what those rules are and it's not always clear. That's always been our first objective, to make sure you have clarity in what is needed to get that person from one place to the next. That's probably the most important to me.

Then we can get into the whole need for temporary foreign workers or not, but I don't know if this is the forum for that. When it comes to just that mobility of labour I think that's an important piece of it.

[The Chair, Conservative, Randy Hoback]

We're going to have to stop you right there and move on to Ms. Grewal.

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

Thank you, Chair.

I do also want to start by welcoming our witnesses and thanking them for taking time out of their busy schedules to come share their thoughts with us today.

As everyone in this room is well aware, Canada is a trading nation and one in five jobs and 60% of our GDP are linked to exports. As trade increases so does our nation's prosperity. It is therefore quite essential that we take steps to remove barriers to trade and that we assist our businesses both large and small to compete in the global economy.

In our recent budget the government announced the creation of an export market development program, which will work with small and medium-sized enterprises as they explore and pursue new export opportunities. The program would provide a total of $50 million over five years in direct financial assistance to entrepreneurs seeking to export to emerging markets for the first time. The idea is that the program will assist with participation in trade fairs, missions, and market research.

In your opinion, will a program such as this one help Canadian entrepreneurs manage the cost of international expansion? Could you please say something about that?

[Philip Turi]

One of the questions that comes up often at the Go Global sessions—it's directly related to your question, and I wanted to mention earlier there was a question around the take-up of these things—is that there are two panels. One of them is about what each of the government agencies does. The other panel is a panel of CEOs of companies that no one's heard of, for the most part, unless you're really involved in certain sectors. These are companies talking about how they exported, how they took that first step, the challenges that they encountered, and how they worked with local government officials to export. That's something to keep in mind.

The question that comes up often is “What's the spend?” SMEs will often look at a foreign market—and let's discount the U.S. because that's usually the default foreign market. When they're looking at a new market, a non-U.S. market, often companies will think about what the budget is that they will have to put together to penetrate that market. It's highly specific to the company. Some companies' export strategies are working though sales agents and through distributors, in which case often they'll go to a market for the first time and they'll establish a relationship with distributors. The spend for those companies is highly dependent on their ability to get to that market and the business relationship with those distributors.

For other companies that are importing with a view to exporting to a large multinational, or tapping into a large supply chain, their spend is also very different. That's one of the reasons why in my comments I was talking more about structuring the fund so the number one criteria is high export potential. That includes putting forward project ideas that may have selling into a supply chain or global value chain as part of the project criteria or part of the project description. To me, and to CME, that should be more equally weighted in terms of value, than a company who's saying, “I'm going to sell product A to a foreign market.”

It depends on the company and therefore the spend depends as well. That's why, I think, we have to structure it to a maximum amount. Companies should be willing to put forward matching funds. If they're going to be serious about this type of investment then they need to think about how they can manage that by putting forward matching funds.