Thank you, Chair.
Good afternoon honourable members of Parliament. I'm glad to be third because I think my comments will dovetail nicely with those of my colleagues up here with me.
I'm pleased to be here this afternoon to discuss the Government of Canada's recent announcement relating to supporting SME exporters in my capacity as the head of CME's global business services department, where I oversee CME's national trade and export promotion initiatives.
Canadian Manufacturers and Exporters is Canada's largest not-profit industry association representing manufacturers and exporters in every business sector across Canada. Collectively our members represent more than 80% of Canada's non-commodity exports and thousands of high-paying jobs across the country.
I will start off by noting that my team is quite literally at the front lines of trade promotion and facilitation in Canada and has witnessed first-hand the impact of the GMAP, the global markets action plan.
Over the past two years my team has organized six sector-specific trade missions to the EU, and to Mexico in particular, each supported by federal government funding. We have also coordinated the reception of numerous incoming trade missions and hosted over 40 export opportunity webinars featuring trade commissioners posted abroad, and other international business experts. We launched the Enterprise Canada Network, a single-window platform that has helped over 700 Canadian firms identify and connect to thousands of international business and technology partners; and over the coming months, working with our government and not-for-profit sector partners, we will be launching export mentoring and learning workshops to help build capacity among Canadian SMEs.
CME has also worked extensively with DFATD and the government's trade portfolio partners, including the trade commissioner service, Export Development Canada, Business Development Bank of Canada, and Canadian Commercial Corporation, with respect to coordination and information sharing to better support Canadian enterprises. For example, my team at CME has partnered with these agencies in the delivery of a national outreach program called “Go Global: Supporting Export Success”, a series of practical business workshops geared toward SMEs that highlight the business services each government agency offers.
To date, we have held more than 15 Go Global events in communities across Canada and have engaged more than 2,000 attendees, most of which are SME representatives. I have moderated at most of these sessions and would be happy to answer any questions about them during the Q and A period.
Today you have asked my organization along with my colleagues to appear before you to discuss the government's recent announcement relating to funding for SMEs to assist with the development of export opportunities, especially in high-growth markets. Before providing my insights on the subject, it's important to note the present export climate in Canada.
ln a period of low oil prices and declining investment in the oil sands region, the pressure on Canadian exporters to buoy the economy has grown more acute. Fortunately, and as recently noted by Bank of Canada Governor Stephen Poloz, the lower Canadian dollar has been a boon to non-commodity exports in Canada, especially in sectors tied to U.S. business investment, with the machinery and equipment, building materials, metals, and aerospace sectors, all showing very positive signs of growth as of late.
However, notwithstanding this recent surge and notwithstanding data limitations, challenges with respect to increased exports to emerging markets remain. ln a January 2015 report released by Industry Canada, it was noted that of the 10% of Canada's SMEs exporting, most continued to focus on the United States. This is not a surprise. Only 10% to 12% of Canadian SME exporters currently sell to Latin America, China, or other Asian markets. Furthermore, exports to these regions account for less than 10% of total export revenues. As such, the GMAP quite correctly emphasizes these markets as priority growth markets moving forward.
With respect to funding export assistance for SMEs, it's perhaps best to tackle this question by looking at the what and the how. What to fund was hinted at in the recent economic action plan, in which the government noted the program will help to finance activities such as market research, participation in trade fairs and missions, shipping prototypes, and pilot projects to create new business opportunities.
While time does not permit me to examine each of these examples, it is important to note the several provincial and local government programs available to exporters that provide funding for similar activities. ln provinces such as Saskatchewan, Nova Scotia, Quebec, and Ontario, for example, local exporters have leveraged programs that assist with visiting trade fairs, carrying out foreign market research, and international marketing. These programs are often well subscribed and fill important gaps in the funding needed to accelerate export growth.
There are aIso export assistance programs available at the federal government level, most notably the global opportunities for associations fund administered by the Department of Foreign Affairs, BDC's market expansion funding, and EDC's financing solutions for exporters. Common among all programs is direct funding, albeit in the form of repayable loans in some instances, for international business development on a broad and targeted basis. Most of these programs require the recipient exporter to meet basic criteria, including being a resident Canadian entity and having an exportable product to service.
Most of these programs and products are also well suited to companies of a particular size, for example, with more than 50 employees, revenues north of half a million dollars, and some experience exporting, usually to the United States.
This begs the obvious question, what can the recently announced export market development fund program do differently than what is presently being offered to SMEs? For starters, funding needs to be made available to medium and small enterprises, meaning companies with less than 50 employees, less than half a million in revenue, and little or no export experience. Export growth potential should be the primary funding criteria. Eligible applicants should be existing exporters, those planning to export, or those selling into a value chain and supply chain leading to exports.
Funding needs to be easy to access—I would echo the comments of my colleagues—and efficiently administered, especially if the audience consists of small businesses. Consideration should be given to whether it's best for the government to administer this funding directly or through a delivery agent. Careful consideration needs to be given to administration costs as well as Canada's international legal obligations regarding subsidies.
Funding should also be structured so as to encourage the uptake of existing services from organizations like EDC, BDC, and TCS, for example, by awarding points to applicants that are existing clients of these agencies, or are on their way to becoming clients.
In terms of fund structure, it would be helpful to look at CME's SMART program as a model. The SMART program administers FedDev funding to companies looking to invest in advanced technology linked to growth in terms of enhancing productivity or exports. SMART includes an assessment component and a project funding component. The assessment component helps companies assess the current state of operations and understand the barriers they face in the globally competitive environment by working with a qualified expert and tools available through the assessment program to develop a vision and a strategy. The findings from this assessment will allow companies to implement a project, under the project funding component, where companies will receive a percentage contribution of eligible costs up to a maximum of $100,000, whichever is less, to implement the strategy developed during the assessment phase.
Using SMART as a model, export market development funding would be project oriented, based on an assessment and strategy developed specifically to the individual SME, and provide sustained internal resources to drive that export strategy plan over a number of years by greatly increasing the chances of meaningful foreign market penetration.
With respect to the assessment of applications to ensure impartiality and to emphasize the funding of export projects with high growth potential, the assessment team should be a steering committee of seasoned exporters from industry and hailing from the priority sectors identified in the GMAP.
As I'm near the end of my comments, I want to conclude by saying that as this committee considers how best to advise on the structuring of the export market development fund, I would urge you to not replicate the myriad existing provincial and local programs available across Canada. Instead, move the needle on exports by targeting companies with the highest export potential and provide funding that leads to sustained foreign market penetration over a period of time.
Thank you for your time, and I'm happy to answer questions during the Q and A.