International Trade Committee on May 1st, 2018

[Karen Ludwig, Liberal, New Brunswick Southwest, NB]

Sure.

[Mathew Wilson]

It's in part a capacity issue, considering the size and scale of these companies, which are so small they just don't know where to go for help.

I think too often the government tries to be the only solution provider, and often they don't look to the government for help; they look to a local chamber of commerce or a group like CME. We don't have the support mechanisms in place anymore, however. We used to be funded to do that type of work directly. We don't have that anymore, so it is a tough thing for them.

[The Chair, Liberal, Mark Eyking]

Thank you; that wraps up your time and finishes that round.

We're going to start the next round with the Liberals.

Madame Lapointe, you have the floor.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

Welcome to the witnesses.

Mr. Wilson, I will continue along the lines of what my colleague said earlier.

You mentioned EDC and BDC [Technical difficulties]. You explained that the SME pool was not big enough and if we wanted them to be able to export, we had to help them grow. This is the first observation. How do we improve things on that front?

Then you talked about Canada’s export capacity. I would like to hear what you have to say about what limits your export capacity.

You say that businesses go primarily through the chambers of commerce. Should EDC and BDC work at the grassroots level to help companies grow?

[Mathew Wilson]

Thank you.

I'll go in reverse order, maybe. I'd say that BDC, EDC, and the trade commissioner service work quite closely with groups like ours—chambers of commerce and others across the country—but they're limited in their own capacity to do so as well. They have only so many people. I would say that they leverage it, but the reach is still fairly limited.

Not every company belongs to an association that has access to that type of information, so that is a limiting factor. I'm sure they could also reach out to their local MPs' offices, and they would direct them as well. Often, however, companies just don't know where to go; they're really stuck and they're not sure where to start the journey, and so that becomes an issue.

That capacity building you're talking about comes in two forms. One is that we need to have a focused exercise on educating SMEs as to what the opportunities are. Through groups such as ours, or directly from the government, or through groups like the chambers at the local level, there can never be too much education on export opportunities and export barriers. Frankly, we just don't see enough of it out there.

To some degree you have to drag the horse to water to make it drink. I believe that. It's not just because you show them the water that they are going to drink. You have to really force them through this.

There are different things we could be doing in Canada to drive those things. We've talked, for example, about whether you put in place an export tax credit, as other countries have done, for example, that would put a lower tax rate on profits made on foreign earnings to directly encourage growth internationally. Would there be tax measures like these that you could put in place? Could we put in place mentorship programs to pair large companies with smaller companies that have done it before? Those are some of the things we have talked about.

The other capacity is strictly a physical capacity. There's only so much by way of goods that a company can put out before it has to expand its plants and facilities. For the most part, Canadian plants—not every single plant, but generally speaking—are at or over capacity already. Their ability to say that tomorrow they're going to start sending x product to Brazil just doesn't exist. It's going to take a long-term strategy.

It could be many years in the making. It starts with investment in new products, typically, which leads to expansion of plants and then gets them into the actual export market. Those first couple of stages come first, however: you have to invest in the new products and then you have to expand plant capacity in order to grow those markets. That's typically where the gaps lie.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much. Those are good proposals.

Mr. Paszkowski, I have a question for you. You said that Mercosur was not a market that might interest you and that it provided no benefit to Canadian winemakers. You also said that we already have a lot of free trade agreements. You also talked about your ice wines.

What are the priority markets, Mercosur or elsewhere, for Canadian winemakers?

[Dan Paszkowski]

The priority market for the Canadian wine industry is China; it would be our largest export market. We see great opportunities there not only for icewine but for our other wine products as well.

Beyond that we focus, unlike some major wine-producing countries that focus on an entire country, on large cities—New York City or London, England—really driving hard into specific markets to grow our sales.

As I said, we're not a big exporter. We're exporting around two million litres of our quality wines every year. Only about 50 wineries are export-ready right now, of the 700. The big guys are out there and the little guys are trying to enter into that marketplace, but it's a niche market for us. We just don't have the supply to get into it in a big way at this point in time.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

I have a question for you, Mr. Williams.

[The Chair, Liberal, Mark Eyking]

I don't think we have time for another question.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

I’m sorry. I had a question.

[The Chair, Liberal, Mark Eyking]

We have to move over to the Conservatives.

Mr. Carrie, you have the floor. Go ahead for five minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to direct my questions to Mr. Wilson. We talked a little bit about non-trade barriers; historically, Canada has been the boy scout in the world when we're dealing with that issue. You, however, brought up something about our domestic industry. If we don't get our domestic house in order, we're going to have major problems and are not going to have to worry about these non-trade barriers.

You talked about capacity building and how important it is to have government policy here in Canada to support it. Interestingly enough, I was up in the House yesterday and I asked the minister a question in regard to pipelines, because we had the Prime Minister state in the election that he was going to, I think, phase out the oil sands, and he was in Europe last week saying he wished he could phase them out faster than he is doing. My question was about Canadian pipelines being built with Canadian pipe that is built with Canadian steel, creating Canadian jobs that help build such capacity.

How do you overcome things like this when you're trying to attract investment in order to build domestic capacity? In Canada we're a leader in the world in our energy sector. We export: we export a lot of intellectual property and our product. What's your plan to move forward, when we're having directions from the top that may not be in line with what needs to be done with our capacity-building requirements here domestically?

[Mathew Wilson]

On capacity building you mentioned energy development, and I didn't touch on that. I'd say there's a capacity constraint across the board, whether in manufacturing or energy or other sectors of the economy, whereby the investment just isn't coming in to expand production. You're not talking about $100 here and there; you're talking about multiple billions of dollars in investment that isn't coming, whether it is direct investment in the natural resource extraction side of things or in the upscale or downstream value-added aspects of it.

The longer you go without investment, the less competitive you become, and this has longer-term, cascading effects on the economy and our overall innovation and competitiveness, which is something that I think we all care a great deal about.

You mentioned, though, the pipeline specifically. Don't ever assume, just because something is built in Canada, that we're going to use Canadian steel and pipe.

[Colin Carrie, Conservative, Oshawa, ON]

Why not?

[Mathew Wilson]

I think Dan's story about wine is similar to stories in other sectors of the economy. We are the boy scouts on trade, and for a long time in Canada we have accepted that we can be less competitive in Canada and produce things at a higher cost and that this is okay, because other people will supply those goods to us. That has a direct and long-term economic impact.

Steel production is a good example, whether it's in Hamilton or Saskatoon or other places across the country where we make steel. A significant portion of the steel that's used for energy development in Canada, whether for pipeline or anything else, is imported steel, from Asia primarily and in some cases from Brazil.

This is a bigger structural problem that we need more serious conversations about. How do we leverage better those assets that we have and better use the talents we have in Canada to grow our economy in both the short and the long term, through major projects as well as through ongoing investment?

[Colin Carrie, Conservative, Oshawa, ON]

I think it is something, if we can stimulate the Canadian.... We have all the tools here. We have the mining; we can turn it into these things; and you mentioned the value added. We need to have policies like that, instead of the uncertainty that I think John Manley mentioned in this past budget. I think the budget was 400 pages, and 200 of them talked about the carbon tax and the uncertainty around it.

I'd like to talk to you a little bit about the uncertainty. The Prime Minister said during the election that he was going to transition away from manufacturing—and that was a concern in my neighbourhood, in Oshawa, for we build cars—and again, domestic capacity.

We have a very aggressive U.S. policy on taxation. What would you suggest, building on Mr. Manley's comments, that we do in the short term address this competitive issue, because it appears that other countries are being much more aggressive, and if we don't get on board really quickly, I'm seeing that the manufacturing sector is going to be facing some real challenges. What can we do right away to help in that regard?

[The Chair, Liberal, Mark Eyking]

It's going to have to be a very short answer, because you only have a few seconds left.

[Mathew Wilson]

Implement accelerated capital cost allowance measures such as the U.S. just implemented. That would provide the biggest short-term bang for the buck and cost nothing, because it's an accounting measure. It's about cash flow back to the companies.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. We're going to move over to the Liberals.

Mr. Peterson, you have the floor.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you to all the witnesses for being here.

Mr. Williams, it's great to see you. You're a neighbour. I'm representing Newmarket-Aurora. It's always good to see friends from Markham here in Ottawa.

I have a question about the free flow movement of labour, of people. What can we put in any free trade agreement to enhance it and to ensure that there remains a competitive advantage for companies such as yours?

[Robert Williams]

I think the whole process around visas—moving people to do work within those countries and the requirement to get visas—becomes challenging and time-consuming for a small company like ours. Having an electronic approach to it would clearly simplify the movement of people back and forth.

[Kyle Peterson, Liberal, Newmarket—Aurora, ON]

Thank you. That's good to know.

I don't know whether anyone has a comment on that. I'm happy to hear it.

[Mathew Wilson]

Yes. Here is something that I think Canada could do unilaterally that has nothing to do with free trade agreements or anything else. It's something we've advocated for awhile.

We tend to get caught up in tying temporary foreign workers to people who are coming into the country and adding value. For example, someone coming in to do R and D work or repair a machine or equipment at a manufacturing plant tends to get caught up in the temporary foreign worker program, which really isn't what it was designed for in the first place. We should have visa-free entry for anyone coming in to add value to Canada's economy. It makes no sense at all that at the border we will stop someone coming in.

I've even heard of stories of presidents of companies coming into the country saying, I want to make an investment. That's what they're talking about in the boardroom. When they get to the border, they're told no, sorry, you're here to steal Canadian jobs. Here's someone trying to come in to invest in Canada.

There's too much of that at our borders. It's great to talk about what other people do, and we like to point the finger especially at the U.S. these days for blocking people going into the U.S.. This is a Canadian problem as well, and it's something we could do quite easily: exempt people from those requirements. Yes, have the right controls in place to make sure there are no people coming in and stealing jobs and things like that, but for the big bulk of people coming in, that's not what they're doing. They're actually adding value and employing Canadians.