International Trade Committee on Nov. 8th, 2018

[Paul Halucha]

A couple of things on that. I think the trade data that often gets quoted.... In economic literature there are lots of discussions around how accurate trade data is anymore, given global value chains. Every time I see a number like what we saw yesterday where the growth rate was that slow, we need to remember that it didn't take account of a lot of the interfirm movement of goods and also that what gets captured in trade flows is the point of final sale.

This is the famous example of the iPad, iPod or any of those products made in China that all get credited to China's export number because they do the final production there, but recognizing that a lot of the intellectual property, the software and the components are made in places like Germany and Scandinavia and, obviously, in the United States as well.

I think that's an area we need to get better at, moving away from those trade surpluses. Anybody who looked through the last year on trade data recognizes severe limitations in looking at the bottom number, and even a surplus and a deficit don't necessarily reflect good and bad at all times. I think that's a point on the data we need to get better on.

In government we often tend to look at how many clients we handled, how many people came into our offices for meetings or that we brokered meetings with others. I think that's a valid point because service to customers is critical, but in the end it's how many deals were closed as a result of those interactions. How many companies were able to land contracts? Those often don't happen that day. They may happen months later. I think we need to get better at tracking the economic performance indicators around that.

I was involved with the economic strategy tables. I led the sector at ISED that was responsible for running the secretariat. They pointed strongly to branding as another area that Canada needs to get stronger at. They noted we have great pockets on that, but the Canada brand remains an extraordinarily strong brand for companies. I have companies coming in all the time that have been able to benefit from that, but we use it inconsistently.

It's interesting because if you look at areas like regulations, companies are always coming in to raise regulatory issues, as was noted earlier. The regs are often the baseline for strong brands. If you look at health products, why do health products from Canada sell so well in markets in Asia, China and Africa, and why is a premium sometimes paid for them? It's because the Canada brand signifies the regulatory process, and the health and safety features of our system here that we take for granted, but it's an enormous benefit to firms.

That was one of the signature initiatives of the tables. I think that area, plus the increase in getting to the metrics around the effects we are actually having, are two areas I think we can do better at. I think in the spirit of what the minister was doing, like offering suggestions around where the committee could work, maybe identifying best practices of other countries that are reporting better on their interactions and their support, would be a really useful thing, and then strengthening the Canada brand.

[The Chair, Liberal, Mark Eyking]

Thank you.

Thank you, Mr. Peterson.

We'll go to the NDP now, Ms. Ramsey.

[Tracey Ramsey, NDP, Essex, ON]

Thank you.

I have a couple of specific things, but I want to make a comment, because I do agree with what Mr. Halucha is saying. Without the data, we can't reflect back to see how successful we're being in terms of our trade. This is something that I've brought forward and that I think we really need to implement as part of our trade agenda and trade policy going forward: that we actually have a report following trade so that we can have official studies that are capturing all the things you're mentioning.

Under that transparency, I think we really could understand the successes and the challenges and then look at policy ways to address those challenges. I had a chat with Ms. Moran. I said that the opportunity for trade exists almost solely within SMEs because the large players are doing quite well. They know how to do this. They know where the programs are. They have the resources to be able to go and acquire them and look at trends that are happening globally. SMEs have none of this.

I remember an early stat that we heard from the CFIB. They came here and told us about the amount of people who try to trade with a country in year one. By year two, that has dropped by 50%, and then there's an even higher percentage drop-off after year two because it's too difficult. They just are not able to do it. That's something we've heard pretty consistently at this committee over the last three years.

I really feel that at this point we have to flip trade on its head when it comes to SMEs, start from the ground up and create something that works based on what people need. As my colleagues have alluded to, and as we've heard here consistently, the programs that exist and the kind of model we have aren't working. I'd like to hear about your efforts to address all of these concerns.

I have two specific examples of things that I think could be helpful. One of them comes from the Canadian Produce Marketing Association, the Canadian Horticultural Council and my colleague, the previous agriculture critic. It's a non-partisan issue, I believe, but we've yet to see it, and that's the U.S. Perishable Agricultural Commodities Act, which would really help SMEs in terms of the produce that they're shipping across the border. We need this program back in reciprocity so that we can secure their future and make sure that when they lose products when they're exporting there is some security measure for them, so that they don't end up losing their farms, essentially. I'll ask you about that.

On the other one, I come from a region in Essex that has over 22 wineries. I know that my other colleague from Niagara has a lot of wineries and certainly B.C. does as well. The vintners are quite an active group here. The excise exemption is critical for our vintners. This goes beyond the bricks and mortar or the fields of our vintners. This goes to our whole tourism sector and the whole ecosystem that exists around it. This is a simple measure that would really help them to reinvest in their businesses.

I'll leave that open for comment. I look forward to hearing from you.

[Chris Moran]

Thank you very much.

To address one of your first questions, the chief economist of Global Affairs Canada does issue an annual report on the state of trade. I will ensure that the clerk receives a copy of that, because it is actually a snapshot and it's consistent across time in terms of methodology, etc. It does provide a good baseline and we can look at it year over year.

With respect to your question about the point that CFIB raised with the problem that some SMEs export once and don't stay engaged, that's something that within the trade commissioner service we recognize as a problem. There are two problems that we try to help businesses address.

Number one is the risk of exporting. Through access to information, intelligence and preparation for that market so that they are going to succeed, so that they are going have a better opportunity when they arrive and they're going make better contacts, they're going to have greater success and we can help keep them re-engaged. That's one thing that we are actively looking at.

We also know that roughly 59% of our clients at any given time are exporting to only one market. These are SMEs that are already working with the trade commissioner service. They already understand what we can do for them. We're working with them to identify other opportunities as well so that we're expanding their markets. We're looking for new opportunities for them. We know that in turn that opportunity and the value they're going to bring back into Canada are going to contribute overall to a more innovative and successful company.

[Paul Halucha]

It has been a couple of years since I've been active on that file but it does have a long tail. I know that the government has announced that they are doing consultations on aspects of the bankruptcy system, but I believe that pertains only to the issues around pension claims in bankruptcies.

We studied PACA very carefully, because they are a very active stakeholder group that came in to meet with us over a couple of years, and what we found was that there were a significant number of regulatory changes that were made with full support from our department by the Department of Agriculture to put in place a regulatory regime for the conduct in the market. This was because what was happening was that there were a lot of players who were coming in and out of the marketplace in Canada, the fly-by-night operations, and they would effectively take money from farmers. They would take the produce. Then they would discount it when they got closer to market, and then maybe give them back their money and then they would vanish.

What was presented often as a bankruptcy problem was actually a fraud problem. It was not appropriately dealt with under the Bankruptcy Act, and I think the government did deal with it through the regulatory changes they made, which were on the licensing regime in that sector. Our data never showed that there was a high degree of losses as a result of bankruptcy in the sector. Almost every case we investigated, and we investigated a lot of them and we have a lot of data on this as a department—

[Tracey Ramsey, NDP, Essex, ON]

I just have to ask you a question. What is the risk of having that? Is there a cost to the government?

[The Chair, Liberal, Mark Eyking]

This topic is dear to my heart—

[Tracey Ramsey, NDP, Essex, ON]

I know you love this topic. I know.

[The Chair, Liberal, Mark Eyking]

—but as chair I have to go by the rules here, and we're going to go over to Madam Ludwig on the Liberal side.

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

Thank you, Chair. Thank you, all, for your testimony and your responses this morning. I'm going to direct my first question to Ms. Moran.

As someone who taught international trade for over 20 years, I know that being involved with international trade requires an increased amount of time, an increased amount of risk and an increased amount of resources.

Certainly within an individual company, especially a small one, we need to have champions, and just bouncing off where Ms. Ramsey was going about the 50% not exporting in their second year, and probably less in their third year, I'm just wondering. If we look at the projections or the plan, does Global Affairs have a plan to work again with the post-secondary undergraduate and graduate students? For example, under DFAIT back in the day there was the export partnership program. We would actually partner students in groups with an individual business. They would do the research and the legwork that the business didn't have time for, didn't have the resources for and didn't know what to look for. We saw a great success rate with that.

I'm wondering if you could speak to that as well as the opportunities with the Forum for International Trade Training based here in Ottawa but offered nationally.

[Chris Moran]

I regret I'm not familiar with the export partnering program, but it does sound interesting.

Right now we've undertaken a review of the trade commissioner service. We're looking, through continuous improvement, to improve our service offerings and to look for opportunities to engage more companies so that we're working with more and more companies. That seems like an interesting place to start, and we should learn from what we did in the past.

With respect to the Forum for International Trade Training, it's something that we often refer our clients to. We know that SMEs who have the FITT training are more successful. We know that EDC is a key partner in that and that's one of the Crown corporations within our portfolio.

I would also note that there are a number of trade commissioners who have graduated from the forum, so it is absolutely a program that works and we want to see more of that success.

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

Great.

Ms. McRae.

[Frances McRae, Assistant Deputy Minister, Small Business, Tourism and Marketplace Services, Department of Industry]

I would just add a couple of things to what Chris has said.

You talked about time, risk and resources, and I think the minister certainly talked a little bit about the time factor, where we know that this is a significant issue. To go back to the point about SMEs being the ones who don't have resources, I think that's really fundamental and core to what the minister wants to advance and what your mandate would really be focused on for small business, and I think that's why she has small business and export promotion in her title, as she said.

Just to add a little bit to what Chris is saying, the innovation and skills plan that we have had in the government for a few years now actually does put innovation and skills together. The point you're making about export skills is really important. As Paul noted, the economic strategy tables did talk about skills as a significant area of gap, not just in export but in a whole range of areas. We would love to hear some advice from the committee about the kinds of skills that are in most demand, particularly as related to exporting.

I would say one last thing on risk. It's interesting. We talked about EDC. I don't know if you've seen their recent advertisements that say, “We take on risk, so you can take on the world.”

I think this is a significant area. That's what they really work on doing, de-risking, as does the Business Development Bank, and in fact, in both Minister Carr's and Minister Ng's mandate letters, there is a mandate for both of them to work with those two organizations as part of their mandate work.

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

Thank you.

In terms of affordable access to financing, EDC certainly is an option, but in terms of the awareness side—I'm sure part of your national campaign will be on how to promote awareness—what advice would you give to us as individual MPs, when we're back in our ridings talking with businesses, on how to better prepare them in terms of the awareness and also the confidence to go beyond the United States and look at the opportunities among CETA as well as CPTPP?

[Chris Moran]

That's a very good question. In the trade commissioner service, we work across the ecosystem. We also do a rolling survey of SMEs that have been working with the trade commissioner service. One of the key pieces of information we're hearing back from them is that they felt they gained the information, insight and confidence to help them manage entering a new market. We have taken up that mantle to promote free trade agreements that are coming on board, especially the new opportunities, so that we are creating that enthusiasm and the awareness as well as the confidence in SMEs to move further afield.

We know that most exporters are looking first to the United States. Culturally and geographically, it's very similar to us. We are working with those who are already engaged in trade, who already have learned the ropes in that very proximate market, to help them navigate moving into those new markets that might be quite different and to understand what those opportunities are.

[The Chair, Liberal, Mark Eyking]

That wraps up the time and that wraps up the round.

We have some more future business to deal with, so we can't do a full round, but I think I'll let each party ask one short question. Then we'll wrap it up.

Mr. Carrie.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

It's always great to see colleagues from the Department of Industry. I remember working over there as a parliamentary secretary. I really appreciated the work you did, because it seemed to be very non-partisan.

I do want to ask you a question, though. I'm a little surprised by the fact that you're still the department of “industry”, because when the government came in, they actually changed the name to, I think, “science and innovation”. I remember joking that this was the first time Canada didn't have a minister of industry.

You're still over at the C.D. Howe Building. He was a great Liberal cabinet minister and a very big champion of industry. The government made a big issue about science and innovation. The C.D. Howe Institute came out with “Canada’s 2018 Innovation Policy Report Card”, which looked at 14 countries to see our standing. Canada is 14th. This was the C.D. Howe report card.

We know that the government really wants to focus on improving the innovation. We had this talk about competitiveness and how important it is for competitiveness to be really innovative. I tried to ask the minister what she's recommended to Minister Morneau to move forward to improve our competitiveness. I'm wondering if you have any specific recommendations we could maybe forward to the minister to help improve our ability to innovate.

Scoring number 14 on a report card just doesn't give me a lot of confidence. Are there some recommendations you could make to help improve that number?

[Paul Halucha]

I'm tempted to just go through what the economic strategy tables recommended.

I think, first off, Minister Morneau had an opportunity to actually be on a panel with one of his senior advisers in the summertime, and I had lived through the economic strategy tables where we had 90 CEOs looking exactly at that issue. Minister Morneau had been out during the summer, meeting, as many members of Parliament do, with business heads, and there was almost a 1:1 alignment with what the areas of need were.

I think we can get negative, and I think a lot of our reporting does tend to focus on some of the challenging areas. Research and development is absolutely one of them. That was an assessment that we made to the new government when it came in: that the R and D indicators were trending downwards and had been for a number of years. Part of that is us losing ground, and part of it is competition in other jurisdictions, as other countries have done different things that have improved their outlooks. The innovation and skills plan that Minister Bains brought forward was very much based on that evidence and analysis and the same type of work that is showing up in C.D. Howe reports.

I think there's going to be a bit of a lag, probably, in terms of the results showing up in the data. There's always a data lag. However, I think the types of investments that we have done in things like superclusters—which are at the stage now where contribution agreements are getting done—will be live and will start to show results in the coming years. Then there's the strategic innovation fund that was put in place.

I'm just cherry-picking a few examples because I know that time is an important issue here.

The third one, I would say, is around talent and access to talent internationally. With regard to the changes that the government made with the two-week visa program, which is a pilot, I think there is a very strong consensus amongst stakeholders that it should get extended.

Those are three cherry-picked measures, but very significant ones, that I think will move that type of meter. I think they're very important, the points that were made around the economic framework: the baseline laws, the outlook on regulations. There's never been a point that I've been in government where we haven't been told that our regulatory system could be improved, and I don't expect to see that day. However, I think that is a very important message. I think some of the measures that have been put in place by the Treasury Board to strengthen the accountabilities among government agencies, like the 1:1 model, which was brought in by the previous government and continues, are important initiatives.

I think that, on regulations, we.... There is the burden side of it. I've heard enough strange examples of burdens that we've put on businesses to know that there is a real issue there and that we can never take our eyes off of it. The tables called for an agile regulatory framework, and I think it is absolutely critical that this be pushed through all of the government regulatory agencies.

At the same time, there is a public good that is served by regulations, and I found myself saying that often at the tables. If you look at history, there are cases where the private sector is the point where the buck stops, and it is government and taxpayers who end up holding the consequences, whether they're environmental, financial or people who are losing their jobs due to business decisions. At that point, we're exposed and we're criticized for not having sufficient accountability and regulatory systems in place. I really do believe that the balance is critical. We certainly can do better and we need to continue to do better to reduce the burden.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. It's a good question, but we—

[Colin Carrie, Conservative, Oshawa, ON]

Mr. Chair, Paul mentioned that they had these tables that are being reviewed with Minister Morneau. Could you give us a copy or send the report?

[Paul Halucha]

Yes, the economic strategy tables reported, so their reports are available. I can't remember offhand, but I'd be happy to, at any point, come back and go in depth.

Actually, the table members themselves are terrific advocates. Perhaps the committee could consider having one or two of them come in to just talk about the tables. They will do a better job than I will.

[Colin Carrie, Conservative, Oshawa, ON]

I think that's a really great idea, and knowing that Minister Morneau has heard about it is a really good thing.

[The Chair, Liberal, Mark Eyking]

That's a good point because maybe we need you to come back. We encourage, of course, the many times you attend our meetings, so it would be good to just keep an eye on that.

I'm just trying to get quick questions and quick answers.

Ms. Ramsey, do you have a quick one?

[Tracey Ramsey, NDP, Essex, ON]

It's tough to just pick one.

We appreciate you being here today and your frank conversations with us.

About the SMEs around the steel and aluminum, I know that you're aware of it, Mr. Halucha, but we really need to support our SMEs. In Ottawa last week, we had a company's shop close that had been here since 1975 with 160 workers. We really have to be able to address this. Otherwise, we're just going to continue to bleed jobs out of the country. It's an emergency situation.

I think that the skills gap is also something that we really need to address. I know that there are multiple ways that is being looked at, but we need to support our SMEs. There's a massive disconnect. They cannot find people to work, whether it's agriculture, manufacturing, rural or urban. Wherever you are, the skills gap exists across our country and the education system isn't matching the jobs of the future.

Last, to pick up on the thread of my colleague, there were 187 new MPs, of which I was one. Many of us on the committee were who were elected in 2015. I would like to see the trade commissioner service, and perhaps your departments, put on a training about trade because we are the front-line people out in our communities, with whom these businesses are speaking. They're coming for answers. We all represent very different makeups of what types of SMEs exist in our ridings. I believe that we're one of your greatest assets out there because we're on the ground. If you could provide some type of training for us, I think that would be outstanding and I think a lot of MPs would take advantage of that opportunity.

[The Chair, Liberal, Mark Eyking]

Okay. I guess that's a statement.

We're going to go over to Mr. Fonseca. You have the floor.