International Trade Committee on Nov. 27th, 2018

[The Chair, Liberal, Mark Eyking]

Good morning, everyone.

Welcome to our witnesses.

Sorry for the delay. It's a busy time of the year for legislation up on the Hill and with the slippery roads, it takes a little bit to get up and down, but we're glad you folks made it from all corners of the country.

Of course, you know why we're here. This is the international trade committee. We've embarked on a study. Over the last few years, we've done many trade agreements since this committee started in this Parliament. Right now, we're doing a study on how to capitalize more on them, especially with the small and medium-sized businesses across this country. They're such an important part of our economy. I think this is our fourth meeting.

Some of you may have been in front of committees before. Usually five minutes or less is what we like to do, for your opening statements. That gives us time for dialogue with the MPs.

We'll start off with Ms. Peters, from Communitech.

[Avvey Peters, Chief Strategy Officer, Communitech]

Thank you, ladies and gentlemen, for the invitation to join you today.

My name is Avvey Peters and I'm the chief strategy officer for Communitech. We're a tech organization in the Waterloo region of Ontario. It was established in 1997. I also lead something called the Canadian Digital Media Network, which is a group of 26 of Canada's leading innovation hubs.

At Communitech we work to build a pipeline of companies that have scaled and will continue to scale into globally competitive firms. They start in the Waterloo region and then they grow and stay in Canada to create jobs and economic opportunity.

Over the last decade we've supported more than 3,000 companies, helping them to attract $1.7 billion in investment and create 16,000 new jobs. This has helped Waterloo region create the second-highest density of start-ups in the world and to attract companies like Google, Shopify and NetSuite to the region.

Our job is to help start-ups and scaling firms do everything from raise capital, to recruit talent, to build out sales and marketing processes, and to help them export to global markets. It's that last area of activity that I want to highlight for you today, given that part of your work is to delve into the ability of small and medium-sized enterprises to maximize the government's assistance in benefiting from trade opportunities.

To that end, there are two ideas I'd like to share with you related to helping those SMEs. They are the importance of early-stage support for Canadian firms and that of partnering to effectively connect firms with the help that they need.

Tech firms are born global. They seek customers outside Canada from the outset. Often they look first to the U.S., but increasingly we see those firms moving beyond North America to explore sales opportunities. From our work to help more than 5,500 companies across Canada each year, we've come to recognize that the most important assistance we can give them is to help them understand how to effectively navigate new markets at the earliest moment possible.

Small firms need market intelligence data and analysis to help them evaluate market opportunities and the potential for customer attraction. They need advice from experienced business leaders who have current networks and a strong understanding of regulatory environments, business culture and supply chains. They need support for travel, so they can meet directly with customers and investors and develop their own in-market perspective. They need pre-flight training and follow-up programming so they can maximize their participation in other programs like Techstars, Y Combinator or the Canadian technology accelerator program. They need to learn how to leverage the brand of Canada when they do business abroad.

The government supports these needs already through the trade commissioner service, Export Development Canada, and through a number of programs offered by Innovation, Science and Economic Development Canada. In fact, many of these ideas were highlighted in the recent fall economic statement. The challenge that faces many small firms is, first, how to become aware of these supports and figure out how to access them. It is also to quickly understand whether they are good candidates for these programs or not, so that they don't waste time that could be better spent on building their businesses.

This is where the notion of partnership comes in. Government agencies and departments can't have an on-the-ground relationship with every single promising tech company in Canada, but there are organizations that have those working relationships.

Innovation hubs, chambers of commerce, boards of trade all engage on a daily basis with firms to help them attract talent, raise capital and find customers. Closer collaboration among those regional organizations and the Government of Canada would create a more seamless experience for companies by providing local training, coaching and preparation in advance of their global sales efforts, and a coordinated hand-off to in-market experts and resources.

These kinds of partnerships can also help to surface points of friction in existing programs, the limitation of CanExport, for example, to be available only to companies entering a market for the first time. What of the company that has piloted online sales in a new market to test customer attraction before moving heavily into that region?

For many small firms there's a great deal of pre-work required before they can take full advantage of the resources made available by the Government of Canada. Regional partners can help with these preparations. We can act as a funnel of strong candidates to the right opportunities and we can make sure that firms know about the resources and supports available to them.

We run something called the soft landing program, where we provide travel support and connections to experts and resources in market. Since 2012, more than 480 Canadian SMEs have done business in 58 different countries. They have reported $86.7 million in new revenue as a result of those landings. They have reported more than $84 million in investment opportunities and they have created 235 new jobs. These results are modest relative to the scale of the work done by the Government of Canada to support firms in their efforts to export, but they're a good test of firms' capacity to enter new markets and be ready for more advanced services.

I share these two ideas in the hope that they will be useful to you in your work. I'd be happy to answer any of your questions and share any further background about our work.

Thank you very much.

[The Chair, Liberal, Mark Eyking]

Thank you.

We'll move over now to Northern Cables Inc. We have Mr. Stafford, the president, and Mr. Bacon, the chief executive officer.

Welcome, gentlemen. You have the floor.

[Todd Stafford, President, Northern Cables Inc.]

Thank you.

[Shelley Bacon, Chief Executive Officer, Northern Cables Inc.]

Thank you for having us here today.

We are a manufacturer. We manufacture products. Canada has been a great place in which to be located. We have many things to be thankful for.

I have samples here of Teck cable, if you want to know what it is. We can pass these around, if you like. Teck cable is an innovative Canadian-designed power cable used in mining and hazardous location practices. In the early 1930s, the Teck-Hughes gold mine in Kirkland Lake decided to use an alternative cable to the unprotected, flexible, portable power cables that were the standard at the time. The popularity of this new Teck cable, driven by Canadian industry, quickly spread to pulp and paper and other heavy industries that benefited from these features.

In 1965 CSA formally recognized and developed a national standard around this new cable. Small and medium enterprises, including Northern Cables, manufacture and sell this product in Canada. Occasionally, we even get the chance to export outside of Canada for job-specific applications where someone with Canadian expertise specifies this cable for use.

In recent years other countries, including China and the United States, have started manufacturing these cables and other similar armoured cable designs, which they export for sale in Canada. One of the main difficulties for small and medium enterprises, including us, is that we cannot sell this cable in their jurisdictions, which have IEC codes and no equivalence or any comparable sizes.

The interlocking armoured power cable, which is what you have there, is a North American invention. All of the products and all of the metals that go into the manufacture of that cable are sourced from the province of Quebec. Furthermore, the technology to produce that armour, the flat-rolled mechanical-grade aluminum, has benefited us; it was developed and largely brought on stream by Alcan in flat-rolled steel over the past 50 years.

According to Stats Canada, the volume of imported electrical wiring cable, including Teck cable, is growing each year in Canada. That is creating greater and greater trade imbalances between nations like us and China and the United States. In 2017 Canada imported $1.6 billion of electrical power cable. We only exported $331 million. That's a ratio of $4.85 of imports to every dollar exported from Canada.

Now, the Government of Canada can benefit small and medium enterprises like us by assisting in the promotion of cables like this to be a globally recognized product within IEC standards for trade within CETA and CPTPP. These are new markets. The differences between them, very simply, with these cables all classified in American wire gauge sizes, are the barriers to global trade. Bare copper and bare aluminum conductors are the starting part for all cable designs. Canada needs to take the lead to remove these barriers.

Our own electrical code in Canada, part 1, and provincial electrical codes are creating barriers by only specifying AWG sizes. The IEC standard 60228, on conductors of insulated cables, is also a barrier to trade for North American cable sizes. In order to achieve global trade based on SI units, Northern Cables believes a set of standard sizes based on SI units should be developed.

As I said, there are two types of gauges. There's AWG, which is a standard that goes way back to the 1850s, and there's SI, or système international, which is all based on square millimetres, the size used in IEC 60228, conductors of insulated cables.

I have provided a table in the background information. We have soft conversion. We have hard conversion. No one buys cable in North America in metric sizes. They always refer to it in AWG. You cannot sell the stuff offshore.

We propose a four-step plan to try to elevate the stuff with assistance from the Standards Council of Canada. Add metric conductor sizes to the Canadian electrical code, part I. As part of this first step to introduce the metric sizes, we've already put a proposal in. One of our engineers and Steve Douglas did this. We want to submit more of these things into these codes and standards and convert to hard metric sizes as opposed to the soft conversion.

Canada is a metric country, but we've only gone partway in these areas. By elevating this to hard metric sizes and having the SCC elevate this to the next level, we can then make these products, introduce them into these other markets and export. As it is, these countries can sell into Canada, but we cannot sell into those countries.

Canada follows the international rule of law, with high standards for labour, safety and the environment. As Canada encourages other countries to follow its lead, we inadvertently subject Canadian small and medium enterprises to more regulation and additional costs associated with these high standards.

Teck cables, and other electrical cables, such as telecom, extension cords and utility cables, are all made in other countries from coal-based energy, and contain polymers that sometimes don't meet our low temperature standards.

Currently, we're experiencing aluminum conductors such as this stuff, which we manufacture, coming in from Asia at below world market prices. It's a form of dumping. We would like to see the government apply the Special Import Measures Act duty so that all electrical cables entering Canada come in at world-recognized market values.

Carbon taxes on imported materials and finished goods should be applied. There should be a benefit to domestic manufacturers using clean energy in Canada, and a cost to import electrical cables made from coal-powered energy. That's basically what we're competing against.

In conclusion, Northern Cables is a 22-year-old privately held Canadian manufacturing company located in Brockville and Prescott, Ontario. The firm was started after the closure of Phillips Cables, a Canadian public company that had been located in Brockville since 1922. We started with five employees, and we now have approximately 230 employees as of 2018. We started selling Teck cables domestically in the early years and have consistently added licences and diversity.

Currently, Northern Cables has grown our export market to about 50% of our production. To maintain our position and grow our business, we really need to work within the Standards Council of Canada and the Business Development Bank so we can enter other countries, such as Latin America, South America, which are rich in mining and other natural resources.

We're unable to grow our business more in Canada, because Ontario has already lost 320,000 good-paying manufacturing jobs in the last 15 years due to global trade and government policy. Many of these closed industries were once industrial and commercial users of the cables that we manufacture in Ontario.

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, sir. That's a very interesting industry in the challenges you face.

Thank you for coming.

Now we're going over to Ms. Arsenault from the best island in the world. From the Cape Breton Partnership, we have the president and CEO.

Go ahead.

[Carla Arsenault, President and Chief Executive Officer, Cape Breton Partnership]

Good morning, Mr. Chair and committee members. On behalf of the Cape Breton Partnership I would like to thank you for the opportunity to appear before you today.

The Cape Breton Partnership is Cape Breton's private sector-led economic development organization, made up of more than 150 private sector investors who are all committed to investing in our island's future and believe that, by working together, we can create a thriving Cape Breton-Unama'ki.

Cape Breton, or Unama'ki, as the Mi'kmaq have called it for centuries, is a breathtakingly beautiful island in northeastern Nova Scotia. It makes up about a third of Nova Scotia's land mass and about 14% of its population at just over 132,000 people spread across five municipalities and five first nations.

The story of Cape Breton's last century is a familiar one in North America. For more than 100 years, the coal and steel industries boomed, turning Cape Breton-Unama'ki into one of the most bustling industrial centres in the country. This was followed, however, by a prolonged decline and a near simultaneous collapse of the fishing, coal and steel industries over the last few decades, and the impact has been devastating. Unemployment, poverty and youth outmigration have all soared, seeing the island's population drop by over 30% in the last 30 years.

However, this history also includes the longer, more constant story of entrepreneurship and innovation that has allowed diverse cultures to thrive on the island for centuries: from the Mi'kmaq to the European farmers and fishers, especially the Gaelic-speaking Scots and French-speaking Acadians who settled on the island and had to rely on their wits and hard work to carve out prosperous lives; from later arrivals like the inventor Alexander Graham Bell who, with his wife Mabel, established one of the first innovation hubs in the world at Beinn Bhreagh in Baddeck; to the host of extraordinary artists and thinkers who have called Cape Breton-Unama'ki home ever since.

I am here today, most of all, to share with you the news that this spirit of invention and creativity continues to thrive in Cape Breton-Unama'ki in the numerous cutting-edge businesses, innovators and artists who live and work on the island, including in Victoria County, which has the highest number of small businesses per capita in all of Nova Scotia. Like Alexander and Mabel Bell, these entrepreneurs are creating and growing companies, products, technologies and works of art that continue to serve and change the world.

After decades of being defined by decline and despair, Cape Breton-Unama'ki is reinventing itself and is poised to become one of Canada's good-news stories and serve as a model for how small, out o the way places can become well-connected incubators and launch pads for world-changing ideas. Cape Breton-Unama'ki is “creative island”. It's potential is unlimited.

To fully realize Cape Breton-Unama'ki's immense potential and the potential of other regions like ours across the country to contribute to our collective and ongoing prosperity, we invite our federal partners to work with us and others to, first, continue to address connectivity infrastructure gaps like broadband Internet and cellular service, as well as rail, road and sea transportation. These service gaps limit businesses' ability to connect with the rest of the world, and rural communities' ability to attract and retain much-needed new residents.

Second, we invite our federal partners to work with organizations like ours, the provinces and others to better coordinate and communicate business support programs and services directly to the private sector through initiatives like program navigators or concierge services. Cape Breton Partnership's export growth service pilot program is one such example, as well as the Atlantic immigration pilot initiative, on which we've been working with the Nova Scotia office of immigration as well as our partners at ACOA.

Third, we invite our federal partners to work with organizations like ours, the provinces and other innovation ecosystem stakeholders to foster greater regional and subregional collaboration among businesses and partners to allow the small innovative businesses, like those working to lead the modernization of the fishery in We'koqma'q, New Haven or Louisbourg, for instance, to contribute to greater national and international efforts. This includes reducing barriers in policy and programs that limit small rural businesses participating in federal programs like the Atlantic fisheries fund and others.

Last, we invite our federal partners to join us and those like our 150 private sector investors, who are putting their own hard-earned money into building a better future for Cape Breton-Unama'ki and all of Canada, in taking bold, coordinated and long-term looking action, action that is looking 10 years into the future and beyond and is focused on supporting entrepreneurs, innovators and small and medium-sized businesses where they live, and on helping them start strong, reach the world more easily and build a better country for us all, from the grassroots up.

I would like to thank you very much for your time, and I would be happy to answer any questions.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go to Monsieur Noël from the Fédération des chambres de commerce du Québec. Bienvenue.

[Philippe Noël, Director, Strategy and Economic Affairs, Fédération des chambres de commerce du Québec]

Good morning, everyone.

Thank you for inviting the federation to discuss government support for international trade of small and medium-sized businesses.

Before getting to the heart of the matter, I would like to introduce the Fédération des chambres de commerce du Québec (FCCQ).

The FCCQ brings together more than 130 chambers of commerce and 1,100 member companies, making it the largest network of business people and companies in Quebec, the provincial chamber of commerce.

Thanks to our extensive network, we represent more than 50,000 companies operating in all sectors of the economy across Quebec.

Government support for the success of our companies in global markets is very important for us because the future of our economy depends on the ability of our companies to export and deal with the increasingly fierce competition, both domestically and internationally.

As we like to point out, more than 28% of our economy depends on the production of goods and services for international markets. If we include sales in other provinces, more than 45% of our GDP is connected to markets other than Quebec. Those data remind us how important this issue is to the economy.

The FCCQ has previously had the opportunity to present its point of view on support for SMEs in export matters to both the Government of Quebec and the federal government, for example, on committees such as this one.

We would like to focus on three aspects today.

The first is the need to properly promote the business opportunities arising from new trade agreements. Large companies generally have a better understanding of global trade issues and are better able to quickly respond to a new trade agreement. However, our discussions with SMEs and chambers of commerce allow us to identify gaps in information and awareness about the issues with new trade agreements. If poorly informed, companies may miss out on business opportunities created by those agreements, or be taken aback by the arrival of new competitors on their traditional markets.

The second aspect is the need to better target support for companies with exports. Other organizations, such as Export Development Canada (EDC) have previously demonstrated that providing support that takes into account the company's level of maturity in exporting is preferable, as it helps to better guide the company's export strategy. For example, we are talking about giving more online support to smaller companies and personalized support to companies with great potential.

To this end, we were pleased to note in last week's economic update by the Minister of Finance that he is planning three measures in line with that recommendation.

First, he mentioned a new mentoring program, designed to match entrepreneurs who want to enter new markets with business leaders who are already established there.

Second, he intends to provide funding for export preparedness and capacity building initiatives for high-potential companies.

Third, he plans to provide additional funding for trade commissioners to better support emerging sectors and our agricultural exporters.

The last point we want to make is the importance of continuing to support our companies as they seek to maintain or gain market shares in the United States. The majority of companies that start exporting do so in the United States, which makes perfect sense. It is the world's largest economy and this market is nearby, just south of the border. We know that the government wants to increase the share of Canadian exports to high-potential overseas markets, but for many of our SMEs, breaking into the American market remains the number one objective.

That is why the FCCQ has set up the COREX program, which facilitates trade between Quebec SMEs and companies in the seven northeastern U.S. states, including New England and New York State. The program is supported by Canada Economic Development, among others. This is precisely the sort of initiative that SMEs say they appreciate, as it makes it easier to connect with new business partners in a priority market.

I would also like to say that we encourage the federal government to work closely with the provinces to ensure that their export support services are well integrated and, most importantly, to better communicate to businesses all the services that are available. For example, by systematically cross-referencing federal and provincial services to meet the needs of exporters, the full range of services offered becomes better known.

In closing, let me take this opportunity to remind you that, while the opening of markets offers many business opportunities to companies, concerns remain, particularly about the compensation paid to Quebec dairy producers.

Recent free trade agreements have created breaches in the supply management system. I will have the opportunity to come back to this in our discussion, if you wish.

Thank you again for your invitation. I will be happy to answer any questions you may have.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

That wraps up the presentations of our witnesses. We're going to move on to dialogue with the MPs.

I'd like to welcome MP Rusnak from Thunder Bay—Rainy River and MP Choquette from Drummond.

We're going to kick this off with the Conservatives going first.

Mr. Allison, you have five minutes.

[Dean Allison, Conservative, Niagara West, ON]

Thank you very much, Mr. Chair, and to our guests, thank you as well for being here today.

My question is for you, Ms. Peters.

I know you guys do a wide range of things. Would you consider yourselves more an incubator or an accelerator? You do all of it, so where do you spend most of your time? Is it in acceleration?

[Avvey Peters]

We think of ourselves as a third category. The innovation hubs often will have an incubation program or an acceleration program as part of what they do. We work with companies from the one-person start-up right up to the size of OpenText or Google. We run the gamut.

The focus in the last couple of years has really been on scaling firms, because we have a really strong pipeline of early stage companies that are now starting to get on that growth curve. We have been spending a lot of time thinking about how you take a company that has $1 million in annual revenue and get to it to $10 million. Then, how do you take that $10 million revenue company and get it to $25 million, $50 million and on up the chain?

Our focus is really on how we help more companies grow to $100 million, because once they're at that size, they have every option as far as how will they grow and how they'll do business is concerned. They become the real engines of job creation.

[Dean Allison, Conservative, Niagara West, ON]

I guess the challenge is that when you're scaling a company from zero to 10, 10 to 20, or 10 to 50, it's different skill sets.

[Avvey Peters]

Absolutely.

[Dean Allison, Conservative, Niagara West, ON]

Sometimes the entrepreneurs have it and sometimes they don't. It's up to them to sometimes get out of their own way or get the expertise they need.

What are the challenges? You talked about some in your opening remarks, but where would you say the greatest challenges are? I guess it depends on the stage or the [Inaudible—Editor]. Is it in raising capital?

Because of your size, scope and reputation, you guys probably have a lot of opportunity for angel investors to come in. You probably do your own Dragons' Den type of stuff where you get to pitch what's going on.

In your opinion, though, where is the toughest challenge?

I talk a lot about competitiveness as being a challenge in this country. You guys are in a different market in that you're attracting the best and the brightest, some of them coming right out of Waterloo and being able to stay in the region. You guys have built some critical mass, so it's a great place to go. I wish we could replicate you guys all across the country, quite frankly.

Talk to us about some of the challenges, in particular, that you guys deal with in the scalability of companies.

[Avvey Peters]

Part of the reason for our national network approach is to try to scale good programming and access to resources from one end of the country to the other. There are 26 of us in all kinds of communities trying to build this kind of capacity.

There are three major problems we're all trying to help companies solve. One is access to the right kind of talent. To use your example, a founder is not necessarily a CEO. He or she can, in many cases, become a CEO with the right kind of opportunities to meet with others who've built that kind of a company before by building a network that helps them do that.

The access to capital piece is the other one we spend a fair bit of time on and encouraging companies to seek investment anywhere that makes sense for them. Some of it is Canadian investment, and some of it is not.

The third piece is that access to new markets and new customers, because we know most of our tech firms are not primarily selling in Canada. They start globally, so for us it's helping them understand how to set up their company to be successful so that they don't run afoul of international regulations or paint themselves into a corner.

[Dean Allison, Conservative, Niagara West, ON]

Sure.

Talk to us about keeping companies Canadian. I know one of the biggest challenges is that you start raising additional funds and sometimes the cash is coming from the U.S., Boston, San Francisco, or wherever, it doesn't matter. Then some of these people want to move. What's the strategy?

I'd love to see Canadian companies that grow to $100 million and actually stay in Canada. I realize that access to capital is part of that, but it's not the only thing.

I'll come to this in the second round, but talk to us about how we keep those companies so that they can grow $100 million here in Canada.

[Avvey Peters]

This is exactly the strategy we're trying to pursue, because we know companies have all kinds of options. We've seen a really encouraging trend in the last eight or nine years. We used to have really promising start-ups get a round of investment from a U.S.-based investor and that would be the last we saw of them. They were required to move. They are increasingly coming back. The investors are starting to understand what the deal flow looks like in Canada.

We spend a lot of time building relationships with foreign capital providers, and getting them to actually come and see companies. Once they make one investment, then they're regularly coming to Waterloo, Ottawa or Vancouver to check in on that investment. That's an opportunity for us to expose them to the next wave of companies.

We're seeing investors coming to us more and more to pursue that deal flow. It's always something we have to balance. Provided that companies can get the resources that they need here—whether it's the right technical talent, the right leadership talent or the investment they need to grow—they don't want to go. They want to be headquartered here and do business elsewhere.

[The Chair, Liberal, Mark Eyking]

Thank you.

We'll go to the Liberals now.

Mr. Dhaliwal, you have the floor.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Thank you, Mr. Chair. Thank you to the presenters.

My first question goes to Mr. Bacon.

Being a professional engineer—and I'm sure Omar being a professional engineer as well—I find it interesting that you talked about the building code and the different standards that you have. You also mentioned CETA and CPTPP.

Could you tell me in clear terms what role government can play that will help companies like yours when it comes to national and international standards?

[Todd Stafford]

I'll answer that.

We've grown well beyond the $100-million threshold and we're trying to stay in Canada, but in trying to export cables, our industry is still dominated by American measurements. That's really the small piece that we're talking about today.

American wire gauge, AWG, is in inches and thousandths of an inch. Export markets don't recognize that. Everything is metric in the rest of the world. If we're going to be global, we need to finish the job that we started in 1974 and become metric, because when we go to Europe or we go to other countries, they don't recognize AWG. Everything is in millimetres squared.

Our own national standards are in AWG. We've used IRAP grants, and we've worked with the BDC, but before we pack up and go on a trade mission to a foreign country, we have to get our world into metric. We're not looking for a financial gain. We want to get things level so that our standards.... They can still use AWG, or you're going to have a bunch of old electricians who won't know what they're looking at, but we need the metric system in our electrical standards so that our products can be marketed.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Are you telling me that our building code is still following the AWG?

[Todd Stafford]

Yes.

[Sukh Dhaliwal, Liberal, Surrey—Newton, BC]

Okay, first of all, we have to change the building code. Have you made those efforts?

[Todd Stafford]

We're working with the SCC, but it's slow. If there's any assistance we could get, that's our purpose for driving here today. We're trying to get some assistance. There's some urgency to that.

We've made proposals to the SCC. We have our own engineer. We've paid to fly him around the world to sit on committees. We sit on standards committees. We sit on CSA committees. There's a real reluctance domestically to go fully metric.