International Trade Committee on Feb. 16th, 2016

[David Morrison]

I have no new information, but the Ambassador Bridge actually carries staggering statistics, which I cited in my introductory remarks. Twenty-five per cent of that merchandise trade takes place within the Windsor-Detroit corridor, so obviously a lot of that is autos. It would be hard to overstate the importance of those links as a lifeline for the North American economy.

The bridge is scheduled for completion in 2020. It will add security to that link and obviously help facilitate trade. Canada has pledged to finance the infrastructure, and its financing will be recouped through tolls.

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

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Peterson, for those questions.

We're going to go to the Conservatives, Mr. Ritz, for six minutes.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Thank you, Mr. Chair, and thank you, ladies and gentlemen, for your presentations today.

It's well known that Canada punches above its weight on many levels and of course the great job that you do underscores that. There's a lot of pressure for the Canada-America market to maintain itself. Some billion dollars a day goes back and forth across that line—we know that—so the question was asked about the bridge.

I think one of the things that keeps the American market honest is having diversity of trade in our portfolio, making sure we have these trade rights into the Asia-Pacific and into Europe and of course with China and so on. We're ahead of the Americans in some instances.

I welcome the bullets in your presentation, Ms. Bincoletto. You're talking about how firms that export are more productive, more innovative, and of course have more capacity for R and D. I couldn't agree with you more, and your new program I think is great. You might want another zero on the back of it.

Over time, we found with agriculture—and Mr. Verheul will remember this—the Market Access Secretariat we set up almost a decade ago does exactly this. Now we have industries getting into China, into India, into these new and innovative markets simply because of that fifty-fifty share that we do. It's been a tremendous success and it's always oversubscribed. Good luck with that. I know it's going to work extremely well.

A little further down in your dissertation, you talked about a study, an assessment of what worked and what didn't. I fully agree with that. Would we be able to get a copy of that or is that for the minister's eyes only?

[Susan Bincoletto]

It's early days. The road map that the former government had, which was called the global markets action plan—

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

GMAP.

[Susan Bincoletto]

—GMAP is less than two years old, and therefore we're still looking at it. It hasn't really been decided how we're going to disseminate that information.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

I understand there will be a consultation process as well, so I would hope this committee would be a part of that. If it's strictly the minister a lot of other areas need to be explored as well.

One thing that has always irked me a little—we see this in some stories in the media—is that our trade balance is always skewed. The one thing people don't understand is that investments into Canada come under imports. Is there any way to hive that off and have three-way reporting of imports, exports, and investments, so that you don't see that skew in trade balance all the time? I'd love to see that. As you already pointed out, Mr. Morrison, the amount of money coming in from the U.S. is astronomical. We're seeing that now from China, from European countries.

I would also like to see a side-by-side comparison as the new trade agreements are put into play with NAFTA, CETA, TPP—the multilateral ones—that shows a comparison on ISDS, IP, Pharma, and so on, so you can see the evolution of these trade agreements. ISDS, Pharmacare, IP are not new phenomena as the world changes and goes electronic. A comparison among the three as to what is new and how it has evolved, I think would be very helpful.

I think the one thing that businesses have told us over the years, and I think will continue to as we do our consultation on these trade agreements, is that businesses want security, reliability, and predictability, or the investments don't flow. I think ISDS underscores that as we saw with the FIPA we arranged with China. We're now seeing a freer flow of monies back and forth and that's not a bad thing. I think we need to underscore the importance of developing a market like China. I certainly agree with the new government on getting moving on that. Of course we're going to have to do it at our insistence on certain levels. But the FIPA that's been signed, the renminbi hub, the new trade commissioners that are scattered throughout China are certainly the basis for those beginning discussions.

Have you developed a timeline looking forward to that?

[Kirsten Hillman]

Susan and I will answer this question together because there are the trade commissioners and trade officials, the promotion side and the trade negotiation side.

On the trade negotiation side, again as you will know, Minister Freeland's mandate explicitly tasks her with deepening relations with China. We are spending time thinking about that and how to take steps toward that. Free trade agreement is one tool. There are many other tools and I think what's really important right now is that we are looking at all the avenues. We're starting to talk to different businesses, different Canadians. That will only increase as we proceed with these discussions to understand what our objectives are going to be. We're going to take a step-by-step approach and make sure that as we move forward, we're doing so in a way that is thought through and makes sense for us on the negotiation side.

The trade commissioners, the Canadian presence facilitating business, that's another side, which is, as you point out, very clearly and particularly valuable for businesses on the ground.

[Gerry Ritz, Conservative, Battlefords—Lloydminster, SK]

Yes. I've found over the years that China loves Canada because we're not the U.S. It's one of the first things I had to point out, that we're not a colony; we're autonomous. Now that they've welcomed that.... I mean, we have beef access and the U.S. still doesn't. There are a lot of different fronts where they use us as a bit of a hammer, and I'm fine with that as long as it ends up in good transference.

The point would be that the size and scope of the Chinese market certainly could overwhelm us. I think we saw some of the wrong way to go with Australia and China and the negotiations they did. In the end, Australia basically bought the deal, which I don't think is good, but it sets a tough precedent for Canada then to get in and again punch above our weight. But certainly I know you are up to that challenge.

[The Chair, Liberal, Mark Eyking]

Mr. Ritz, you're out of time.

Did you have any comments on Mr. Ritz's last...?

[Susan Bincoletto]

Maybe I can add a few points on the trade commissioner side.

The last budget did provide us a top-up for the trade commissioner service, particularly for emerging markets, where companies have a harder time going. They do need a bit more hand-holding, not only to go and diversify their export opportunities—hence CanExport—but we also have global opportunities for associations, which get associations to bring members into new markets so that they can actually investigate a bit more on what exists.

It's a daunting market—India, China. They're difficult to penetrate, so what we're going to be doing is increasing our footprint, especially in secondary cities in China, and in Asia particularly, because again, the more difficult the market, the more you need some hand-holding.

At the same time we're working a lot more closely with some of our domestic partners such as the BDC—the Business Development Bank of Canada—and Export Development Corporation, which falls within the minister's mandate, to figure out whether we can offer a continuum of support to companies, not just that fifty-fifty, but also loans and working capital, again to grow firms so they can actually do business in those more difficult markets.

As David was mentioning, we've always been at around 75% of our merchandise trade vis-à-vis the U.S., and that can be both a good thing and a bad thing, because as you've said, diversifying your portfolio is also a good thing. What we are trying to do through this new strategy is to look at how best to push our Canadian companies to go abroad—other than to the U.S., even though there is a kind of magnet with the U.S., especially with a lower dollar, and it's easier for various reasons to do business in the U.S.—without losing sight of the opportunities for double-digit growth in other countries.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to go to the Liberals, with Mr. Dhaliwal.

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

Thank you, Mr. Chair.

To the panel here, even though the committee has its own agenda, we can set up our own priorities. Last week we talked about some of the priorities that we should be following in the coming days and weeks—the TPP, the softwood lumber agreement, our trade with the European Union. I want to gauge your feelings when it comes to the priorities.

When I was out talking to the businesses last week, almost everyone, even though they supported the TPP and said this would be a good agreement for them.... But again, coming back to British Columbia, they said the first priority is dealing with the softwood lumber agreement. That should be the priority the committee follows. Assistant Deputy Minister Hillman mentioned that the agreement expired in October 2015.

Would you be able to give us some direction on where we should be heading, if we have to pick up one or the other? What would be your priority? What would you be looking at doing first, the softwood lumber agreement or the TPP study?

[Kirsten Hillman]

Well, that's a very difficult question for me to answer. I guess my question back to you would be whether you have to choose or whether you can do both.

My experience, having done many consultations over the past couple of months, primarily but not exclusively focused on TPP, has been that during the course of those conversations with a variety of different stakeholders—Canadians, provinces, officials, municipal governments, etc.—we talked not just about one file but about many things. As I understand it, the committee is considering outreach. It seems normal to me that, in conversations with interested Canadians who are looking at trade either because they're traders or because they are experts in the field, they will be eager to give you their perspective on a variety of initiatives and tell you what their priorities are.

I guess my answer back to you, which is perhaps not a straightforward answer, is that I'm not sure that as a country we need to choose a priority. I think we can say without question that softwood lumber is a very important file. It is a very valuable and very economically significant sector of our economy. From a trade policy perspective, it represents a tension that we have to resolve. At the same time, I think it's very important that we have concluded some free trade agreements. We need to finish them and bring them into force. Then there's the TPP, which is different again, and the government is actively trying to make sure that it understands the views of Canadians with respect to the TPP.

I would maybe put it back to you that it strikes me that both could probably be done in the course of the same interactions you have with the witnesses you bring to this committee.

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

One thing for sure is that the softwood lumber agreement is one of the priorities for you, right?

[Kirsten Hillman]

Well, for our negotiations branch, softwood lumber is a priority, yes, absolutely, 100%.

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

Thank you.

My question now is on India. Even though I was born there, I'm very fortunate to be where I am today. Even though Canada is a minor partner when it comes to trading with India, what are the obstacles that are preventing us from doing business there? I have seen it first-hand, but perhaps you can brief the other members here, too.

[Kirsten Hillman]

I think there are two ways to answer the question. There is an answer that would be similar to the one that Susan gave with respect to China. It's a large and complicated market. Sometimes for Canadian businesses it can be somewhat opaque, somewhat unpredictable. It takes extra effort to do business in India, to establish yourself in India, to invest in India. In that respect, we spend a lot of time and energy with our missions abroad in India, in the smaller offices that we have around the country, trying to help Canadians understand the environment and succeed in the environment. That is, I think, very important. It's important that Canadian companies take the step, take the risk, and get out there. I think it's not always comfortable, partly because Canadian businesses are often used to dealing with the United States. There are a lot more similarities between our legal systems and our language, etc. So there's that.

We can also seek to have legal frameworks, so trade agreements and investment agreements to help support businesses and to help provide the predictable environment, and we are working on those as well and have been for quite a few years. We started a free trade negotiation with India in 2010, and we've been negotiating a bilateral investment agreement for longer than that. Neither of those agreements has been concluded. They're challenging. They're complex. We are looking at continuing to move them forward, but India has a lot of priorities and a lot of other things that are gathering its attention, so sometimes doing that can be challenging.

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

Thank you.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Dhaliwal. Your time is up.

We're going to go over to the Conservatives.

Mr. Van Kesteren, you have five minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Thank you for coming here. I, for one, am extremely appreciative of your being here. I don't come from a trade background. I didn't serve on this committee. I'm one of those who need this presentation, so thank you for that.

Mr. Morrison, one of the things that struck me was that you mentioned the United States was, I think, 70%. I think 70% has been floating around, but I seem to recall that years ago it was more like 90%. Am I correct in thinking that? When I'm talking about 90%, I'm 60 years old, so I mean within my recent memory at least. Have we moved? I guess the follow-up question would be that, as a result of free trade, as a result of opening up our markets, we've certainly begun to take away that dependency that we were being criticized for so much in the past. Am I right in thinking that? Maybe you could make just a quick comment on that.

[David Morrison]

I actually don't know the historical figures. Ninety per cent strikes me as high, but for as long as I've been active, there's no question that there have been efforts to, as has been said, diversify our trading partners. As just a smart strategy, one diversifies one's portfolio.

From many perspectives.... I'm thinking here of a conversation involving my equivalent in Australia, who looks at Canada's geographical setting and thinks we're very fortunate to live next to that market and to have free trade not only with the United States but with Mexico and all the way down the Pacific Alliance. He looks north, and the neighbourhood's a little rougher. It's a blessing, as my colleague said, but also, diversifying is smart.

We can come back to you, or perhaps my colleague, our department's chief economist, has the figures at hand. Certainly, my sense is that it has been roughly 75% for a very long time. That is simply the merchandise trade. That doesn't include the trade in services.

[Dave Van Kesteren, Conservative, Chatham-Kent—Leamington, ON]

Here's what my follow-up question would be. We've spoken a lot about the importance. We've spoken about some of the challenges. I guess I have three questions. Maybe anybody can answer these. Maybe Mr. Verheul can jump in at some point too.

Here's what I want to know. What are we really good at? Also, what are we getting good at? As a businessman, I would look at opportunities. If there were an area where we couldn't compete, obviously we would ignore it. What are we not able to compete in? I think that's becoming increasingly obvious in some areas. I wonder if you could talk about those things. If we were to strategize, we could maybe use those figures to explore where we should be going.

What are we really good at? What are we getting good at? What are some of the industries that we just can't compete in?

[Susan Bincoletto]

It's a difficult question to answer in regard to just making a list of the top three that we're good at. I look at the trade figures. We are very present in the extractives. We're very good at mining. I was just in South Africa at the Mining Indaba conference. We are good at that and we do that responsibly, so we also have corporate social responsibility.

By no means is mining better than information and communications technologies or aerospace. Aerospace is a very big export-driven industry as well. I'm looking at it from an export perspective.