International Trade Committee on Feb. 9th, 2017

[Tracey Ramsey, NDP, Essex, ON]

Having a one-stop shop or a one-window type of set-up for small and medium-sized businesses would potentially eliminate some of that.

The other question I have picks up on my colleague's question around smaller businesses and even micro-businesses. I see that the threshold for annual revenues is $200,000 to $50 million, so I'm wondering if this has been a barrier to any small or micro-sized businesses and how they would access this type of funding if they fall under that line.

[Elise Racicot]

Thank you for your question.

It's true that there have been some refusals based on the fact that a company didn't have the revenues. However, in previous programs and other programs of the same nature, usually the threshold would be much higher, often above $1 million and sometimes above $2 million in revenues. This one is considered to be smaller than usual, so the entry is a bit easier.

One of the reasons is that it's delivered in partnership with the NRC's IRAP. Many of their clients tend to a new company bringing a technology. They sometimes start really small, with no revenue yet, so IRAP also wanted to make sure when we designed the program that we would be able to catch some of their potential clients for other technology development programs. We've been taking that into account. It's still a barrier to a certain extent, but I'd say that it's a more generous entry level than most other programs.

[Tracey Ramsey, NDP, Essex, ON]

Do you have a referral program for refusals? Do you redirect them to another department or potentially another source where they can get some funding or information?

[Elise Racicot]

We do. We redirect them to our regional network of the trade commissioner service to help them prepare for international markets, since sometimes that's the step they might have missed. We also refer them to the concierge service, which is a little bit of a one-stop shop, as you were referring to in your previous question. A company can get information about all programs that could be of interest to an SME, including CanExport. We do refer to both of those organizations.

We also spend a lot of time, even in our own program, trying to educate the companies, so if they missed something or there's something that they could have done differently to make it happen, we try to provide them feedback. I'm pleased to say that a significant number of applicants were able to present a better case and were able to receive the money.

[Tracey Ramsey, NDP, Essex, ON]

My next—

[The Chair, Liberal, Mark Eyking]

Your time is up. We're going to have to move over to the Liberals. Madam Lapointe, you have the floor.

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

Thank you, Mr. Chair.

My thanks to the witnesses for joining us today. We appreciate their attendance.

When you answered a question my colleague asked a little earlier, I think you said that you were more “reactive” than proactive last year.

How can we make sure that we are proactive in terms of small and medium businesses?

What do we have to change in that respect?

[Michael Danagher]

I think it's just a question of resource allocation.

That program was launched last year. So the program and those participating in it are halfway along. People are really developing good relationships with the clients.

We have seen a lot of interest from private sector clients. With a newly launched program, it's quite normal for there to be a promotional period. After several months, we are able to see the applicants' progress. For us, it was more important to provide the program than to promote it.

I think Ms. Racicot wants to add something.

[Elise Racicot]

In the first months of the program, we were more proactive with the promotion. We communicated with about 1,000 people, either by telephone or in person. These were people who could spread the word, such as provincial partners, other federal partners, chambers of commerce, and so on.

In the first months, our promotion was a little more intensive. As we said earlier, we are now a little “reactive”, but we still undertake to make contact with the public very frequently. Since you are from Quebec, I can tell you, as an example, that the ORPEX network recently asked us to make a presentation to all the local development centres in Quebec about how the program operates.

We get requests from organizations from all over Canada. Each time one comes to us, we try to respond to it, through a webinar, for example, so that we can talk with the members of the organization and describe the program more proactively.

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

Thank you very much, this is very interesting.

My constituency is Rivière-des-Milles-Îles, which includes the cities of Deux-Montagnes, Saint-Eustache, Boisbriand and Rosemère. We have very fine companies there. We are located next door to the aerospace sector. My constituency has a number of suppliers to the aerospace sector. The constituency also has an agri-food processing sector.

Here is my question. Do officers from small and medium businesses in the agri-food processing sector come to see you?

[Elise Racicot]

Perhaps I can answer that.

If a company supplies a product like food, it would actually be covered by the AgriMarketing program. They operate under conditions quite similar to ours, but with more money than our program.

That said, a number of companies that are part of the food processing chain have requested funds and have received support from the program in areas like equipment, software, packaging solutions, and so on. There are also companies that we can help through CanExport.

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

Thank you.

I will make way for Mr. Fonseca.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Okay.

Thank you.

I want to ask about the allocation of the funds. What would they go to? Would they be for trade shows, one-on-one meetings, conferences, or all of the above? Can you just run us through what people would use the monies for?

[Michael Danagher]

Thank you for your question.

In general, they're for incremental marketing activities, overseas marketing activities, so they should be directed at a specific market—for example, France or Brazil—and they would be for those exploratory meetings. There would be an involvement in trade fairs and other networking activities.

The funds may also be for specialized services, such as researching regulatory regimes for the product and the destination country, or even legal costs. We do put a cap on the percentage of the contribution that can be used for that purpose—for third party specialized advisory services—but otherwise the core principle is that this should be for incremental activities rather than the core business operations.

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

I have one more question.

I see that number one is the United States with 89%, and then it's Europe with 31%. They have pretty stable regulatory, judicial, and political systems. When you get into countries that maybe don't have the same standards that we do, do you help with those concerns as well when you're talking about financing or mitigating risk? How do you address that with those who come forward?

[The Chair, Liberal, Mark Eyking]

I'm sorry, but I have to cut you off. You have more time coming up, so maybe you can finish that thought and move on, but we're going to have to move over now to Ms. Ludwig.

Go ahead.

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

I'd like to hear your answer to my colleague's question.

[Michael Danagher]

Okay.

Indeed, the concept we have for this program is that in those markets where there are particular challenges, the companies can access those resources. As I mentioned in the presentation, the cap on our contributions is $99,999, so for our 50% that would mean for a particular market exploration activity we would be co-funding up to the $200,000 level. That in itself limits what an individual company may seek to do, but in our experience as trade commissioners in difficult markets—Elise served in Brazil and I served in Korea—we have found that quite often the answers can be obtained by clients at a relatively reasonable cost, and this indeed helps the clients to focus on those markets.

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

Thank you.

I have a fair number of questions to add to that.

Years ago when I first started teaching in international trade, I remember that a representative from Industry Canada approached our team. A comment of his has always stuck with me. He said that 75% of first-time exporters are not exporting in their second year. As for the reason why, when we asked him about that, he said it was because they didn't do their homework. They didn't realize how difficult it would be, for example, to export directly to Cuba and how long it was going to take to get paid—and not everyone can get paid in sugar.

We had different scenarios like that, but certainly it was about just not doing their homework, so a service like yours is integral. How is it promoted within the business community so that they know about the service, the necessity, and the potential outcomes?

[Michael Danagher]

I think the needs of our SME community in their international market development are dynamic. We see with the development of eBay or Alibaba, for example, that new chains are developing for companies.

In the trade commissioner service in Global Affairs we try to identify where those trends are going, and sometimes our success is more limited than we would like. That said, I think the important consideration in this case, as we were trying to outline, is the co-sharing. We believe that companies should pay a cost. It's a commitment on their part.

We respect the fact that SMEs have all sorts of challenges in meeting their bottom line every day and meeting a payroll, but at the same time....

It's quite surprising to see that some SMEs rely 90% to 100% on foreign sales. I wouldn't pretend there's a single SME out there whose needs are uniform, and I think with our program we intend to have as much flexibility to all the circumstances that....

[Elise Racicot]

I would just add that we communicate the results to our trade commissioner service, and recipients agree that we offer practical services to help them and support them in their efforts internationally.

Typically, if a company is not already working with the trade commissioner service, someone from both the post and the regional office in Canada would likely be in touch with them. The regional office could help them prepare for an international market and make sure that they're connected to the right trade commissioner at the mission who can then help on the ground.

That's another way we make sure not only that this program is going to help financially but also that we make sure to make that bridge and connect them with our network abroad and in Canada.

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

Thank you.

My next question is about women exporters. I sit on a different committee, and earlier this week we heard from an expert who said that of all Canadian businesses that are owned by women, only 5% are exporting. They have challenges getting finances—debt financing especially—and developing networks.

We know that in the Atlantic region only 9% of businesses are exporting. What kind of services do you have for women exporters?

[The Chair, Liberal, Mark Eyking]

That will have to be very quick.

[Michael Danagher]

As I mentioned, within the department we manage the business women in international trade program. That was launched in 2005. It's grown to be quite successful, and I think operates on three different pillars.

One is information sharing, so it has a newsletter and a LinkedIn group and all sorts of nice things like that. The second thing is to provide profile for the sector in general, and the third and most important, in my opinion, is business women in international trade missions. The missions are centred on supply or diversity programs that are offered by Fortune 500 companies, in most cases. We started with the United States. We're going to look at similar programs that exist in other countries in future iterations.

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

Thank you very much.