International Trade Committee on Feb. 9th, 2017

[The Chair, Liberal, Mark Eyking]

I call the meeting to order.

Good afternoon, everyone.

Today we're going to have one hour to start off. We have people from Global Affairs here talking about how we can help and engage small businesses.

Just to let you know, I have received notice that the minister could not be here today but is willing to come next Thursday. I've decided we will have one hour with the officials here today, and then go right into our TPP draft. We will do the same thing next Thursday. We will split the time, with an hour for the minister and then an hour for the TPP.

Is that okay with everybody? Can we get going?

[Tracey Ramsey, NDP, Essex, ON]

Is that with the Minister of Small Business and Tourism?

[The Chair, Liberal, Mark Eyking]

Yes.

[Tracey Ramsey, NDP, Essex, ON]

Do you think we need a full hour?

[The Chair, Liberal, Mark Eyking]

I don't know. It's usual that when a minister is here, it's for an hour. If it's half an hour, we'll go right into TPP. With whatever it takes to ask questions, we can just split that day up.

Without further ado, thank you for coming, folks.

This request came from our committee. As you're probably well aware, we've been dealing with a lot of different trade agreements and trade issues. We're just finishing up our TPP study. We've gone through every province. We videoconferenced the territories.

We had an open mike at the end of each meeting. We had a lot of input, a lot of uptake from the public. We also heard from a lot of businesses that were probably not very familiar with the export business and would like to be doing more. I think that's where our request for you folks to come came from. As I stated, the minister is going to be talking a little bit more about it next week.

I know you guys are doing a lot of good work already, but if you can enlighten us—we have an hour with you—and just tell us some of the things we can do. I think we're mostly looking at how we can get small and medium-sized businesses plugged in more and how we can help them understand the great opportunities we have and what some of our trade agreements are.

The floor is yours, and then we'll open up for questions.

[Michael Danagher, Director General, Regional Trade Operations and Intergovernmental Relations, Department of Foreign Affairs, Trade and Development]

Thank you, Mr. Chair. My name's Michael Danagher. I'm director general of regional trade operations at Global Affairs Canada, and I'm accompanied by Elise Racicot. She's the program manager for the CanExport program.

Mr. Chair, I don't have to tell you that the current mandate of the trade commissioner service is to assist qualified Canadian clients with their international business development activities and that small and medium-sized enterprises receive a lot of attention from us in the process of creating and delivering our services. We recognize that many challenges exist for the SMEs, but in the area of international commerce, these are accentuated, given the lack of resources that they may need to succeed in the international market through access to market intelligence and support for their operations.

Global Affairs Canada has a number of mechanisms to assist SMEs, and first and foremost, of course, is the trade commissioner service, which offers core services to Canadian clients at almost 180 points of service outside Canada, in addition to 17 cities located in Canada. We have programs that respond to specific SME needs, such as promotions of opportunities that will flow from free trade agreements such as CETA, to respond to some of the points that came out in your hearings across Canada.

We also have a well-established business women in international trade program, which has organized a number of successful missions that have benefited women-owned businesses, with the clientele being primarily SMEs.

However, I'm going to focus today on the CanExport program, which is in many ways the flagship of support for the SME sector. The program was launched January 5, 2016. It's a $50-million program that covers a period that will extend up until March 31, 2020. The mandate of the program is to provide financial contributions to SMEs looking to export their goods or services into new markets.

In more detail, CanExport is a co-funding mechanism that provides matching contributions from the federal government to successful applicants. They reimburse up to 50% of approved eligible expenses after the activities have been performed. CanExport draws on lessons learned from similar programming, such as Agriculture and Agri-Food Canada's AgriMarketing program and the industry component of the former program for export market development, PEMD-Industry, as it was called. The experience gathered through PEMD's 34 years of existence allows CanExport to expect that the activities it currently supports are likely to produce a positive economic impact on the export profiles of the recipients and therefore of Canada.

The program responds to many expressions of interest for marketing support from Canadian clients. CanExport also complements existing provincial programs aimed at supporting SMEs that are looking to develop their exports while also levelling the playing field with Canada's international competitors with similar tools at their disposal to support the growth of their SMEs, competitors such as Australia's export development grant program.

This program will help hundreds of Canadian companies every year. The program's expected results are that SMEs will achieve three broad objectives: in the short term, they will have a better understanding of international markets; in the medium term, they will conduct better export development activities; and in the longer term, they will have further diversified their markets and will have made sales in these new markets.

Achieving these results will be measured through activity reports and questionnaires sent to recipients who have completed all the activities for their projects at the time of their final claims, as well as at one-year and three-year intervals after the end of the project.

CanExport reports on its performance to Global Affairs Canada senior management on an annual basis and will also be the subject of a summative evaluation in 2018-19 by Global Affairs' office of the inspector general. CanExport's results will also be reported to Parliament on an annual basis through Global Affairs Canada's report on plans and priorities and through the departmental performance report.

How does it work? CanExport provides SMEs with matching contributions—again, it's a fifty-fifty cost-sharing—of between $10,000 and $99,999 toward export development costs. CanExport is open to companies in all sectors in all industries, with the exception of those already covered by existing federal programs such as the Agriculture and Agri-Food Canada program I mentioned earlier.

In order to be eligible for a CanExport contribution, SMEs are currently required to target a market to which they have not yet exported or not exported to in the last 24 months. Applicants also need to have annual revenues ranging from $200,000 de minimis to $50 million and to employ between one and 250 employees in Canada.

A range of activities can be considered eligible as long as they promote international business development and go beyond the company's core activities. Eligible activities also need to represent new initiatives and yield incremental results. For example, activities could include travel to the market for client meetings, adaptation and translation of promotional material, participation in trade shows, or a customized market study. This is not an exhaustive list. More details are available in the applicant guide online.

The program is innovative for us. We work with the National Research Council's industrial research assistance program. They have the experience in working on contribution agreements with clients, and by working with IRAP we have found a cost-effective and timely response to SME requests for assistance. In every case so far, we have managed to have a decision on an application within 25 working days, which is a standard for programs of its type in Canada.

We also have a tripartite agreement with the IRAP program and the Canada Revenue Agency, which allows for the quick and inexpensive verification of applicant eligibility on the criteria I have just mentioned—revenue size and numbers of employees—based on the business identification number that the applicant authorizes CRA to use.

Those approaches have resulted in significant savings. They also allow for best practices to be shared, so other programs in Global Affairs, for example, are looking at this approach as we progress through it.

I would like to report to the committee some of the results so far that we have seen from the program. Since the launch in January 2016, $18 million in contributions, out of the $50 million committed, has been committed to applicants, including close to $14 million from the current fiscal year. The approval rate is approximately 48%, which seems to be consistent with approval rates in other similar programs. There have already been over 600 SMEs approved for funding, and these in total target about 70 markets around the world.

With respect to those markets, while a significant number of applicants are looking at the U.S. market, CanExport has also approved applications for exports to a broad range of countries in Asia, Europe, Latin America, the Middle East, and Africa, and I'm pleased to report that recipients are located in every Canadian province.

The SMEs are active in a variety of sectors, including ICT—that is, information and communications technology—infrastructure, mining, automotive, defence and security, consumer products, ocean technologies, and aerospace. The typical successful applicant has approximately 17 employees, about $2 million in revenue, about $300,000 in existing export sales, and has been incorporated for roughly 12 years.

Program recipients have already reported several success stories related directly to projects supported by CanExport, such as the signing of partnership agreements or even new sales contracts.

I would like to share some of those examples, with the permission of the companies. I think they are illustrative of the type of SMEs we're supporting through this program.

Korite from Alberta is the world's largest producer of gem-grade ammolite. With the support of CanExport, it is looking to increase market awareness in China specifically through strategic partnership initiatives and industry trade shows. It has already, as a result of its CanExport contribution, successfully partnered with a China-based jewellery company to ensure distribution of the finished jewellery in China and further development of innovative product technology resources in China.

The Samajam Group from Quebec is an entertainment impresario. It creates an energizing, participatory musical experience which entertains, educates, and engages people, particularly young people. With CanExport's support, this company has just signed a tour of performances in venues across China for 2016. This agreement has allowed Samajam to put on nearly 100 shows throughout the year in 22 cities in China, with a total of 50,000 tickets sold and revenue, we understand, of approximately $500,000.

Team Eagle Ltd. from Ontario is a company working in the aviation sector with a highly sophisticated vehicle that analyzes runway contaminants and then provides information regarding the aircraft braking capability available on any given runway. With CanExport's support, Team Eagle recently attended a global symposium in Paris on runway condition reporting that helped to introduce the company to potential customers and partners from many international markets. CanExport also supports Team Eagle in preparing presentation and related materials for commercial promotion.

4Deep inwater imaging from Nova Scotia—this is my last example—has patented holographic technology to create powerful microscopes that enhance research and discovery. With CanExport's support, the company is marketing and promoting its submersible microscope system in India to monitor water quality in lakes, rivers, and oceans. It is reported that as a result of its CanExport contribution, it has issued over half a dozen quotations to direct potential customers, and it fully expects this to translate into sales within the next six to eight months.

Mr. Chair, this is a very quick overview of the program, some of its highlights, and an example of four of the over 600 successful CanExport applicants and their business cases. We would, of course, be very pleased to answer any follow-up questions that you and the committee may have.

[The Chair, Liberal, Mark Eyking]

Thank you very much, sir. It's quite impressive what you and Global Affairs are doing.

We're going to open up the questions from the MPs. We'll start with the Conservatives.

Mr. Van Kesteren, you have the floor.

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

Thank you, Chair.

Thank you for coming. This is fascinating material you're sharing with us today.

Your presentation tells us that this program was launched January 5, 2016. Was there a program prior to this that was similar, or is this a brand new endeavour?

[Michael Danagher]

The Global Affairs Canada-administered program was PEMD-Industry. That was in operation for 34 years until it was discontinued in 2004. There was an evaluation of the program, and many of the findings of that evaluation were incorporated in the analysis for CanExport when it was launched in 2006.

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

That was in 2006.

[Michael Danagher]

That's right—no, that was 2016. I beg your pardon.

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

It was 2016, so you had to resurrect a whole new program. I'm curious, because you would need quite a level of expertise into some of these other countries. How were you able to get the people that you needed to run this organization?

[Michael Danagher]

The platform here in Ottawa is actually fairly simple. We use as our backbone IRAP and their ability to automate the generation of contribution agreements. With our tripartite agreement with CRA, we're able to provide that basic screening. Where we get involved is that Elise and her team are responsible for evaluating the business cases themselves. In those cases, we rely on our broad trade commissioner service around the world.

For example, if an applicant is interested in a market in India, we'll be in touch with our trade commissioner network in India and ask their advice in terms of whether this is a realistic, bankable proposition. In some cases, when this interaction takes place, the trade commissioner service may point out that it is a very competitive market, that barriers exist, or perhaps that there is a regulatory impediment to that particular activity. We rely on a very large network to get the best-informed advice to our applicants.

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

When you presented your brief, you stated, I think, that 17 was the average size. I can visualize that small, energetic group. It's somebody with a brand new product. Say I'm 30 years younger, and I've got this product I know is going to sell in Holland, for instance, so I would go to your organization. What would you help me with? Would you be able to tell me that's just not going to fly because these regulations won't come into place? Is that accurate?

[Michael Danagher]

That's correct.

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

You'd be also able to say, “Yes, that's a good fit.”

Would you eliminate—and I'm not suggesting it, because usually these types of individuals are quite astute—much of the need for them to go into the country and do that product research, or do you work hand in hand with them?

[Michael Danagher]

We work hand in hand. I think that's the best way to describe it.

Our trade commissioner service has the local knowledge that is appropriate. Of course, individual exporters have their own resources at hand. I think it's a good process. We can validate some of the market intelligence they have, but at the same time, we might add to that equation. The provision of the trade commissioner services is based on good teamwork between the exporter and the trade commissioner.

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

You mentioned as one of your examples a company that went to China. I'm thinking now, with the signing of CETA, that we're moving forward and we should have this in place soon. Have you seen a lot of interest from companies in going into Europe, and are they beginning to work on that?

[Michael Danagher]

I can perhaps ask Elise to give an indication of some of the markets breaking.

[Elise Racicot, Deputy Director and Program Manager, Regional Network and Intergovernmental Relations, Department of Foreign Affairs, Trade and Development]

Thanks for the question.

Europe has been the second-largest region. If we compare North America, Europe, the Middle East, Africa, Latin America, and Asia, Europe would come in as the second-largest pool of recipients in terms of money and number of companies that have been approved. The U.K., Germany, and France are the most popular destinations that we've been requested to—

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

Can I ask you just a quick question, because the chair's going to cut me off in just a second? Are you finding that a lot of immigrants or recent immigrants are participating in this program? Am I right to assume that?

[The Chair, Liberal, Mark Eyking]

Sorry, Mr.—

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

They're going to just answer that question.

[The Chair, Liberal, Mark Eyking]

Okay, go ahead. Be quick.

[Elise Racicot]

Sure.

I think it would be difficult to know, quite frankly, because we have information on the company and we have the name of some of the signing authorities from the company, but we do not ask for that sort of information—for instance, if someone just came to Canada or not—so we wouldn't have this information.