International Trade Committee on Oct. 23rd, 2017

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

Coming from a small business family—and certainly we're directly involved with small business even today— there is the e-commerce threat. If it's $800 Canadian, those are sales that may not be taking place in Canada. How do we maintain our competitiveness if the limit is increased to $800?

I appreciate the broader aspect of competitiveness, it would be a very difficult environment for so many, particularly small businesses, to compete with that. It doesn't matter where that small business is located, the Canadian consumer is going to have a lot more options.

On the flip size if you're in business today and you're importing, regardless of where you're located in Canada, you must stop at customs and report. I live in a area where the borders are not as busy as they are in the west. The threshold for bringing merchandise across is very low, so they're more likely to get pulled over if they're over the $100 limit, or whatever it is for the day. If they're in British Columbia or southern Ontario where the border crossings are very busy, the threshold is much higher. It does cause concern for those locally in terms of competitiveness.

Mr. Clarke, do you think Canadian businesses are prepared to take advantage of e-commerce? How do we better connect Canadian businesses to knowing what services are available and how to access those services when so many businesses are so small? We're talking one to four employees.

[Ethan Clarke]

One of the services we offer for our members is how to write a template contract. Many of our members, being younger and being individuals, are just doing this as they lose a regular job and find themselves at a total loss as to how to run that kind of business. That's where these services come from. The average citizen doesn't know about those sorts of things.

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

Have you ever spoken with Startup Canada? Ms. Lennox talked about having older business owners. You talked about having a younger demographic. There's a marriage there.

[Ethan Clarke]

Yes, we'll talk more.

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

That's great. Thank you.

[The Chair, Liberal, Mark Eyking]

That pretty well wraps it up, Madam Cupid. That's good.

We're going to move on to the NDP. Madam Ramsey, you have the floor.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much for being here today.

I think across all your presentations today we're hearing about a level playing field. Whether that's culturally or economically in tax fairness, this is critical, I think, to the success of the companies that Ms. Lennox is here representing to ensure they can grow and stay in Canada and not leave because the global market is more enticing. It's really important to grow that.

Other countries have made moves to implement some laws and regulations around taxation of e-commerce. New Zealand, Australia, Japan, and the EU have all begun this way to close this loophole. We're losing an incredible amount of tax base in our country, having foreign companies that are not paying the same amount because they are only in the e-commerce space.

Mr. Sanger, I wonder if you could speak to how important it is to close that loophole? What the impact of that could be and the growth we could potentially see here in Canada from doing so?

[Toby Sanger]

I think it's really important to close that loophole, and it's not something that would necessarily be that difficult. Some have said you wouldn't even need a legislative change, but I think it's better to have that, in terms of the excise tax. As you mentioned, a lot of different countries—I have a list of over 40 here including Albania, India, the EU, Russia, South Africa, Norway, Switzerland, Australia, New Zealand, and Japan—have all taken steps to close this loophole.

What I found interesting is that they're increasingly moving to not having a minimum threshold. I think it's because that creates complications in terms of the amount of business that they sell. We understand why there might be a de minimis in some areas, but I think it can complicate the issue if you're dealing with the issue of imports of digital services and you're relying on the producer in that way.

There's a very good report that came out, from the C.D. Howe Institute. I don't know if you've had a chance to read it. It's called “Bits, Bytes, and Taxes: VAT and the Digital Economy in Canada” and shows the different ways that businesses can avoid that. It's very important in terms of revenue, but I would say it's more important in terms of the jobs and the economic impact.

I think it's having a pretty serious effect on our main streets and main-street businesses, as well as on our cultural industry and its workers. It's extremely important. We've also seen a major shift of advertising dollars to digital platforms. That's another issue. The rules that are in place right now are very biased, and I just see it as a no-brainer to move on that.

I don't know if you had anything to add, Nathalie.

[Nathalie Blais]

I just wanted to say that if we had a threshold in the communications sector, let's say for a subscription to Netflix, then there's no tax applicable. Usually what you pay for those services is quite a small amount, so it wouldn't apply to have a level playing field.

I also wanted to add to what Toby said that Canada is one of the three countries of the OECD, with Mexico and Turkey, that haven't moved forward yet. I read that this morning.

[Tracey Ramsey, NDP, Essex, ON]

Thank you so much.

Mr. Wilson, you touched on the secure flow of data. We've had a lot of conversations here about that around NAFTA, autonomous vehicles coming in, and the type of data that will be shared across that border. USTR actually came forward and said that they wanted to lift restrictions on measures that regulate cross-border data flows and do not require the use of installations or local computing facilities. Again, I think that this would have an impact on what we're doing here in Canada, and on the health and growth of businesses that are engaged in that type of data collection and storage.

I wonder if anyone has any thoughts on that or ways that we have to prepare ourselves regulatory-wise and legislatively for this space that we're going to be occupying and the technologies that are coming forward.

[The Chair, Liberal, Mark Eyking]

That's a big question for 20 seconds. You're going to have to be quick, whoever is going to—

[Tracey Ramsey, NDP, Essex, ON]

It is a big question.

[Mathew Wilson]

Since I was the one who raised that, I'll just say that what we were talking about wasn't so much the storage. It was more that companies are already moving massive amounts of data around the world intra-company. On product design, for example, a car may be designed in five or six locations around the world, and it's necessary to ensure that the IP protection is maintained throughout that trail so that the company itself is secure and new products or other things aren't being stolen from those companies. That was really what our point was on that one.

[The Chair, Liberal, Mark Eyking]

Thank you.

We're going to move over to the Liberals now.

Mr. Dhaliwal, you have the floor for five minutes.

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

No, it's Mr. Fonseca.

[The Chair, Liberal, Mark Eyking]

Sorry.

Mr. Fonseca, go ahead.

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

I want to thank our presenters for coming here in such short order.

I thank you very much for your presentations. They were very enlightening. Many of the presenters who come here enlighten us as a government. I feel that the government is always behind where business is. We move at a snail's pace here, and that's where my questioning is going.

When we look at the services that we're able to provide through our trade commissioner service, through CanExport, and through EDC, are they keeping pace with the change that you're seeing? What I feel is that many of the presenters who come in enlighten us, as I said, and tell us about what's happening out there, and then we try to bring it back to the government so that we can provide those services.

I am going to start with Ms. Lennox because you brought up our trade commissioner service. I would like to hear from your end where they are. Are they doing well? Can they do better? Do you have some recommendations?

[Victoria Lennox]

Every entrepreneur who's used our trade commissioner services says they're our best kept secret as a nation. They're super-useful at a certain stage, generally when they're a lot bigger than they need to be. It's disproportionately white guys who are leveraging those services. The feedback we're getting is that they're great for the manufacturing sector, for pharmaceuticals, for resource-based sectors, but they're not doing what they could be doing for our ideas economy, our innovation economy, and this is where the world is going.

I think we need to reboot our trade commissioner services to make sure they're serving women and every entrepreneur. We have to realize that our businesses in Canada are small, and they can scale very fast. There is an opportunity in the mid-stage to equip our trade commissioner services with what they need to connect our digital economy.

Other countries like Israel and Switzerland are very good at making these connections. I think it comes down to information and equipping the trade commissioners with the insights they need. Startup Canada would be happy to be of service. We work with our global counterparts in the trade commissioner services quite a lot. There's a lot of work to be done in that area.

I would say as well, in response to previous comments, that we work with the start-up nations. We're part of a network of 50 nations across the world. Canada, we're a non-profit, but the other members are all the other governments in the world. Canada needs to move faster when it comes to opening it up.

We keep hearing a lot about protectionism, which is very important for our culture, but why not unleash an entrepreneurial culture in Canada and work in that way? Our entrepreneurs are choosing jurisdictions that are more competitive and more open. We should be moving towards being more open and competitive.

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

Let's follow that line of opening up Canada to the world, and opening up to more people in Canada.

Mr. Wilson, you brought up the “made in Canada” brand. Can you flesh that out for us? Is that straight branding? Is it “buy Canadian”? What are you saying?

[Mathew Wilson]

Look, we don't want to pull a “buy American” and have everyone just buy Canadian stuff. It's true, though, that we don't celebrate anything that's made in Canada anymore. There are a few things now that I think are starting to brand. The companies don't do it, and governments sure don't do it.

In Ontario, for decades we've had the slogan, “Good Things Grow in Ontario”, a celebration of agricultural products. The government actively encourages the purchase of locally grown things. We've been asking the government of Ontario for decades why they don't do that for manufacturing goods.

Then we run into the Competition Bureau, which decided to change the definition of a made-in-Canada good without actually asking anyone who knew what they were talking about. Things that are made in Canada can't even be labelled as such anymore, just to make it more complicated.

They don't understand software, to reiterate Victoria's point. None of that stuff is ever considered in anything that they're doing. We need to start from the top and look at how we define a made-in-Canada good. It doesn't have to be screwed together in Canada. What about the software, the engineering, all the technology that goes into a Canadian product or service? Then we need to put some branding around it and sell it around the world as Team Canada.

If you want to talk about growing exports, we have a world-class brand image as a grower of healthy, affordable, high-quality food, yet we don't export it. One of the lowest export commodities we make is agricultural products. It's crazy. But if we branded these products as made in Canada, they would have a huge market around the world. Instead, Canadian producers often send stuff other places and then it comes back in as finished product and we buy it as Turkish or Israeli or something else, when it's all Canadian to begin with.

I think we have a problem in Canada with how we see ourselves.

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

Let's look at the Canadian brand in light of products and services.

Mr. Clarke, would that help in stopping some of the offshoring, outsourcing, taking stuff outside? Would it encourage taking pride in Canadian products and services, and keeping jobs at home?

[Ethan Clarke]

I think so. In my industry of web-building, our biggest competitors are small design shops in India that work on something like a fiver platform where they do everything for five dollars. Everything done by my company for similar services is a couple of thousand dollars.

Acknowledging the better working conditions of the folks doing this work in Canada compared with places overseas is definitely something that Canadians should be proud of. Hopefully, we can encourage those countries to improve their working conditions as well.

[The Chair, Liberal, Mark Eyking]

Thank you, sir.

That ends our first round. We're going to start our second round. We have one more round here. We're going to start off with the Liberals.

Mr. Peterson, you have the floor.

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

Thank you, Mr. Chair.

Thank you, everyone, for being with us this afternoon.

I want to briefly look at the European market. As you know, Canada just entered into a free trade deal with the European Union.

From your experience—anyone who has an opinion on this can answer—do we have the sort of e-commerce infrastructure in place to be able to tap into that new free trade zone? If not, what steps need to be taken for our exporters to be able to tap into that large market that would be beneficial to Canadian companies?

[Victoria Lennox]

I don't know if we have the infrastructure. I would assume it's the same infrastructure that we would need to compete globally.

Ever since CETA came to be—something we've rejoiced about at Startup Canada—the biggest challenge that we've faced is educating Canadian entrepreneurs about the European market and the opportunity that this agreement has. It's a landmark agreement, and there's a lot that we can do. It goes back to branding Canada. It's not just promoting Canada to world; it's promoting the world to Canada. We have a lot to do here to promote that.

I think we can work together around education. We can also look at Export Development Canada and how it serves early-stage entrepreneurs, not in terms of the services it provides but in terms of the education resources and skills that they need to navigate these awesome new trade agreements.

We can also look at how the Government of Canada shares what's included in the trade agreement. How do we market it? How do we sell it to Canada? There's a huge opportunity there to work with associations like ours to get the word out.