Good afternoon, and thank you for inviting me to participate in today's discussion.
It's my pleasure to be here on behalf of Canada’s 90,000 manufacturers and exporters, and our association's 2,500 direct members to discuss Bill C-18, the implications for Canada’s manufacturing and exporting sector, and the future of this vital industry.
Our association’s members cover all sizes of companies, from all regions of the country and all industrial sectors. We represent the majority of Canada’s manufacturing output, as well as Canada’s value-added exports.
With over $20 billion in exports, the U.K. is one of Canada’s largest export markets. Canada-U.K. trade was one of our very first trade relationships and traditionally has been our doorway to the European market. According to our management issues survey, which is a large biennial survey of Canadian manufacturers, the European Union, and the U.K. in particular, is one of the top three markets that exporters see as having the most potential in the next five years.
As the committee knows, this is a unique situation. We've had a free trade agreement with the U.K. for many years under CETA, so the discussion today is all about maintaining that access and then, we hope, a discussion on how Canada can take advantage of a new bilateral trade agreement between Canada and the U.K. We, therefore, fully support the Canada-United Kingdom trade continuity agreement, and we urge swift passage of Bill C-18. This interim measure is required, obviously, while our negotiators hammer out a more permanent Canada-U.K. agreement, and like my fellow panellists, I urge that it happen as soon as possible as well.
However, beyond these mechanical trade agreement issues lies an even bigger problem that I must raise. That is the problem of our declining value-added export performance, a decline that has been accelerating despite signing more and more free trade agreements across the globe.
Let me explain what I mean. Two-thirds of Canada’s value-added exports, the types of exports that Canada makes the most money from, are manufactured goods. In other words, Canadian manufacturers take the raw ingredients, transform them into something of higher value and then sell these goods abroad. This “bigger bang for your buck” type of trade has been declining for years. In fact, with the U.K., manufacturing exports have been declining steadily for five years, even after we signed CETA. Canada can no longer afford to ignore the lost economic potential that the decline in value-added exports represents. It's simply not sustainable.
How do we fix that? We have ideas.
Simply put, Canada’s manufacturer-exporters are too small, and at full capacity. Generally speaking, Canada has a higher proportion of its businesses being smaller SMEs than most of our global competitors. From a fundamental structural perspective, we need to get our companies to invest in their businesses and help them grow and scale up. Larger companies are simply better positioned to take advantage of global trade. CME’s manufacturing survey results back this up. When asked what is holding them back from exporting to new markets, they told us that the risks are too high because they lack a competitive edge with foreign companies. They simply feel that they can’t compete and don’t bother.
It's important that we agree that this structural domestic business problem is driving our export underperformance. Landing new global customers through FTAs is rather pointless if we cannot produce the goods to sell to them at competitive prices.
Now, you might ask yourselves, isn’t this the point of EDC, BDC, CCC and the trade commissioner service? Aren’t they supposed to help derisk exporting and help SMEs get out there? The answer is yes, and we would argue that they are all quite good at doing that. The problem is the disconnect between these great programs and exporters knowing that they exist. When we polled manufacturers, we found that those who used these agencies and programs loved them, but a majority of respondents couldn’t even identify the agencies, let alone the programs they offer. This is a big problem.
Therefore, we have the dual challenge of our exporting companies being small, underinvested in and uncompetitive, and a big gap between government assistance and companies using that assistance.
Here are some concrete actions that we would like to put forward to address some of those problems.
Number one, create a manufacturing and export strategy for Canada that focuses on modernizing and growing our industrial sectors. It needs to help companies invest in the technology that will help them scale up and truly become global players. We happen to have such a plan, which we discussed with many of you in the past, and I would be happy to leave a copy with the clerk.
Number two, launch a made-in-Canada branding exercise at home and in international markets to celebrate our manufactured goods. This will boost awareness of Canadian capabilities and technologies as well as sales and exports. The maple leaf is a global brand with a sterling reputation that we don't take advantage of enough.
Number three, bridge government export agencies and exporters by leveraging the vast networks of business trade associations. This can be done by investing in Canada's trade associations' capacity to link the two sides and act as a concierge service for exporters. The government used to support these types of initiatives to great effect. We think they should again.
Number four, expand our efforts on SME exporter mentorship. Organizing and managing private peer-mentoring networks is another way Canada's trade associations can be used to maximize company-to-company learning.
All these actions are table stakes if we want to play a bigger role in global trade. They will also go a long way to helping current manufacturers maximize their export potential for years to come. However, while we at CME believe these solutions are something we need to work on now, the priority, of course, is ensuring we maintain current global market access.
Let me reiterate that CME fully supports Bill C-18. We need a transitional agreement in place between Canada and the U.K. as soon as possible and, in time, a permanent trade agreement between our two nations.
Thank you for inviting me. I look forward to the discussion.