Mr. Speaker, I am pleased to participate in this debate today on the motion for concurrence in the House of Commons committee report to provide some relief to Canada's apparel and textile industries.
I had the great pleasure, in 2004, of working as a member of the House of Commons Standing Committee on Finance when we did a very exhaustive study of the textile and apparel industry and came out with our report in October. The report was entitled “Duty Remission and Zero-rating of Tariffs on Textile Inputs: the Canadian Apparel Industry”.
As a result of that report and other requests, the minister of finance at the time, the member for Wascana, brought in a very complete package to try to assist the apparel and textile industries in Canada to cope with the competition arising offshore and to try to give them a transition whereby they could become more productive and more accommodating to that competitive environment.
When China acceded to the World Trade Organization, it committed to develop a market economy. In Canada, we view that on a sectoral basis, guided by the Special Import Measures Act, SIMA, and we review by sector whether a market economy exists, in this particular case in China.
I have had some experience working on some issues that came up with respect to bicycles and barbecues. We had a similar problem. Industries in China are hugely competitive in terms of costs. Some of that is driven by low wage costs. I think we have to distill and separate out of this some of the issues and how we go about dealing with them.
If we as Canadians have concerns around low wages in China, there are mechanisms to try to deal with that through our meetings with the Chinese. I believe firmly that we should be engaged with the People's Republic of China and that the best way to get change is to trade and invest with China, with some restrictions.
I am not a very keen supporter of state-owned enterprises buying up our natural resource companies, and I have spoken out about that on a couple of occasions, but generally speaking we should be open to trade and investment with countries such as the People's Republic of China. I think that over the medium term to the long term that is how we are going to be able to influence policies like low wages or the employment of children and the like.
There is a very interesting book that I would recommend to many members of the House. It was written by a gentleman by the name of Jeffrey Sachs. Jeffrey Sachs is the United Nations coordinator with respect to the millennium development goals. Recently I read his book. Unfortunately, I do not remember the title.
In that book, he talks about the use of child labour and the use of very coercive labour techniques in terms of hours of work and conditions of employment. This gentleman is responsible for monitoring the millennium development goals on behalf of the United Nations, and what he concludes is that while we should argue for improvements, the reality is that there are so many more people employed who otherwise would not have any income whatsoever. For the woman or the young child working in a small village in China, India or Bangladesh, even though the wage to us seems totally unfair and unreasonable sometimes, without it, that person might not be able to look after their children or have any standard of living whatsoever.
So while we realize that the competitive positioning of China right now is very favourable, not only for reasons of low wages but for the way it is using technology and the way it is capitalizing on some of its competitive and comparative advantages, we all know what is happening.
It is the concept of what is called offshoring. This is happening around the world. We are losing many industries to countries such as India and China. Rather than arguing that it should not be happening, we have to adapt and respond to that. This is a reality.
I have heard a lot of critiquing of what our Liberal government did or did not do, but I would like to set the record straight. Our government increased the Cantex funding. Cantex is a program that encourages companies to improve productivity through projects such as lean manufacturing and the implementation of new information technology and logistics systems.
Back in 2004, the Liberal government increased funding to Cantex by more than $70 million over five years. That additional funding was to assist the textile and apparel industries to become more competitive and to respond to the competitive pressures from countries such as China.
If we look at the textile and apparel industries, we see that they cut somewhat along these lines. There is a very strong textile industry in Quebec. There is some textile industry in Ontario as well, but Ontario has had quite a strong presence in the apparel industry. Quebec does as well.
If we look at the apparel industry, we see that its main objective is to have cheap raw materials, so there is a creative tension between the apparel industry and the textile industry. The textile industry wants to compete against countries such as China, India and Bangladesh. The apparel industry wants to get the cheapest raw materials it can. Within all that, though, they do work together. There are some meetings of the minds and some accommodation is made. They generally have been supportive of a number of programs.
The apparel industry, for example, has the benefit of the duty remission orders. The duty remission orders were introduced in 1997-98 to give textile and apparel companies relief from some duties. The government had previously sunsetted them. They were about to expire in 2004. Our government decided to extend them but to sunset them to provide the industry with a little more time to adapt to this new competitive reality. I was very happy that we did so.
As part of that announcement in 2004, we also eliminated the tariff on fibre and yarn imports, which was worth about $50 million a year, and on imports of textile imports used by the apparel industry, which was worth up to $75 million a year. That was effective as of January 2005.
These were efforts to try to assist Canada's textile and apparel industries to adapt to the increasing competition from countries such as China, India and Bangladesh, but there is also the reality that this is a new world and this kind of competition is here to stay. In fact, under the Doha round and under commitments that our federal government has made, there is I think an inclination to reduce tariffs so that those in the developing world can actually sell their products, uplift their economies and help alleviate poverty in their home countries.
There is a careful balance here. Do we allow all these imports from countries in the developing world? In the agricultural sector, it is a very big issue. Do we allow this surge in imports from countries in the developing world so they can lift their economies, provide more employment for their people and address poverty but also create some economic destabilization in this part of the world?
These are difficult questions, but there are remedies available to countries where there is huge disruption. The gist of this motion is to say that the kind of competition coming from China is causing a huge disruption in the sector and the committee would like to bring in safeguards to deal with that.
To go back to the bicycle and barbecue example, there were protectionist tariffs on bicycles and barbecues. With commitments made by our government, and in fact by governments all around the world, once we were convinced that China was a market economy, those tariffs would come down. For example, in the case of bicycles, CCM and other companies located in Ontario and companies in Quebec were very concerned that if those tariffs were eliminated completely there would be a flood of bicycles into the market, and the jobs and the economy activity that goes with them would be threatened.
There was a lot of pressure on the government, but the issue was a basic one. Are we satisfied as a government that in China there is a market economy as it relates to bicycles? I will use the bicycle example first. There were many visits by Canadian officials to the People's Republic of China to ascertain whether there was a market economy functioning in the sector of bicycles.
We need to be careful because subsidies and dumping are different issues. There are other remedies available. In terms of these protectionist tariffs that Canada had on bicycles, the issue was whether China was operating as a market economy with respect to the market for bicycles.
What the officials concluded after many trips back and forth and by working with local missions was that the bicycle market was operating much like a market economy. In other words, the government was not dictating prices. That is largely the test: is the government involved in setting domestic or export prices? They concluded that it was not.
Having worked in China as a business person and having been to China number of times, I must say that I was initially a skeptic. At the time, I had the great honour to serve as parliamentary secretary to the minister responsible for the Canada Border Services Agency. I remember requesting a number of briefings on this issue, in which I was asking people to convince me that there was a market economy operating in China with respect to bicycles. I must say that they had done a lot of work and had a fairly convincing case that a market economy did exist with respect to bicycles.
In Canada, we approach a market economy definition for China on a sectoral basis, as I indicated earlier. That aligns with the way we go about the Special Import Measures Act. There are some countries, for example the United States, that decide as a global entity when, in their judgment, China is a market economy. They have a slightly different approach. Some of the companies in Canada were somewhat dismayed by the fact that Canada had a different approach, but it was aligned to our own legislative framework and the way that we approach things generally, so that is the way it was.
The reality is that in the case of bicycles the tariffs came down. I have not followed up since then and I do not know if the bicycle or barbecue manufacturers in Canada have used some of the special measures that are available. I forget the exact process, but I think the case goes to the Canadian International Trade Tribunal in the first instance. Ultimately the decision is made by cabinet, which says that notwithstanding the obligations it has, our industry is being negatively affected in a very substantive way and therefore the cabinet is going to provide some tariff protection in the short run.
I am not sure if the bicycle manufacturers or the barbecue manufacturers avail themselves of those provisions. From the point of view of a business strategy, I know the companies were looking at finding the niches where Canada can compete more effectively. This is what I think we need to do more and more with respect to the textiles and apparel industry. I will give an example.
The textile industry in Canada, rather than staying with the typical rugs and carpets and apparel, has moved into textiles as they relate to automotive use and other OEM-type applications. The argument with the bicycles at the time was that yes, we would get a lot of bicycles into Canada, but they would typically be the lower end and lower cost bicycles, and that Canada's companies could position themselves in the middle to upper end of the bicycle market. That is what we need to do, not only with bicycles and barbecues, but with textiles and apparels. The reality is that economies like China, India and Bangladesh are here to stay and Canada has to find the strategies to move up the value chain.
We could look at the amount of outsourcing, or offshoring as it is called, that is going on in Canada with respect to India and the information technology industry. There was a good example that I read about not too long ago. It was in a book called The World is Flat.
The example used was of California's animation and cartoon industry. Today some of that work is being farmed out to India. Bangalore and various centres in India have developed a huge cadre of IT professionals who are quite qualified. They can turn a lot of that information into animated cartoons which are then sent back to California, and the industry in California upgrades them. They are adding value to that raw material. They are finding actually that they are growing their industry in that sense, because the industry in Bangalore is just developing and is not as mature as the industry in California. The IT professionals in India are able to do the basic animation, actually in a quality way, but they are not trained yet to do the value added.
We have a great responsibility in this world as a developed country to allow more access for the products of the developing world. We are seeing a growing gap between the rich and the poor nations, and if we are going to deal with that, we are going to have to be a little more accommodating with respect to allowing developing countries access to our markets. In doing so though, there are ways in the short to medium term that we can provide some protection to our industries, but if we do not deal with this, we are deluding ourselves because this is becoming a serious problem globally.
I am not suggesting that terrorism is a function necessarily of the growing gap between the rich and the poor countries, but I would say it is a factor. Therefore, not only is it the right thing to do, it is the pragmatic thing to do to try to close that gap. One way to do that is to provide more market access for the developing countries.
With respect to this motion, my colleagues have been more intimately involved. I will have to be guided somewhat by them and do more research myself, but I wanted to speak on this topic because it is a very important one and something that we need to be seized with, and that is how to cope with these new emerging economies of countries like China, India and Bangladesh.