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Proceedings of the Standing Senate Committee on
Foreign Affairs

Issue 19 - Evidence - Morning sitting

VANCOUVER, Wednesday, February 5, 1997

The Standing Senate Committee on Foreign Affairs met this day at 9:13 a.m. to examine and report on the growing importance of the Asia-Pacific region for Canada, with emphasis on the upcoming Asia-Pacific Economic Cooperation (APEC) conference to be held in Vancouver in the fall of 1997, Canada's year of the Asia-Pacific.

Senator John B. Stewart (Chairman) in the Chair.


The Chairman: Honourable Senators, I call our meeting to order. Today we resume our work relative to Asia Pacific here in Vancouver. The great advantage of coming to Vancouver is that there is a high concentration of people in this part of Canada who are knowledgeable about the area that we are studying. The other advantage is that we can concentrate upon our terms of reference in a way that probably would be impossible in Ottawa. We can put in three solid days of work and thus achieve all the benefits that flow from that type of concentration of time and attention.

Senator Pat Carney is the Deputy Chair of the committee; as such, she may wish to say a few words.

Senator Carney: Mr. Chairman, I would like to thank the senators for coming to Vancouver. It is a long way for you to come from Nova Scotia, Senator Stewart. I am glad to show you that the sun also shines on this coast. Senator Perrault is also from Vancouver. I would like to welcome all senators and visitors.

This is one of the busiest committees in the Senate. Not only does it have responsibility for foreign affairs and legislation relating to that, but also it has responsibility for trade and investment. It has scrutinized all of the major trade legislation and trade agreements, including the FTA and NAFTA.

Having just completed, last summer, a major study on European common currency, it was felt by committee members that in this Year of the Pacific, particularly here in Vancouver, we should be looking at Canada's relations with the Pacific.

It is a very broad subject. Mr. Chairman, I believe it is fair to say that we have not yet focused on any particular area. We will hear from a broad range of witnesses in Ottawa and Vancouver on aspects of Canada's relations, and we look forward to continuing our work here.

It is a pleasure for me not to board a plane to fly to Ottawa. I wish we did this more often. This is first time that our committee has met in Vancouver and we look forward to it.

Welcome to all. Thank you very much for being here. For those of you who are participating, we are very grateful to you for taking the time to do so.

The Chairman: Our first witness this morning is from the Asia Pacific Foundation of Canada. Before I turn the microphone over to Dr. William Saywell, the President of the Foundation, I wish to say a few words.

The committee is most grateful to the Asia Pacific Foundation for facilitating these meetings in Vancouver. It has been a great help to the Clerk of the committee, Mr. Pelletier, who has told me that the cooperation he has received from Mrs. Kelly Turner has been remarkable. He did not go so far as to say that it was better than we had at certain other places when we were involved in our study of the relations between Canada and the European Union, but I think he was at the point of saying that we would have had a smoother trip in some parts of Europe if Mrs. Kelly Turner had been on the ground there to do the preparatory work. I wish to thank her personally for the cooperation she has given us.

As members of the committee know, Dr. Saywell met with us in Ottawa. I thought that it would be helpful to have him appear before the committee today on his home ground. Because we have been away from the topic now for several weeks, it will help to concentrate our minds again on Asia Pacific and prepare us for three days of intensive work.

Dr. Saywell, I turn the microphone over to you and ask you to kick-start our meeting here in Vancouver.

Mr. William Saywell, President, Asia Pacific Foundation of Canada: Honourable senators, let me say that I share your good feeling of being in Vancouver, and not Ottawa. I left Ottawa last night at 6.00 p.m. as the next storm was coming in, as perhaps many of you did. My congratulations in particular to having four senators -- the whole complement from British Columbia -- currently here, a time when Vancouverites are just as likely to be out sipping coffee on Robson Street or walking on the beach, when we get rare days like this. Welcome to you all.

I must confess that I did not expect to re-appear before the committee as a witness, but only to assist with the meetings and the assembly of witnesses. However, since I have been put back into the agenda, let me, first, do two or three things and then try to get into a dialogue, or questions and answers, as quickly as possible.

I thought I would recap within two minutes the thrust of what I recall having said in Ottawa back in November. It has been suggested that I talk a little about the Team Canada approach to enhancing our trade with the region, as well as a little bit about Canada's Year of Asia Pacific and the role of the Asia Pacific Foundation both currently and into the future.

When I met with you in Ottawa, I reminded you of how dramatic the economic growth of the East Asia region has been. I did not talk about South Asia. I was really talking about the eastern area, the region from Japan and Korea in the northeast to Indonesia and the other ASEAN nations in Southeast Asia. At that time, I told you that most economists and crystal ball gazers believe that over the course of the next decade or two, at least half of world global economic growth will be in that region. Whatever set of numbers one looks at, the growth will be dramatic.

The question I posed was: Can it be sustained? Has the centre of economic global gravity shifted now definitively to that part of the globe and that part of the Asia Pacific region? As might be expected, although I am not an economist, I gave the mixed answer that, in effect, yes, it can be. The one big question mark is political stability, which I will address in a moment.

Very high economic growth may well be sustained in East Asia and therefore be absolutely paramount in affecting all other global geostrategic issues for a variety of reasons.

First, the region has enormous amounts of indigenous capital. This area, particularly a country such as the People's Republic of China, has not even begun to exploit, through the development of their debt and equity markets, the capital they themselves are sitting on. The reason for that is simple: they have had by far the highest savings rates of any part of the globe. The average savings rate per capita of GDP in East Asia is 30 per cent, whereas ours is something like 8 per cent. Therefore, there is enormous capital. They are not entirely dependent -- as we sometimes in the west have as our own mythology -- on us for foreign debt investment.

Second, it can be sustained, although not at the double-digit rates we have seen over the last decade. In fact, that would be dangerous. The region has become far more integrated in terms of trade and investment itself. The intra-Asian trade and investment has now become very much a part of the economic momentum of that area.

Third, it has moved from import substitution to export driven and to now consumer-driven economic growth in the area. To a very large degree, that is driven by the unprecedented growth in terms of absolute numbers of a middle class.

I recall that in Ottawa, Senator Grafstein and I had some discussion as to what is a middle class, in any event. I meant a family with a disposable income in Asia to buy western goods and services, to travel, and to send their kids to school in the west, or whatever it might be. In all of these countries, that consumer-driven level of a group of people with that level of disposable income is a very major ingredient in terms of the area's economic growth today.

Market size is obvious. One does not have to be reminded of the enormous population growth. Return on investments is so much faster than in the rest of the world. Hence, there are the economic features in East Asia to be able to argue that very high -- and by that I mean World Bank predictions of 7.5, 8 per cent -- growth over the next foreseeable future, whatever that is, five, 10, 15 years, is highly probable.

The question in my own mind is the extent to which political stability will sustain that or could undermine it.

There are other areas, but those are three areas that I am sure you are spending some time looking at.

The Korean Peninsula, it goes without saying, is an area of potential conflict and great instability. There is nothing in North Korea to give one any degree of real optimism that a change for the better and for the long run is definite.

Indonesia is also facing a major issue, by virtue of the succession that is coming along, sooner rather than later, and for which the basic components have not yet been put in place. We must also remind ourselves of how large, diffuse and diverse culturally, economically and geographically that country is. Whatever you may think of the current regime, it has sustained a degree of integration and stability. However, there is an open question as to the extent to which it will be sustained later. I am not predicting that it will collapse; I am only stating that Indonesia is a second area to consider when looking at longer-term political stability.

In my own mind, the area of greatest concern is China, specifically the People's Republic of China. I am not one of those who believes that the country is about to fall apart, that we will see an historical re-emergence of a period of "warlordism"; I do not predict that, although some do.

Rather, there are two reasons. First, by order of magnitude, if there were any significant political instability and economic dislocation in China, there is no way that it will not have a very serious impact on the rest of the region and, therefore, the rest of the globe. It is too large a player in every way to come to any other conclusion. Therefore, one has to concentrate on China, as indeed China's neighbours do -- either on the scenario of instability or the scenario of high growth and superpower status one day. Whichever way you look at it, countries, from Japan to those in Southeast Asia, have their concerns.

The question of potential instability in China is largely economically driven. There are increasing disparities between the regions and social classes, in terms of the sharing or lack of sharing of the economic growth that they have witnessed. There is regional power in the wealthy areas along the seaboard, particularly the province of Guangdong, and those areas having the ability to thumb their noses at Beijing in terms of revenue sharing. There have been improvements in this area in the last 18 months, but there are still some question marks around it.

Also to be considered is the degree to which environmental degradation, which is massive in China, will undermine economic growth and economic stability and, therefore, political stability.

I gave as examples in Ottawa the dangerously low water table in North China and the attempt to bring water from the Yangtze River, up to the North China Plain. There are questions of air pollution. Whatever is done in terms of energy diversification -- and a great deal is being done -- they simply cannot move dramatically away from coal as the major source. The coal that is used is a dirty coal and the air pollution from it is dramatic, as is the dramatic increase in vehicular traffic and the air pollution caused by that. There is no question that water, air, and environmental degradation is at the point of threatening economic sustainable growth.

There is also a massive problem with state enterprises. They simply cannot be privatized, as the bottom line would suggest be done in the mixed economy that they have. They are recognized as an economic albatross around their necks. However, the state enterprises are the social net of much of China, accounting for something like 200, 250 million people, workers and dependents of workers in terms of social care, pensions, clinics, day care, hospitals -- the whole bit. So they cannot suddenly be dissolved.

Corruption is pervasive. This is not something that we on the outside comment on; it is something that they comment on more than we do in their regional and national press. They are attempting to do something about it. Corruption throughout the system, including in the People's Liberation Army, is entirely into the economic fibre of the country.

There is also the succession issue. In terms of who will replace Deng Xiaoping, it is clearly Jiang Zemin and the group around him. There are two questions about the succession. One, can that group stay in power; in other words, does it have the roots to be able to stay for any length of time? I do not know, but it is a question.

The bigger question, in my own mind, as I stated in Ottawa, is the succession in terms of a value structure. In my opinion, China today is essentially a nation and indeed a civilization, because it is both, that does not have a clearly defined value structure. It has thrown Marxism/Leninism into the dustbin of history. It has had an economic revolution in terms of both its economic reforms and its life-style reforms, and it has made some political changes, but it has not in any sense narrowed the gap between its economic change and its political change. Call it a move toward the rule of law, call it whatever you wish. But there is complete disharmony and disjointedness between its economic change and what I call, for want of a better term, its "set of values", what glues the country together in terms of its social sense of direction and values. This, in my own sense -- and it is instinctive more than analytical -- has to be a challenge for any society. In a society that is so large and with the regional diversity that it has, it is a major challenge.

In conclusion, in that sense of recapping my earlier remarks, the issue of political instability in China has to be a concern. I am reasonably optimistic; I think China will meet its challenges. There will be bumps along the way, perhaps some serious ones, but it must be a part of your attention and it must be a part of Canada's foreign policy attention.

On that issue, I should say, parenthetically and briefly, as a couple of footnotes, that it is terribly important that China-U.S. relations improve and are put on a good footing. There are some structural issues on both sides that will make that very difficult, although they are largely being driven by economic considerations on both sides.

The issue of Hong Kong, and in the longer sense the way Hong Kong goes: Will that affect the whole relationship in the Greater China Basin, namely the Taiwan-Mainland relationship?

On Hong Kong, I have to admit that one day I am optimistic and the next I am not. Clearly, in a word, the Chinese want to make Hong Kong work. It is in no one's interest to have Hong Kong change quickly and fundamentally. The issue in my own mind is: Do the Chinese really understand the essence of what makes Hong Kong tick? The essence is this extraordinarily free enterprise society, but based on a rule of law and a relatively corruption-free merit-driven civil service; the Independent Commission Against Corruption. All these things have worked. Once Hong Kong is more totally integrated into the Chinese form of government and business, these things will change.

In recent days, we have seen the change in terms of civil liberties. It could well be that we are in for a bumpier ride with Hong Kong over the first six to 18 months than is in the interests of anybody.

In terms of economic stability and integration, all of those issues have to be looked upon not only in economic terms, but also in terms of international security. Security issues internationally are no longer military issues primarily. They are issues of illegal migration, of uncontrolled drug movement through territory, piracy on the seas, environmental degradation that crosses borders and affects other countries. Those are all issues that therefore make this question of economic growth and political stability issues also of international security.

In my judgment, Canadian foreign policy is basically on course. Mike Pearson laid down the basic contours of Canadian foreign policy, and they are still sound, despite the changes in nuance and making them more current. They are focused in my mind on a basic Canadian commitment to "multilateralism", whether that is in Europe or at the United Nations or now in the emerging and very important structure of APEC. APEC is something to which Canada should be committed for the long haul in a very significant way.

APEC, while officially and literally dealing only with trade and economic issues, by implication deals with other issues of security confidence-building, of human resource development and of environment. Whether or not these are on the agenda, one cannot have the leaders, the senior officials, the ministers of this dynamic region getting together as regularly as they do without implicitly beginning to merge into these other areas. APEC is extraordinarily important in terms of things beyond the economic agenda to which it is immediately directed.

Canada still plays a very interesting role as an honest broker some time, but we often exaggerate our role. For example, not very long ago I was in Korea with a Canadian-Korean group, Canada-Korea Forum, and a Canadian asked whether or not we could assist by playing a role in the Korea Peninsula tensions and whether or not we should recreate the North Pacific security dialogue that Mr. Clark initiated many years ago.

Essentially, the Korean answer, which was more forthright than they often are, was "Not really, you do not have a role in this. This is a role for the major powers, the United States, China, ourselves and Korea. Thanks for the offer, but no thanks." It was a useful reminder -- and of course I am putting it in my words, not their words -- that there will be opportunity, such as the South China Sea in which Canadians are playing a useful role, behind the scenes, quietly; but we must not exaggerate what we can do. We have good bilateral relations with most of those countries because we do not exaggerate what we can do. It is built on a non-colonial past, good economic relations and good ODA in the past. We must concentrate on the multilateral role both informally and formally through issues and organizations like APEC.

Let me conclude on three issues: Team Canada, Canada's Year of Asia Pacific, and the Asia Pacific Foundation.

Our relations with this part of the world are critically economic. If we are not plugged into East Asia more thoroughly than we are at present, we will lose out in terms of the basic economic growth that that region will bring to us. We can be as altruistic or as genuinely interested in other issues as we want, but our economic relationship in that part of the world is absolutely critical. The Team Canada approach has been very useful in two or three ways. It has shown Asians that we are interested in having a high profile. It gets lots of press, and it brings people out who otherwise one would not meet. It open doors, especially for small- and medium-sized enterprises.

Much of the business that is done in Asia, along with many of the companies, is in one way or another connected to the governments of Asia in a more direct way than is true in North America. When the Prime Minister and the premiers take a delegation of business people to Asia, doors are opened in a way that for small- and medium-sized enterprises, it would take many years to do. It is then up to them to go through those doors, but door opening is important. Honourable senators will know better than I, being closely associated with government, that this helps to light fires under bureaucracies on both sides of the oceans to attend to things that have been in the pipe for months and months. An excellent example of that is Team Canada's recent attendance in Bangkok for the Thai-sat deal, which had been in the pipe for a very long time.

Despite the media scepticism that surrounds Team Canada -- although my impression is that it received much better media this time than it did on the last two occasions -- it has been very positive for this country. Although much of it is in MOUs, which may or may not become deals, it has been effective, and I hope the government will in one way or another continue to do it.

In Canada's Year of Asia Pacific the government has recognized the importance of this to us. The various programs, the five ministerial meetings of APEC across the country, these are things the Asia Pacific Foundation is deeply involved in.

We are running a youth summit in Winnipeg. We are dealing with at least three of the ministries in terms of the programs associated within the business programs. The level of activity this year is very good.

My question about Canada's Year of Asia Pacific is: On December 31, or on the day after the leaders' meeting ends in Vancouver in November, will we close the doors and say that it has been fun and useful, that it has raised awareness, but that there is no legacy? It is important, whenever there is momentum, be it in a baseball game or an international issue, to somehow concentrate on a legacy. It would be useful if this committee were to influence that.

I will give you my two-minute commercial on the Asia Pacific Foundation. I remind honourable senators that the Asia Pacific Foundation of Canada was created 12 years ago by an act of Parliament that was unanimously passed. I do not know how often that happens. Let me also point out, particularly to my four colleagues from the West Coast, that I believe I am correct in saying that this is the only national organization <#0107> that is, having a national mandate -- created by Parliament that is headquartered in Vancouver.

We are facing enormous financial pressures, and I support the basic economic strategy of this government to reduce the deficit and eventually the debt -- the debt continues to grow. However, there are issues of priorities. It is important that there be a national organization which continues to raise awareness across Canada of the importance of the Asia Pacific region and to develop programs that make Canadians more comfortable and more competitive in dealing with that part of the world.

Through getting the media to Asia, through our media fellowships which we have now had to discontinue, although we keep some modest programs alive, to the huge initiatives we are now involved in, we are bringing hundreds of millions of dollars to this country.

Every other year, our wholly owned subsidiary, the Globe Foundation, hosts in Vancouver what is considered a hallmark international event, the Globe's Environmental Business Trade Show and related conference. Globe 96 had 411 exhibitors from all over the world promoting environmental business to about 11,000 or 12,000 trade fair visitors. Some 50 international and national organizations had their meetings on the environment here in Vancouver because Globe was happening. From an independent audit that was conducted, we believe that close to $400 million worth of business has come to this country as a result of the Globe show.

We have established, in partnership with the Government of Canada, the Canadian Education Centre Network, about which I spoke briefly last time. We are now opening two new centres, one in New Delhi and one in Mexico City. Nine centres will be operational this April on a cost-recovery basis; every institution in this country, be it a private ESL school, a high school, a college or a university, that wants to market its education and training, to have students come here or to deliver programs in Asia, can, through a subscription fee to us, market themselves in Asia. This is a $3-billion-a-year business. There is no area in the trade of services for Canada in which we are more competitive.

We have a first-class education and training system -- yes, I am biased; I was in the educational community for a very long time -- but we do it in a very inexpensive way, comparatively, and in a hospitable and safe environment. This not only brings in hundreds of millions of dollars to Canada, but also it helps to develop strategic contacts with Asia. More than 50 per cent of the foreign students studying in this country come from Asia. Individually, they put $27,000 a year into the local economy.

Because of marketing efforts, the number of students we have had from Korea has increased to 8,000 this year from 400. This represents $250 million to Canada. The key part of it is that these are the daughters and sons of Asia's elite. Following their education here in Canada, they return to their homeland and, by definition, move into family businesses, into government, join multinationals; they are almost immediately in positions of power and influence. They have fond memories of Canada. They know our names; they know our brand names. All other things being equal, as it is in a global economy, they will buy from us.

The Canadian Education Centre Network and the Globe Foundation are worth hundreds of millions of dollars to the economy of this country, from Newfoundland to Vancouver Island.

The Asia Pacific Foundation of Canada deserves your support, and I would urge you to do your best to see that it is sustained over the future. We are being driven to find our own revenue. As a national organization, we are doing very well in that regard, but I am not sure we can go the whole route.

Senator Carney: Dr. Saywell, you have covered a lot of ground for us. Your testimony both here and in Ottawa has been very helpful to our committee. I know that you have been associated with security aspects in the North Pacific through several administrations and can give us guidance on that. You have touched on the problem of Canada's modest role in the Pacific, and possibly you might want to elaborate on what we could do. We are not very visible, as you know.

My question is directly related to APEC. You say that you would like to see a legacy follow the APEC conference. What do you think that legacy could be?

Mr. Saywell: It could be several things. In my judgment -- and you will forgive the bias from my educational background -- the most meaningful way of sustaining a legacy is in the educational area. It is important that people from senior high school through college be reminded and given opportunities in a variety of ways to make the Asia Pacific region a part of their life. If I had to choose one area where I would concentrate, it would be that area. One cannot do everything.

If I were the Prime Minister, I would say, with respect to the $20 million that we are attempting to raise for Canada's Year of Asia Pacific and APEC: "Let us make sure that there is another $10 million in an endowment with a national organization like ours that concentrates in that area."

Thousands of young Canadians now go to Asia to start their career, through co-op university programs. There is a variety of ways that we can focus on our youth to make it a worthwhile legacy and a meaningful one.

Senator St. Germain: Thank you for the good presentation, Dr. Saywell. I know how capable you are from past dealings with you, sir, and you have reinforced that this morning with your presentation. You must be one great salesman selling Winnipeg! I was raised there.

My question relates to human rights violations. How does a country like Canada reconcile its position? We know of incidents of excessive human rights violations in certain countries; yet, it appears that often we change position or direction, because of economic reasons, and cast a blind eye to human rights violations and continue trading. In other sectors, we do other things. There does not seem to be any consistency.

In the eyes of the public, we are often asked to reconcile having taken certain positions. I am not speaking of the present administration. This has been continuous in the free world -- the G-7 countries and how they deal with those situations.

Have you any recommendations? Will this continue? Will there be what is perceived as massive inconsistencies in our dealings?

You make reference to the fact there is no value standard in China. Often, when dealing with human rights violations, I do not see a great value standard in the United States, Canada, France, or other countries, vis-à-vis the manner in which they deal with such issues.

Mr. Saywell: I am not sure I say there is no value structure in China. There is certainly a transition to need a new value structure. It is a good question.

Canada has a choice like any country. It can cut itself off at the knees in terms of its own economic prosperity and job growth by saying that it will not do business with whomever because it does not like the way a certain country deals with its own society. If we did that with major economies with which we deal, there would be a very high cost in terms of our own social and economic well-being.

Are we going to continue to be ambivalent about that? Yes, we are. Regardless of which government is in power in Ottawa, that will continue to be the case. At the end of the day, we are responsible for the economic well-being, the social net, the educational quality of Canadian life. We are a nation that is overwhelmingly dependent on international trade, and that will always be the case.

That is particularly true of Canada because we do not have the bilateral clout of a United States. We cannot go in and pound our fist on the table and say, "If you do not do this, we will do that," because it will not work. We will continue to live in this world in which none of us is particularly comfortable but which is the real world.

Having said that, the Canadian government generally -- and I would say this is true of the various administrations that have been in power in Ottawa over the last several decades -- has not handled the human rights issue badly. They have been realistic. They have been quiet, but nevertheless persistent, advocates behind the scenes of change. Certainly now, and for many years, our ODA has had components in it that are euphemistically related to human rights -- the good governance issue. We are involved in advising on the set-up of legal reform structures.

There are critics who say that this is hypocrisy, but I will say it anyway: Over the longer run, it is the economic opening; it is then bringing economic reform and the life-style reform that economic change brings that also begins to bring a change in terms of basic values.

I stated that China has a huge gap. But that gap will be narrowed if one predicts a reasonably consistent economic growth and policy of economic reform, because the people will demand it and the value changes will begin to take place. There you have it, at least in my view.

Senator Andreychuk: I agree with you on the Team Canada issue. While it is an important initiative, I want to speak in defence of the press. You stated that they looked at the bottom line. Is it not a fact that the government sold "the bottom line" as the reason and the impetus for Team Canada? I would not blame the press for the emphasis there. I hope that some government officials are listening to you when you say that the long-term effect, the legacy, of Team Canada is the educational value that it leaves.

My question -- and I will restrict myself to one -- is that you indicated that economic growth is the important thing, that it leads the way to many positive changes in any area or a country. You also said that China in particular, but also the rest of Asia, is not as dependent on foreign investment, that it has its own reserves of capital that it can work on.

If we are interested in a multilateral-based society in our economic world, and Canada has always looked to a rules-based economic system -- World Trade Organization -- what assurance do we have that there will be good rules in place in the end? In other areas, we have had to go into an economic structure that has been corrupt, that has not been at least even minimally receptive to our economic value systems; we have been able to bring players like the Paris Club into Africa, to say, "Here is how we are going to play into there." And then we have the combined pressure which then makes those countries respond to some international rules.

If you are saying that this area has its own capital base, then outside combined pressure will not be sufficient to make them change. What optimism do we have that something like the rules of world trade organizations will succeed in at least giving us some rules by which we can play? It seems to me that the ultimate stability we are looking for, political and economic, is that we have some say and some influence in a world order.

Mr. Saywell: It is a very good question, but I am going to have to qualify or reinterpret what I was trying to say. I was simply arguing that one of the reasons one could be optimistic about continued high growth in Asia is that they do have an indigenous capital source because of high savings rates. That does not mean that they are not integrated into the world economy or that they do not want our investment. They do. They very much want our investment and certainly our trade. They are as dependent as anyone else on international trade and investment.

What I am saying is that many people in the West believe that if we "take our marbles and go home", they will collapse. That is not true. They are much more integrated and have larger capital sources than we expect.

As Asian countries come into international organizations, such as the World Trade Organization -- it is important that China be a full member of that -- they accept the rules of the game and they play by them. There is no indication to the contrary.

Senator Andreychuk: In the first round with the World Trade Organization, the signs were that China was not going to come in and negotiate on the present rules, that it came with its own agenda. I do not see where it has been amenable to the kind of negotiation that has gone on with other countries. Where do you see them coming in and playing by the rules?

Mr. Saywell: China, like any other country coming into a new organization, is negotiating from its perspective. Its perspective is that it wants a maximum length of time under the developing country rubric to come up to the full implementation of developed countries' regulations. It is doing what any of us would do when going in.

There is a spectrum vis-à-vis where you come in and what you have to abide by. Naturally, still being a developing country, they want to come in at the lower end in order to have the maximum amount of time to come up. There is nothing unusual about that. Once in and once they accept the rules -- and they have been very good at this in other international organizations -- they basically abide by them.

APEC is not an organization of that type. It is an Asian cultural organization that is consensus-driven and voluntary; as such, you go in a direction that the consensus allows you to. There are no rules or regulations at all.

Senator Perrault: The Asia Pacific Foundation of Canada has justifiably earned enormous respect on the West Coast and across Canada. A large amount of the credit goes to Dr. Saywell.

Dr. Saywell made reference to human rights in Hong Kong. I was there a few months ago. Of course, we are hoping for the best but fearing the worse. In the past two days, we have seen another move on human rights and civil liberties in Hong Kong. The advisory committee, which was appointed by PRC, has moved in the area of restricting free speech and civil rights -- a unanimous decision by that committee. It seems to me that that is a PRC apparatus. Should we be concerned about that? How secure are human rights and the prospects of them when the reunification takes place?

Senator De Bané: He said it depends on the day; one day he is optimistic and the next day he is not.

Senator Perrault: I wonder whether he is optimistic today.

Mr. Saywell: No, I am not.

Senator Perrault: I am sure you have also read the recent reports.

Mr. Saywell: Today is Wednesday; I am back in Vancouver and the sun is shining. I left Ottawa last night. I am in a very optimistic mood about everything, except Hong Kong. I am on the down-slope in terms of my mood about Hong Kong.

As I said, at the end of the day they want to make it work, but they are doing some dumb things. It is an area in which this city and this country has some vital interests. We have to keep plugging away reminding everyone just how international the implications will be if the Hong Kong transition is a bumpy one.

Senator Grafstein: Mr. Chairman, I congratulate Dr. Saywell for being here with us again. I wish to deal with the domestic issue and then talk about the structural problems with our current trade with Asia.

First, the domestic issue. If you do not want to answer this question I will understand, since we are in Vancouver.

We made a rather intensive study of our trade relations -- Canada-Europe. Our committee concluded that one of the barriers to making us a much more effective trade competitor was our own domestic marketplace; that before we started preaching international trade we had to preach domestic trade. As we speak today, British Columbia appears to be on the wrong side of that issue. What is your view on that? In other words, does our competitiveness improve dramatically with developing our own domestic marketplace in a competitive manner? We do not have a competitive domestic marketplace at this moment in large sectors, yet we go across to Asia and preach to them. May I have your comments.

Mr. Saywell: Thanks for the offer to duck out of it. Over the 10 years serving as a university president, I learned how to duck out of public partisan issues!

The answer to your question is that I am not an economist, so I do not know what the impact on our international competitiveness would be if intra-Canadian barriers were reduced. Clearly I am a believer that intra-Canadian barriers ought to be reduced and that domestic trade ought to be liberalized, but I simply do not know what the direct impact of that would be on our international competitiveness.

Our volume of trade with Asia has gone up. Our market share has gone down quite significantly. Our value-added has not increased as much as any of us would wish.

Senator Grafstein: You have led into my next question. When I looked at the last figures for Canada-Asia, after subtracting our trading relationship with the United States, Asia is now our largest trading partner. These numbers are for 1991-92 and may not be up to date; you may have more up-to-date figures. As I read those figures, Asia is now our largest trading partner, subtracting the United States. It now accounts for approximately 40 per cent of our trade.

The problem is that while we are running a trade surplus with the United States, we continue to run a very large trade deficit with Asia. In 1991, it was approximately $6 billion. That situation probably has deteriorated. While we sit here and are optimistic about our trade responses, which are crucial, we are in quite a critical situation with regard to our trade imbalances with Asia, essentially, I assume, Japan and China. Have you looked at this problem? There are large sectors of trade where we have a dangerous trade imbalance.

In my view, it is a security issue; in other words, at the end of the day, if there is a collapse, as we saw in Japan in the financial markets, Canada could end up in a very serious economic situation. The shock waves on the West Coast could be very serious.

Can you give us some insight as to how we deal with what I consider to be a real crisis?

Mr. Saywell: The trade deficit with Asia is 1.25 to 1 in 1994-95 figures, if I recall, but I stand to be corrected. The basic point you make is accurate. Clearly, he overwhelming economic relationship for this country is and will remain the United States. There is greater diversity and significant longer-term strategic value in our changing trade patterns with Asia than the statistics show. Particularly in this city, but also in other parts of the country, there are many small enterprises selling anything from components of wood building to software that are beginning to make inroads.

What the figures do not show is the extent to which trade and services have really mushroomed between Canada and this part of world, in terms of education services, which I have already talked about, tourism, financial services, accounting, executive management, consulting, engineering consulting. We do very badly in getting FDI support and support in particular for anything related to infrastructure, but our engineering consulting firms do very well.

If you take the whole picture and look at some of the small changes that do not show up on the statistical map, there is reason for optimism.

What can we do to accelerate and improve that? The answer is to get a better recognition of the importance of Asia. Through the Asia Pacific Foundation, get young people to Asia; have them live in Asia and understand Asia so they will want to work with Asia when they return to Canada, whatever their business may be.

We have to spend more on export development credits. Some of our competitors, such as France, surpass us by a large margin when it comes to that issue.

We have to look more significantly at the use of consortia, so that they will have the critical mass. The Kenora Group is an example of this.

We must also put some time, effort and money into looking at strategic alliances with Asian partners. For example, look at the construction industry. Much of the construction and the infrastructure development in Asia, which will be worth trillions of dollars over the next decade, is being done by huge Korean conglomerates. We have value-added, whether it is management of the building of an airport or management of an airport. We can work with a co-construction company in Korea in terms of a joint venture, a strategic alliance. Collectively, all those things will help.

When looking at the trade side and the economic impact, have a good look at the servicing. It is difficult, because the statistics are not good.

Senator Lawson: Thank you for an enlightening presentation. My concern deals with the area of South Korea. I was part of a small American labour delegation that went to South Korea. We met with government officials and, as befits the occasion, they arranged a dinner and arranged for the 40 national presidents of the 40 national unions that make up the Korean free trade union movement to be in attendance on this occasion.

The government outlined its labour philosophy and policy and then invited the 40 national presidents to make comments or add whatever they wished to add. To our surprise, not one of the 40 national leaders had anything to say. The government was a little embarrassed.

If one thinks of this country and a Louis Laberge, a Ken Gorgetti, a Bob White or a Jack Munro saying nothing on an occasion like this, it would be quite surprising.

Because of their embarrassment, they said that there would be a private luncheon the following day so that our small group could meet directly with the 40 national presidents. We had the luncheon and, to our surprise, they did have something to say. They recited word for word the labour policy that the government had given us the day before. In discussion, I stated that there seemed to be an undue amount of government influence on the labour policy in this Korean free trade union movement. Privately, they acknowledged that that was so. When I asked if they saw it changing, they stated they had a concern or perhaps a fear that down the road this may change. I asked what would give rise to this change and was told that it would be the workers themselves.

The very day we were meeting, the court decision came down on a two-day wild-cat strike that had taken place at Daiwa Motor Company. Four people, the ringleaders, were charged: two were given two months in prison, and the other two were given two years in prison. When we inquired as to the difference in the penalty, we were told that the sentence of two years was not for the wild-cat strike but for denying their education. They were university students who should not have been working at blue-colour jobs.

It seems that their fears are upon us now in South Korea, with all the conflict that is taking place. Is it possible for North American-style free trade unions to function there without a lot of bloodshed? That is what appears to be on the horizon at the moment.

Mr. Saywell: My honest answer is, I do not know; it varies from country to country.

South Korea is in a very critical period of transition in terms of its overall liberalization and democraticization. There has been major progress, but there are still very serious challenges, such as the one you mentioned. However, yes, I think it will gradually change.

There is one issue that I thought you were raising in your comments. In most parts of Asia, one will find a reluctance on the part of Asians to confront, in an open forum, issues over which internally they are at loggerheads. We are learning much through Team Canada and other missions. I tell a young person who goes to study in Asia to remember that he or she represents not only an his or her province or city, but also the country, and that to bad mouth people in your country is very un-Asian. The more public the forum, the less willing a group is to talk about their own difficulties and differences.

Senator Lawson: When we requested of the government officials the opportunity to meet at the university, there was almost panic in their eyes, and under no condition would they allow it to happen, which came as quite a surprise.

In Taiwan, the attitude was quite the reverse. They were anxious to go to the university because they had a Canada-Asian studies group and a U.S.-Asian-Taiwan studies group. There appeared to be real fear because they were concerned about student revolutions, which subsequently came to pass. It seems that with what has gone on in the last few months, there is a potential for more bloodshed.

Mr. Saywell: I cannot comment further.

Senator Stollery: This has been a very interesting presentation. I always have a problem with the word "Asia". Israel is in Asia. My mind is seized in this matter with China and Japan for the moment, in what I always thought was the Orient, the Far East.

I have been reflecting on the comments on China, with 28 provinces, the vastness of it and the linguistic difficulties. I am reminded that 25 or 30 years ago, I was travelling on a country road. I have only been in half a dozen of the provinces of China. I remember on that country road 25 or 30 years going quite a long way. I was struck with the villages. Every village was a fortified village, and I was reminded how Italian looking these places were. For 200 kilometres, every single place had a tower and a fortification. I asked the men I was with about it, about the construction, which was very European, and was told they were built in the 1920s. It was explained to me that many Chinese people, perhaps from Vancouver, and certainly from Toronto and other parts of the world, had family back in China, and because of the menace of the marauding bands, they built these places in their home village.

You get the feeling when you talk to provincial leaders from China that they do not seem to like the national government. Everyone of course talks about the division of the Yangtze, but it is much more complex than that.

As I said, my mind is seized with China and Japan. Do you have any views about the U.S.-Japan Defence Agreement, which is the major defence agreement in the region, if there is disorder in China? The U.S.-Japan Defence Agreement came about in 1950, a reaction to the Korean War. It did not have much to do with U.S.-Japan defence; it is a regional agreement. Do you think that that agreement has become more or less important?

As Senator Lawson stated, we have all noticed some of the problems on the Korean Peninsula. I am not suggesting that China returns to the marauding bands of the 1920s. However, if there is disorder, will the U.S.-Japan Defence Agreement have any impact on that disorder?

Mr. Saywell: I do not believe that any internal issue of disorder in China or anywhere else will bring to bear an international force unless invited through a peacekeeping or a peacemaking initiative. Some instability in China would not provoke that.

However, the bigger strategic issue I think you are getting at is whether or not the U.S. military presence in East Asia is something that Asians want. And by the way, Asia is difficult to define. I define the region we are speaking of as East Asia. I gave the parameters at the beginning of my talk. They see it as a stabilizing force. The U.S. is the only power in the world today with true international military power, and so it is seen as a stabilizing force. Indeed, the Chinese see it that way with regard to the Korean Peninsula, for example.

Would the U.S.-Japan security force come into effect in terms of resolving a domestic issue? No. Is a continued U.S. presence and that relationship important to the region as a whole? Yes.

I remind honourable senators that the American reaction to the Taiwan missile crisis was many things, but in part it was a reminder by the United States that the Taiwan Straits issue was not only a domestic issue, but also an issue with international implications. Hence, they moved appropriately in their terms in that crisis.

Senator Stollery: The genesis of the U.S.-Japan Defence Agreement, the only other major defence agreement that the United States is a signatory of, other than NATO, is in fact the Korean War. You were saying that because the Korean war is history and conditions have changed, it does not have any real east-west conflict effect, but that the Japan-U.S. defence agreement has taken on a different goal than that for which it was designed.

Mr. Saywell: It is seen as having the value of injecting a greater degree of regional stability. Therefore, it has taken on a greater regional nuance than before.

Senator Stollery: In other words, if it is there because of a fear of a stabilizing effect, then there must somewhere be the fear that there is the possibility of a destabilizing effect in the region.

Mr. Saywell: Sure, and I pointed out what I thought were potentially destabilizing areas. The Korean Peninsula remains potentially very volatile, which could have an enormous impact on Japan, as well obviously as South Korea. There are always question marks around the Asia region generally in terms of where is China heading.

There are experts coming behind me. Let me mention one, Brian Job from the University of British Columbia, who is a true expert in some of these areas. It will be valuable for you to ask him those questions. I do not pretend to have his level of expertise in this particular area of security.

Senator Perrault: Mr. Chairman, there has been talk about private and public involvement in funding this very valuable work in the Asia Pacific region. I would be interested in the percentages from both sectors. What type of operating budget do you require and what should be done to help continue the work? What should we be supporting?

Mr. Saywell: The foundation is attempting to sustain our future by developing cost-recovery programs and putting everything we can on a fee-for-service basis. The Government of Canada, as well as other provincial governments, can contract us to do things in which there is some overhead and wherein we can help sustain ourselves.

In terms of us retaining a national viable organization and doing things that we cannot charge for in the education community, we need a couple of millions dollars a year, and we can get that matched from our own endeavours.

Senator De Bané: Sir, would you please explain what you said very cryptically when you stated that you were concerned if ever China put an end to freedom of speech and free enterprise in Hong Kong. You stated that if that happened, you would be very pessimistic. I have great difficulty understanding what is behind that statement. If the ruling people in China, for the sake of discussion, have no commitment to freedom of civil liberties in China proper for over 1.2 billion people and that does not prevent us from doing business with them every day, why would we become more concerned if tomorrow they extend that behaviour to another 6 million people?

Why is it that we do not mind if they behave in such a repugnant way towards 1.2 billion people but that we would become very concerned if that behaviour were extended to another 6 million people? I have difficulty understanding.

Finally, surely we are not doing business with China because, to use your expression, we espouse the same set of values. We do it because their GNP is as big as Canada's already and tomorrow it will be double Canada's.

Mr. Saywell: Absolutely. As I said, our choice in human rights is that we do business with whomever. If we do not, it is at our expense. The answer to your question is -- of course as a Canadian who cherishes the liberties and values of our rule-of-law-based society, I wish all countries of the world had it -- that there is no way that China is overnight going to change its system of values or government. In some areas of China, there is progress in moving toward a rule-of-law-based society, and one can only hope that that is accelerated by greater international integration and economic reform. That will take years; it will not change quickly.

In Hong Kong, there has been an agreement that there will be a 50-year period of transition of a very international society. Yes, it falls under Chinese sovereignty on July 1 of this year. However, it is a very international society whose very economic vibrancy and importance to the rest of the world is based on that fundamental existence today of a rule of law, a merit civil service, a non-corrupt society and a free enterprise system. To have that reversed is significant, not only in terms of the people of Hong Kong, whom we care about and with whom we have very close connections in this country, but also it is symbolically unfortunate in terms of the whole relationship of the west and Asia. It is a very special case. It is not that one does not wish that China, too, were liberalizing more quickly; one does, but one cannot really affect that.

The Chairman: Thank you very much, Dr. Saywell. This has been a very enlivening discussion. You have launched us well into our meetings in Vancouver. We are most appreciative.

Mr. Saywell: I apologize for having taken so long.

On February 14, the Asia Pacific Foundation is putting out what we hope will be our flagship publication, the Canadian Asian Review. It will be done annually. It is an 80-page document, approximately, a report card, reporting on what has happened in the past year in Asia in terms of our relations. We will make sure that you buy as many copies as you would like to buy.

The Chairman: Honourable senators, we have another witness who has been waiting patiently while we have been asking questions. I am not going to read his full curriculum vitae. He is in architecture. He lives in Vancouver. He is a partner in Blewett Dodd, an architectural firm. He has been active in his profession both in North America and in Asia, specifically in Hong Kong, in Beijing and Shanghai. I will stop there. You have the full list of his professional experience.

With him is Mr. Bing Thom, a principal of Bing Thom Architects Incorporated. This company was established in Vancouver in 1980 and has also been active in the Far East. It is notable that this company was appointed by the Department of External Affairs after a nation-wide selection process to design the acclaimed Canada Pavilion at Expo 92 in Seville.

We have two persons in the same field who have had on-the-ground experience in the Asia Pacific region. I will ask Mr. Blewett to lead off and then we will turn to Mr. Thom.

Mr. Peter Blewett, Partner, Blewett Dodd Architecture: Mr. Chairman, honourable senators, you are seeing Vancouver at its very best, but I hope you will not tell too many people about it. We do enjoy a particular geographic location here which puts us very close to Asia. As a consequence, the company I represent has developed a considerable market in Asia over the last 10 years. It is becoming increasingly easy to travel there.

Although I have had extensive experience in Hong Kong first, and then in Mainland China, I do not speak the language. It has been a barrier to some extent, but not a tremendous barrier. Most of the work that I have done has been in association or partnership with local Chinese architects and engineers in China. As the Chairman stated in his introduction, we started off in the big cities of Shanghai and Beijing, but recently, in the last two or three years, we have concentrated much more on the so-called mid-sized cities. Partly, I have no embarrassment in telling you, it is that the competition is less there.

The company that pioneered this work that I was part of was originally founded in British Columbia in 1946 and lasted 50 years. We had to cease operations in Vancouver one year ago. Since then, I have been doing continuing work in China, but that work is now directly for Chinese principals. Therefore, I have gone back to being a consultant. We now have a very small establishment in Vancouver. One year ago when we closed the operation, we had to lose 22 highly skilled people. Presently, we are continuing much more on an individual scale with our labour force in China and being employed by the Chinese.

The value I believe I might have for this committee is that of a professional selling consulting services in China. I am a small businessman in that regard. We are not selling widgets; we are selling expertise, intelligence. As such, there is big black hole in the support system of this country to its exporters.

Statistics, reports and surveys consistently show that Canada's economy is based on small companies.The employment and taxation base of the country relies on the diversity and quick response of small business to changing conditions. This is especially true with exporters. There are very few CANDU reactor deals, very few jet aircraft sold, and very few Three Gorge projects, but there is an immense demand for the products and services of small exporters. These projects and opportunities are identified and in many cases created by small exporters who do the work on a profit basis without aid or subsidy and bring home the taxable profits to Canada.

The work carried out by these entrepreneurs opens the door for other Canadian services and products in related fields incrementally increasing the export value.

With home bases and production facilities located throughout Canada, a regional benefit is felt by subcontractors and suppliers in communities throughout the country.

Small business is by its very nature flexible. It is responsive and adaptable to changing market conditions. It is now a fact that heavy manufacturing facilities and the labour force required for industrial production for exports requires capital and other services unavailable to small business enterprises. The post-industrial age deals largely in knowledge and the transfer of expertise. Often these products are the work of a single mind; further, the overhead is low, consisting only of mobility, communication and personal expense.

Small exporters fan out into prospective markets creating profitable opportunity. We do not only stay in the coastal zones. I have been in most regions of China and have done work as far away from the coast as Urumchi, which is rumoured to be the place furthest from any ocean on this planet. It is also close to the second lowest part of the planet in terms of elevation. It is a sand desert. The population there is mostly Moslem and the specialty food of the region is camel's foot.

These markets are the things you find out by going there. You meet people who have never met Canadian business people before. They are very interested in what we could give them, what we could sell to them more probably. These small companies, the representatives of them, at least, that go throughout the country, and I am one of them, find increasing market opportunity as personal income and living standards rise in China.

Canada can provide world-class expertise in virtually every field required by the emerging China, and it is the work of architects, engineers and "imagineers", often individuals, that open up these markets. There have been many instances recently of huge projects costing billions of dollars, such as the new Shanghai airport developed by a French consortium. The architects and engineers did the pioneering work, but there was no way that they could invest the type of money required to win the competition. However, when the competition was won, it became virtually a French project; billions of dollars of equipment, from signage to conveyor systems and the apron equipment, was manufactured by the French.

There is lack of stability in business arrangements in China. Volatility gives rise to opportunity; but in order to conduct business and concentrate on meeting demand, there has to be a framework of stability where the rules are known.

China is changing at an incredible rate. Often the changes are in regulations, and take place with no warning. A change by edict can prove disastrous for a business undertaking that is under way, something which we personally suffered. When a government policy change takes place, there is neither notice nor compensation. On a project that is under way, everything that has been done to date is valueless. As our Chinese partners point out, contracts and agreements are not accorded the importance that we are accustomed to. Also, there is virtually no way that a foreigner can collect on a delinquent account.

There is an acceptance of a "fluid" business agreement by the Chinese partners that is unaffordable to foreigners. The institutionalized two-tiered price system for internal travel and material increases the cost of doing business to the point that overhead cannot be reasonably forecast. There is no way that one can travel at the same cost as resident Chinese. To gain admittance to a museum, one will spend something like five times that of local people. And when you get there, of course, you cannot read the signage, if you are a foreigner like me.

The financial problems facing small business are probably generally known. Notwithstanding the headline companies that one hears about, small business groups, including individual ownership, are generally financed by their owners. Successful small businesses often cannot expand to meet the opportunities that it has created. Overheads and payrolls expand to the point where late payment of accounts can spell disaster. Canadian banks do not support professionals exporting a service. Products can be financed and insured, but intellectual exporting, which Canada is very good at, is not helped in any way.

Personal experience testifies that you can only finance a small, even highly successful, export-of-services company by personally borrowing money for operating capital. In other words, if you want to do business in China on a scale that we were doing it, supporting a payroll of about $1.25 million at your home office, all of that money was personal risk money on the part of two principals.

Chinese development companies are not like western corporations. Ownership is fractured and shares are constantly changing. There is no balance sheet or annual report to comfort a Canadian banker. Nonetheless, huge projects are built and profits are made. We made a lot of profits over there. The system is different and it may change, but this is the traditional way they do business. We have to adapt to it if we want the work.

On a 40-storey flagship office building, a major project we had in Pudong for a $100-million building, we attempted to get financial backing from banks. They asked for the balance sheet of the companies putting it together. The companies putting it together were Chinese families and, as is generally the case, local officials and probably government or party involvement at many levels that one does not see. The building was also owned by hundreds of subcontractors, people who were hoping to sell air conditioning equipment, for example, and goods and services to the building. The next week, it would be quite different; it all had changed. There was no balance sheet. There was nothing there, and yet this building is now built.

We were in a position to get a Canadian contractor to build it. All of the negotiations were done; it was a go ahead. The company was a Montreal company called McGill; for them, this was an entry into China. I attended a meeting in a boardroom of a law firm that represented this company in Montreal. The Chinese principals came to Canada for the meeting. The first thing that the lawyers wanted was the balance sheet of the Chinese principals. The Chinese principals, through an interpreter, became very upset. They were not going to expose their confidential financial information. They were very forthright in saying to the McGill group: "What are we here for? We have come here with the money to build this development. You have told us that you can do the project management and build it financing yourselves, and yet you cannot, you want to go out and borrow the money." It was game over. That is the way business is done there.

At the local level in Vancouver when one goes to see an account manager for the CIBC and he asks who these people are that you are dealing with, quite often you do not know who they are.

I am sure Bing Thom will enlarge on this, having the advantage of the language and the culture. The language and culture of financing business in Vancouver is as foreign as it is in China.

Some say that big business is merely successful small business. Small business that becomes successful does not of necessity become big business. We cannot get beyond that stage. I am talking now of a fairly detailed level, but I think it is probably of interest to this committee that this is what happens in the field.

We run into intense competition over there. For some years, everyone has been excited about the size and growth of the China market as 1.2 billion people acquire purchasing power and seek to raise their living standards. It is all true. However, virtually every exporting nation is there and the competition for the supply of goods and services is extreme.

Canadians enjoy some advantages. We are generally regarded as benign. Every Chinese child is taught about the great Canadian benefactor Dr. Bethune. Even taxi drivers will talk about Dr. Bethune.

Other nations, however, enjoy much greater support from their governments, who see exports as a means of furthering national objectives as well as creating home employment and foreign reserves.

Architects and engineers can spearhead their country's involvement in major projects simply by being in on the inception of these projects.

Canadians, however, are among the heaviest taxed people in the world. The tax system does not permit the building of a small company's financial resources. We routinely lose projects to other nationals that can quote far lower fees because they pay such low taxes, or none at all, on overseas profits. The classic example is that we often run up against Hong Kong architects, for whom, if they pay anything after most incredibly generous allowances, the maximum rate is 15 per cent.

I have some comments, if I may, on the role of government in support of small exporters. This is my personal viewpoint, naturally.

Many small exporters meeting their big brothers at receptions associated with Team Canada and the like are amazed to find that many large Canadian companies have departments that are devoted to lobbying the government for loans and subsidies and that the huge loans are written off if a bid is unsuccessful.

The role of the government need not be the provision of subsidies, grants and loans. To the ordinary small business, it may take the form of insurance. The growing importance of intellectual exports should be supported, in my opinion, by an initiative that provides tax relief for business development, insurance for receivables and perhaps some incentives for the Canadian banks to support their customers.

There should be some government-to-government protocol in the recognition of contracts and agreements. The Government of China is a participant in some form in virtually every enterprise. The simple deposit of a contract or agreement with both governments and a recognized arbitration procedure would probably suffice.

The Team Canada events raise the profile of Canada as an exporter and the media hype of the banquets can give even small exporters the chance to invite local clients to fringe receptions.

However, the real business is conducted in another world. The photo opportunities and signing ceremonies do not represent the efforts of the many individuals who are staking their own savings and capital in this fascinating but dangerous market.

Mr. Chairman, I trust I have not taken too long to allow my friend to speak. I will be very interested in what he has to say.

The Chairman:We all are. Mr. Thom, would you please proceed.

Mr. Bing Thom, Principal, Bing Thom Architects Inc.: Mr. Chairman, my presentation is relatively brief. I thought the best way to introduce it would be bring along a videotape, which is two or three minutes long, to give some background to the work that we do.

My company is a very small company involving only 20 people. We focus mainly on work in Canada. But when it is offshore, at the present time it is mainly in China, Hong Kong, and, to a lesser extent, Malaysia. We will first go through the video and then I will make some brief comments.

(Video Presentation)

The purpose of the videos was to introduce one of the main points I wish to make: that in attempting to discuss the issue of trade we must not forget the vital interlink between culture and trade.

Incidentally, both of these programs were produced by CBC: one is Adrienne Clarkson Presents; the other is a program called Alive, which deals with health. The theme was "healthy city, healthy people".

The reason I brought the videos was to show that in times of budget cuts to the CBC, it has played a vital role for me in marketing my services in Canada, in Europe, and in Hong Kong. In previous days, the cultural programs of Foreign Affairs encompassed looking after the promotion of expos for Canada in the various countries of the world. More lately, it has been shifted to the Ministry of Heritage, which I feel will hurt Canada. I wish to suggest to the committee that consideration should be given to switching the program back into the Department of Foreign Affairs. I do not think we would have been as successful in Spain had a ministry other than the Department of Foreign Affairs backed us.

The other issue about culture and trade that I wish to emphasis is that culture is a two-way street. In order to market in a foreign country, it is very important for Canadians to understand the cultural milieu into which they are entering. As my fellow architect Mr. Blewett mentioned, when going into a foreign country it is very important to understand the way business is one.

Canada is a large country -- and we are already in many ways much better off than the United States -- and all large countries have a tendency to be inward looking. China is one, Germany is another; it is the nature of a large country. Small countries have to look outwards. Canada is probably better off than most because we are a country of immigrants, which brings about my second theme.

The secret weapon Canada has is our multicultural society. We have ambassadors of goodwill from probably every country in the world. If you want to market in Hungary, Poland or any country in Asia our secret weapon is those people in our country who can help us to bridge those cultural gaps. This ties back to the whole issue of promotion of culture within our own country, to educate those of our citizens who are not familiar with foreign cultures, which then ties back to cultural institutions such as the CBC, which plays to an internal audience.

The whole aspect of multicultural programs within our own country are now under attack because of fiscal constraints. We have to look at a much broader picture. We cannot look at it from day-to-day. These investments are made over many years and will bear fruit for us in many subtle ways.

With regard to the Dalian project, I was largely successful in making this contract because I was able to have the assistance of a recent immigrant, Dr. Li, who is present with me today. In 1986, he was a foreign student who came to Canada from China, one of the first to come. He stayed and became Canadian largely because of the Tiananmen incident in China. Today he serves as my representative in China. He is from the area of Dalian. I am able to tap into the local culture and the local ways and subtleties of doing business because I have a Canadian as my right-hand man.

Canada has a very valuable resource in that manner. The whole idea tying back in with culture and immigration is education and foreign exchange programs with foreign students that attend our universities. The example I just gave you is an investment Canada made 10 years ago that bore fruit for one small Canadian company.

There are discussions taking place at different universities about increasing fees for foreign students coming to this country. We have to think about that very carefully.

I remember in my early days being in Toronto helping Arthur Erickson build Roy Thompson Hall. When one went to Chinese restaurants in the early 1980s, one could see many young people. It was very different in Vancouver where Chinese restaurants are usually run by families; in Toronto and Ontario they were run by young people. I said to my wife that they were all foreign students. The Ontario government, in the early 1980s, had a very progressive program to welcome young foreign students from overseas. That bore fruit ten years later for Ontario. Vancouver did not receive the good fortune of Ontario until five, six years later.

The gist of my short presentation are these three issues that I tie together in a very loose manner: culture, immigration and education.

Senator Carney: Mr. Chairman, these have been two fascinating presentations. The small business community is always being urged to seek business in Asia. Yet with the obstacles both witnesses have indicated it seems to me to be almost insurmountable. I have run my own business for 12 years. The problems encountered in Asia seem to be enormous. Could you give us some guidance that we could pass on in our report to other businesses?

How do you make your profits? How are you able to sustain your efforts over the problems both financial and cultural that you indicated? Do you need deep pockets? Do you need a foreign banker? Do you need significant cash flows from other projects? How do you manage to sustain a small business over the length of time and in the face of the obstacles that you encounter? We know many business people who have not been able to do what both of you have done.

Mr. Blewett: To be an architect in practice in Vancouver also requires a degree of survivability. The difficulties that we run into offshore are probably commensurate with the opportunities that are to be found there. I have practised for many years in Vancouver. As you may detect, I came here as an immigrant 40 years ago; yet I admit that there is an element of excitement and opportunity in China. The sheer size of the market and our ability to tap into it is largely based on the reputation that we have built over five years on the mainland and ten years in Hong Kong.

You are quite correct that the difficulties are almost insurmountable. I found them insurmountable. I have had to build up the practice which I said originally was in its fiftieth year when we had to close down the operation. I am back now with my partner and myself as principals, using that brain power or initiative, or whatever it takes in a different way.

From the point of view of export, the country has lost by this because we had a highly skilled staff of approximately 22 people working on China projects in Vancouver. The payroll for that group was substantial; they all paid income tax, as did I, of course. It is probably lost. We are in this very strange position, which I believe Senator Carney touched on, of having had the opportunity -- we have the projects. We cannot find the financing to carry on our costs.

Over the last few years I have tried to interest private investors; I have tried to interest engineering companies; I have tried all of the federal agencies that would support us if we were making widgets. But I have not found any way to take advantage of the skills available in this city. I am speaking very parochially, and I hope you will forgive me here, but we are rather like Silicon Valley in the United States, because of our climate and the nice place it is to live.

We have enormous talent in this province, particularly in engineering and architecture which are very valuable in world terms, and particularly in China as an emerging nation. They want these skills and we have them here. These are highly motivated people who are living in this province. Beijing on a good day is only nine hours away and when you return you arrive back before you left, so what you lose on one way you are gaining on the other. We have this ability in the city. Yet our experience, and that of other professionals who have been interested in the China market, and indeed those who have acted as subcontractors for us, is that there is no way that we can get the type of financial insurance that we are looking for.

I have raised the issue of insurance a couple of times. Coincidentally, my brother is an architect in Britain. Some years ago there was a similar opportunity in the Middle East. The government had an insurance scheme so that architects working over there could pay something like 2.5 per cent of their fee to insure that they would be paid. When it hit the fan in the Middle East, in Libya and Lebanon, what saved his practice was the fact that the government had insured it. This is insurance which every practitioner would pay for.

There is also the question of whether the Canadian banks could take part in this. Perhaps they would provide us with the money if the government were to insure it. We would pay for it.

Another issue is the sanctity of the contract that we enjoy in this country. Over there, I have referred to it as a "fluid" form of agreement. I see that our former Premier has arrived. He was the one who told me that in China an agreement was a pause in the negotiations. That is very true. The small consulting company can respond to this and can say, "If you cannot pay in this way pay us in other way." We equipped our two offices in that manner. All the electronic equipment in the offices was bought by a client, which was a government agency, when it could not pay us cash. We can be flexible.

However, we cannot take someone reneging on a deal completely. Our final act, if you like, was a government agency simply would not pay us the fee. The trigger was that the people who had commissioned the work all were promoted to another city in a big political changeover. The incoming group had no interest in what we had done and so they found every fine-print way to say that we had not carried out the contract. There was $250,000 in that job that they simply reneged on paying.

Because the contract relationship is not the same in China as it is to us, and there should be a way of making it the same, it would be quite simple for the Government of Canada to say to the Government of China: "Our nationals are doing this work with you. Please accord them the protection of a level playing field when it comes to a contract." If you have a contract that has been signed or chalked by both countries, the individual would then know that if a client reneges at least there is someone to listen to him.

Senator Carney: Mr. Thom, have you have any more success being paid? I know that Mr. Erickson did not.

Mr. Thom: I come at it from a different angle. I was lucky to have had 15 years of working under Arthur Erickson in the Middle East, where for 15 years he tried to break into the Middle East market and only built one building.

I am often staggered by the amount of ignorance that we as Canadians have when we go offshore. As an architect in Vancouver, I would not dream of trying to build a building in Toronto without a Toronto partner. I remember in the old days talking to Cadillac Fairview when it was building in the United States. They stated that they would never try to build in any American city without a strong American partner from that city. There are so many Canadian businessmen who, when they think of going overseas, do not think about that crucial issue, of having either a Canadian partner over here who knows the market they are going into, or a Chinese partner on the other side, or a Hong Kong partner who understands them as well as they understand the local market.

When we do this type of work, people do not play by the rules that we play by. They do not have the similar history or cultural background that we have. In my case, I probably turn down nine jobs for every one that I take, because unless I know who I am dealing with and unless I really trust the people that I deal with and know that I am going to get paid, I do not even give them a second interview.

That is a very conservative look, but in my younger years I was burned too badly or watched other people who got burned. This is where government can help to promote more networking even within Canada. Many people in Vancouver or across Canada have experience in Asia. In this regard, the government can help to bring out this hidden resource within our own immigrant communities, help the businessmen who want to go offshore to do that first level of education.

Senator Grafstein: Mr. Chairman, because of the time I will try to focus on the heart of the mechanical issue of two-way trade between small business service sectors. Both witnesses have talked about some of the parameters of establishing good relationships.

I would like to have an index of the government agencies that could do a better job or where we could expand government support. I have heard from Mr. Thom that the CBC and others have helped him in his promotion, marketing in a sense. Should that be better systematized to make it more accessible not only to great architects but also to people who wish to become a great architect? Is there an expansion of insurance that we should look at in terms of country risk? We have strong insurance bases in Canada but very poor insurance in Canada vis-à-vis external risk. Is there a way of expanding our export insurance for services as opposed to goods?

With respect to what Dr. Saywell suggested, that there is a fire to be lit under the bureaucracy to move on those fronts, under which government bureaucracies would you light those fires?

Mr. Thom: I will be very brief. My own experience with the government agencies, the federal ones, has not been that good. We no longer apply for any of the FIRA programs, or whatever they were before, simply because of the paperwork that is involved. My accountant has said that for whatever dollars we get from them, we spend more dollars trying to fill out the forms.

I do have a point of view about CIDA. We need to clarify the CIDA programs. There is very often a conflict between whether we are funding these programs to try to help developing countries from their point of view of developing infrastructure or trying to ride CIDA programs to get benefits for Canadian trade. Especially lately, that has been blurred. We should get back to the essence of what CIDA programs should be for, and that is longer-range programs.

For example, CIDA has been funding some very good programs, whereby of senior Chinese administrators are coming to Canada to learn about how we administer our cities, the programs that we have for raising taxes, which China does not have. It is through those programs that we then begin to tap into long-term services, where we can sell package programs on hospital administrations, city administrations.

At the moment, Dr. Li is working on a program with Professor Brahm Wiesman on development taxations to fund infrastructure. When a Canadian developer tries to build a building, he has to pay development-cost charges. The development-cost charges then help to pay for the building of schools, sewage infrastructure and the upgrading of roadways. Those types of programs will have very large returns for Canada.

On a more provincial level, but also related to the federal level, we have an organization called B.C. Trade which developed a very ambitious program within China to try to help B.C. businesses go into the China market. That was a very effective group; it helped me greatly in Dalian. Unfortunately, that is where I have to second the idea of the Asia Pacific Foundation. Some of these programs are so susceptible to political changes and political priorities that it took five years to lay the groundwork for B.C. Trade -- I am sure that ex-Premier Harcourt can add to this later. The whole program has been decimated and scrapped.

Some of very best people, who took five years to get onto the ground, now have had funding cut. Some of them are now down in Washington, the next state here, helping the Americans break into the China market. To me, that is an unfortunate waste of an investment by Canadians into a program that I thought was very good.

Senator Bacon: Many authors say that Asia is too large to undergo important cultural changes. With major changes in the economy, the global enrichment of the population and the technological advancements of society, will we be witnesses to the westernization of Asia or the Asianization of the west, or can we reach an equilibrium, a balance?

Mr. Thom: I cannot answer for Asia. We use the word so loosely. Asia has half the world's population. I can answer for China. I might be able to talk about Hong Kong, about which I do wish to talk a little.

In the case of China, there is a gulf of misunderstanding and lack of knowledge. The issue of democracy has been reported very marginally in the press. In virtually every village of China today the village head is elected. If one considers that 80 per cent of the population lives is in the countryside, China is building democracy from the ground up, yet it is not reported in the western press at all. What does that mean? It will bring profound change in China. It is not trying to do it the Russian way, top down; it is trying to do it from the bottom up. I am completely dumbfounded when I read the western press. The stories we read are filtered from the western point of view and we do not have enough reporters who try to understand the nuances in a much more subtle way.

Hong Kong is a good example. I happened to be born in Hong Kong, but I am a third-generation Chinese Canadian, so I have to say something. I have been asked to do a major exhibit in Hong Kong on the future of Hong Kong. Eighty to 90 per cent of the people are very happy with what is going to happen. If for 150 years a foreign people had been ruling you, you would be happy, regardless of how bad it will be, to be the master of your own house. Many are worried about their personal freedom and other values. However, there are other values that are more fundamental than that, and that is not reflected.

I was one of those children who were brought over by my parents. They had already made up their minds that they did not wish to stay. The taxi drivers, the maids, the doormen or dishwashers know they have no alternative, but they still would rather have a sense of being the master of their own house. There are the issues of the basic law and the question of what Patten has done. A large number of people say the greatest mistake the British ever made was having a politician run Hong Kong in the last five years because he was playing to the home market in Britain; he was not playing to the home market in Hong Kong. There will be others who can second that thought, but those are my thoughts.

Senator Lawson: Mr. Blewett, on the issue of delinquent accounts, there is a similar situation with the Russians involving a North American joint venture partner involving tens of millions of dollars, and they were prohibited from going to the Russian courts. I do not know where the pressure came from, whether it was the World Bank or what the involvement was, but they were forced into arbitration.

Two days ago, an arbitration panel was set up in Sweden to deal with this issue. One of the panellists is a Russian judge. The panel has been told as a prelude, if the decision made is against the Russians, that assets they hold in North America are attachable. Is this arbitration not available for the Chinese situation?

Mr. Blewett: Not to my knowledge.

I did have considerable discussion with the trade consul in the Canadian Embassy in Beijing on this matter and they attempted to intrude on the basis that they were simply reminding the Chinese clients that there was a very good trading relationship between Canada and China and that they hoped this would be resolved. This, it turned out, was very inflammatory because from their point of view they had lost face because a local government agency had been approached by the federal Canadian government. To put in mildly, they were extremely negative about this and the letter is quite a collector's item.

The process that you speak of is exactly the one I would advocate, and that is simply that a piece of paper that is easily translated into Chinese and English which states what either party is to do and be responsible for is simply signed by representatives, who could be fairly low down in the embassy, so that both governments are acknowledging that there is a fair trading practice going on between two of its nationals. That would be sufficient, in my opinion, to take care of the sanctity of the contract. A case of late payment or non-payment would be the same.

Even though I still have a delinquent account of approximately $250,000 Canadian, I am told that there is no way that I would be able to afford the Canadian and Chinese lawyers to even make a dent in that. Some other delinquent accounts I have had to settle on the basis of a 50-per-cent discount.

There is horse trading in delinquent accounts that I am fully prepared to take part in. Prevention is better than cure.

I am advocating that there should be a form of registration and there should be a form of insurance which the businessman, the architect or the engineer pays for. We are not looking for any handouts. We will pay for it.

Senator Perrault: The insurance idea is an excellent one in my view. However, you said that the difficulties over there are commensurate with the returns. So it is high risk but there are obviously good rewards.

Are we training any Chinese architects in Canada? What is the state of the profession in China?

Is there any Canadian role in the massive dam which is being constructed?

Mr. Blewett: There is probably a Canadian content of heavy engineering in the dam, which I would not know about.

We have very close ties with Chinese graduates. At the time that we had to close down the operation, about 60 per cent of our staff were Chinese-trained architects. They are graduates of schools of architecture or universities in China who in every case had come to Canada and had taken higher education, such as masters degrees in Canadian universities. Hence, they were highly skilled in our way of life, our language. The consulting work that we are doing now is with Chinese partners in China. As Bing Thom pointed out, we learned very quickly that you cannot do anything over there without local participation.

Senator Perrault: This is very valuable testimony from both witnesses.

The Chairman: That reminds me that the time has come to thank them for their contribution, which has been very helpful.

Our next two witnesses are more closely related to government. Dr. Goldberg, the Dean of the Faculty of Commerce and Business Administration at the University of British Columbia, did basic research for the Province of British Columbia on the feasibility and content of establishing Vancouver as an International Financial Centre. His current research explores international direct investment and its links to international immigration flows and ethnic business networks, focusing especially on Asian immigrants and investment. He has also looked at the role that Vancouver and British Columbia play in bridging the Pacific and being North America's Pacific Rim gateway.

The second of these two witnesses is Mr. Michael Harcourt. I will not go into his political career in detail. He served as Mayor of Vancouver, presiding over the city's participation in the prestigious Expo 86 event. He was a member of the Legislature of British Columbia. He served as the Leader of the Official Opposition. He then became Premier of the province. He now acts as a member of APEC 97 committee and has been appointed by Mr. Chrétien to the National Round table of the Environment and the Economy. He is a member of the board of the Asia Pacific Foundation.

Gentlemen, welcome both. We are glad to have you here.

Dr. Michael Goldberg, Dean, Faculty of Commerce and Business Administration, University of British Columbia: Mr. Chairman, I prepared notes which I have provided to the Clerk of the Committee, so they are available to people and can be looked at later. I wish to go over the highlights and present some factoids which illustrate why the Asia Pacific region is so important and how Canada can take advantage of it. I want to use British Columbia as an example of an entity which has been very successful in dealing with Asia. The Canadian Asian strategy that had British Columbia's experience firmly in hand would be a very useful strategy. We are Canada's Pacific province. We have also done an enormous amount to recover from the depths of the 1985 depression when unemployment peaked at 15 per cent to our present healthy economy.

The Asia Pacific reality, the so-called Pacific century, was a useful metaphor except the century arrived at least a decade before it was supposed to. I included in my notes to you a number of charts. I wish to illustrate how important the region is from two charts.

If we look at growth in GDP for the Asia Pacific region and our principal trading partner the United States, in the period 1970 to 1980 the Asia Pacific region, in which I include East Asia, roughly going from Japan down to Thailand, grew at 6.9 per cent per year -- that means it doubled every 10.5 years; the United States grew at about 40 per cent of that, at 2.8 per cent. In the period 1980 to 1993, the Asia Pacific growth slipped because of a recession in the early 1980s to only 6.3 per cent, and the U.S. fell to 2.7 per cent. Roughly two and a half times annual growth occurred in Asia in GDP in those economies compared to the United States.

To me, the most striking figure is when we look at investment. In the decade 1970-1980, Asia Pacific gross domestic investment grew at 8 per cent per year. That means that it doubles every nine years. The capital stock in those regions doubled every nine years. The United States grew at 2.8 per cent, which is about one-third of that rate.

If we go into the 1980-1993 period, again a period of some depressed economic growth, gross domestic investment was still more than twice United States gross domestic investment.

What is important about that is that gross domestic investment is the best indicator we have about the future because the laying down of capital stock will not only make them competitive today but also will make them competitive into the future.

The Asia Pacific region is for real. One of the most dramatic things to take note of is that in the decade of the 1990s, the Asia Pacific region emerged as the largest customer for the Asia Pacific region. So it is becoming less and less dependent on demand from North America and is become becoming more and more self-sustained as an economic region. Our membership and leadership in APEC coming here in November is right on the money and very timely.

Vancouver and British Columbia are unique units in all of the non-Asian world. Vancouver has emerged as the only true Pacific Rim city in North America. There are larger Asian populations in San Francisco and in Los Angeles. There is even a larger Chinese population in Toronto. But there is no city in North America where the Asian presence is so meaningful that every citizen knows about the reality of the Asia Pacific region. Taxi drivers know about the reality of the Pacific. We know that that is where our future bread will be baked and buttered.

Vancouver is unique in that we tend to forget in this Pacific Rim-focused world that the Atlantic rim is still important, and Vancouver has unique Atlantic rim connections. In 1991, people of British ancestry comprised just under a quarter of the people in British Columbia. 1991 was significant because it was the first time in the history of the province, certainly in the post-war period, that ethnic Germans were outnumbered by ethnic Chinese. Up until 1991, the ethnic German population was second only to people of British ancestry. We have a huge German population here and a huge Dutch population. That is reflected in flight patterns. Each day, there are two non-stop flights to London, one to Frankfurt and one to Amsterdam. We are very accessible to Europe. Of course, when we go across the Pacific, it is particularly remarkable.

Up until the Open Skies Treaty was signed, you could go to seven cities non- stop in the continent of the United States, eight if you throw in Honolulu; you could go to eight cities non-stop in Asia. Hence, accessibility to Asia non-stop was better than to a number of cities in the United States.

As a result of Open Skies, which is why British Columbia lobbied so much on Canada's behalf, not only on our behalf, there are some 20 cities in the United States that you can go to, hundreds of flights daily. We have also expanded our Pacific Rim connections. There are now approximately four daily non-stops to Hong Kong, two to three to Tokyo, and a daily flight to Seoul. Additionally, there are now ten cities you can go to, as well as three additional cities with continuing same-plane service stopping in Seoul or Hong Kong to get some gas.

In a world that is looking both across the Atlantic and across the Pacific, we happen to be in the middle of that world. Whereas, in an Atlantic-focused world, Western Canada and the Pacific were the back end of the world. It is equally easy to go to Europe and Asia from here. Indeed, when I speak to people from Asia, they often see Vancouver as the preferred way to go to Europe because of the excellent connections.

We have taken extraordinary advantage of that, with the airport investment, with the explosive investment in our port, and with the fact that own we happen to lie exactly on the great circle route between Los Angeles and Asia. People are stunned to find, when they fly from Los Angeles to Hong Kong, that they fly over Vancouver and go either to Anchorage or Tokyo to get gas and go on to Hong Kong. We have nearly a three-hour time advantage by plane, two hours from San Francisco, and many days each way by ship. We even have a day advantage by ship over Seattle because a ship does not have to navigate down into Puget Sound.

Our geographic location is unique. The time zone is also unique and this holds true for all of the Pacific Coast. This is the only time zone in a normal working day where you can do business with Europe and with Asia in the same day. The Eastern United States and Central Canada do not have that advantage; they can deal with London, Frankfurt, Paris in the morning, but cannot deal with Asia in the afternoon. We can talk with London very handily at eight o'clock in the morning, and from three or four o'clock on we can talk with most of the cities in Asia. Despite the globalization of business, people do not work a 24-hour day; they work an eight- to ten-hour day and we happen to be in that time zone.

We have also seized that advantage in an imaginative number of ways. We have the International Commercial Arbitration building, which is in this complex. The International Financial Centre was given a boost by the International Banking Centre legislation and that is in this building. The Asia Pacific Foundation is in this building. We have a number of international institutions that we have developed proactively at the federal, provincial and local levels to make sure we seize the Pacific century.

Our tourism business is extraordinary. It is growing at a phenomenally rapid rate and it is very broad. It is not only Whistler, it is not only cruise ships, it is not only conventions in Vancouver. We have a diversified mix of tourism and travel.

Vancouver Airport and the Vancouver Port Corporation have done an enormous amount to position Canada -- not only British Columbia, but Canada -- strategically in the Asia Pacific region. When comparing us to the West Coast United States cities, one is struck by the extent to which we, as a country, a city and a province, face outward. We realize the importance of the Pacific and we realize the importance of trade.

We have a very balanced trade pattern here in British Columbia: Roughly half of our trade goes to the United States; a little more than a third goes to Asia; and the balance goes to the rest of the world. One can compare that with Ontario's trade pattern. Because of the Auto Pact, more than 90 per cent of Ontario's trade goes to one destination. Selling one product to one market is not a brilliant trade strategy. If I had to have one reason to diversify into Asia -- the old Trudeau "third front" -- that has to be it. We are extremely vulnerable to blackmail from auto companies and blackmail from pressure from the United States. Diversification is key to our economic health and fortunately we can diversify readily in the most rapidly growing region in the world.

Due to the time shortage, I wish to stress some of the other things that we have in Vancouver which are starting to emerge in other places.

I want pick up on a point Bing Thom made which relates to the extraordinary advantage we have because of our recent immigrants from Asia. In Vancouver, I listed seven different national trade associations: Taiwan, Hong Kong, Singapore, Thai, Canada-China, Korea and Japan. These groups hold monthly meetings, or have monthly luncheons at least. Some, like the Hong Kong-Canada trade association, are phenomenally successful; one can do an incredible amount of networking without ever buying an airplane ticket. This is a unique city, because if you are willing to learn about Asia, you can get a library card, you can eat a variety of Asian foods, you can join these business associations for roughly $50 a year and build a phenomenal network -- all this without ever leaving the city of Vancouver. You can do your homework before you leave, and doing your homework in Asia is absolutely what you have to do. That is the only way to succeed.

In North America, we tend to think in terms of transactions. People in Asia think in terms of relationships. In this light, relationships are not built by a single transaction but are built well before a single transaction occurs. To do that, we have to understand the cultures and the diversity of Asia and go well prepared.

How to see us taking advantage of this Pacific century: The first thing we must realize is that it is real. It is not something that has been created by the press; it is not going to disappear. Asia will be an enormous engine of global economic growth for a significant period of time to come. There are great opportunities.

Many of the reasons were already mentioned, such as Canada's reputation throughout Asia. Wherever it is that I go in Asia, I hear different stories. You hear about Norman Bethune. You also hear about Trudeau sponsoring China into the U.N. Then in Hong Kong, you hear about a regiment that defended Stanley in World War II. You hear similar stories in Singapore. You also hear about the Colombo plan in Singapore and Malaysia. We have left a incredibly positive imprint wherever we have been in Asia, and we have an extraordinary opportunity to build on that and take advantage of it.

Canada is a Pacific nation and an Atlantic nation. As a country, our Pacific Rim location, along with British Columbia's Pacific rim location, is a great stepping point. Our immigrants give us a phenomenal ability to build bridges. These people come to Canada with linguistic and cultural skills that any non-Asian native would love to learn. For a European to be able to read and write Chinese or Japanese or Korean is something that impresses us. We do not think twice when an Asian comes with that skill.

Asians also have family connections, and family and business are inextricably intertwined in Asia. Building on those immigrant groups is an extraordinary advantage that we have. In this regard, our immigration policy will pay huge dividends into the future.

We have to learn much more about the Asian region. We have to realize that Koreans and Japanese are not the same -- they speak different languages; they do not even like each other that much. Chinese people from Asia are not Chinese people from Asia. People from Taiwan have a different language and culture from people in Hong Kong. People in Singapore are different yet again.

We have to appreciate that Chinese settlements throughout Southeast Asia tend to be the dominant economic settlements in those countries. They are the links to make if you are doing business. We have those Chinese communities represented in British Columbia in abundance, and we have to understand that those communities speak different languages because they came from different places. They have also been melded by different indigenous forces in Indonesia and Malaysia and in Hong Kong and Brunei and the like. We have to appreciate that those communities are very different and are very proud of their differences. We have to learn those differences. We have to learn that doing our homework and building on networks before we ever get on a plane is something that is the absolute essential key to success. To this end, we have this huge advantage of being able to do that at a very low cost without ever leaving the city of Vancouver.

Chinese have this great saying, "Make haste slowly," and that is exactly the way you have to succeed in Asia. You can spend a great deal of time doing your homework, building connections, because you do not make cold calls in Asia. You do not say, "Hi, I am here and I want to sell you some coal." You learn about the people before you ever leave and then your network will take care of you. They will plug you into their network, if you are trustworthy.

I cannot impress enough about the importance of food. Every Asian culture is incredibly proud of its food and learning about food and learning about dining etiquette is perhaps the single most important tip I could give people. Learning how to eat, how to appreciate the differences in these cuisines and being appreciative when you get there is an enormous building of trust. A lot of business is done over banquets and understanding that is important. Anything else that can be learned about art, history and culture is to the good. People are very flattered when you show that you value their culture by doing some homework.

In Vancouver, we have the opportunity to do those things and we can share them and need to share them with the rest of Canada. What the rest of Canada needs to do is appreciate that, barring a monstrous earthquake, Lake Ontario will not be a salt water body plugged into the Pacific -- Toronto will not be a Pacific Rim city. That is not in the cards. You will either get rid of us or tow Toronto closer.

Senator Grafstein: I am hearing the witness being parochial.

Mr. Goldberg: I thought I was being global. But I guess from a Toronto perspective, I was not being global since I did not include Toronto.

Senator Grafstein: Because I did I am really a nationalist.

Mr. Goldberg: I realize that and I am trying to give a national committee some local information so it can act nationally instead of parochially.

Senator Perrault: You are doing a great job.

Mr. Goldberg: The Asian opportunities are extraordinary. Canada is unique globally in being able to seize those opportunities. Canadian business has been very reticent to take advantage of those opportunities. As much as anything because of the massive market that lies to the south us and because of our success in dealing in that market, success is extremely dangerous in the long term because it breeds complacency and arrogance. As a result, we need to broaden our world view.

We in British Columbia have been forced to take a broader view because our resource economy was cyclical. It was unstable, it was unreliable for tax revenues and it was unreliable for the people who live here. In the 1980s, we knew that we had to find new markets and new things to sell in those markets. We did not do it because we wanted to do it; we did it because we had to do it. I would submit that all of Canada has to do the same thing and that we are a very useful metaphor to build on for our future.

The Honourable Mike Harcourt, Sustainable Development Research Institute, University of British Columbia: Mr. Chairman, I felt as though I were back in politics again. It was a good feeling to see that sharp exchange; that the committee was listening was very encouraging.

I would like to congratulate you for holding these hearings on the Asia Pacific and the opportunities that will bring us, particularly in the Year of the Asia Pacific for Canada 1997. The ideas you have heard from some of the previous witnesses and those distinguished people who will be appearing later on I hope you will find useful when you come to some conclusions.

Michael Goldberg was very effective in helping us put together at the city an economic strategy in the early 1980s that focused us on the Asia Pacific region very aggressively and rolled out from there into some of the initiatives we have taken provincially and cooperatively with the federal government and the partnerships we have developed between government and business. He has been an integral part of that focusing and increased sophistication that we have more and more as we move on to the Asia Pacific region.

You have heard from Dr. Goldberg and others the transition that we have gone through here in Vancouver and British Columbia from being, in our first 100 years, the last stop on the CPR train. That was when Canada was, by and large, an Atlantic focused country. We are now proud to be the front door of Canada on to the Asia Pacific region. That is quite a conceptual change in this province and for us in the country. We play that role strategically not in a parochial way at all, but just as a fact of life.

You have heard of the advantages we have of time zones, of being the second largest port in tonnage in the Americas, the advantage we have in the polar route, the shipping advantage we have of two days or more over Los Angeles, three hours by air. Hence, there are many advantages and reasons why British Columbians are excited by playing the role of Canada's front door on to this huge and diverse area.

If you travel to China, you will find a different dialect every 50 miles. As well, each country is quite different and has historic animosities. If anyone thinks we have cultural pressures in our country, they do not go back as many centuries as they do between the Japanese and the Koreans and the Koreans and the Chinese, et cetera.

Dr. Goldberg was correct to point out the difference between British Columbia's trade patterns and those of central Canada; not only those of British Columbia but western Canada also. In central Canada, approximately 90 per cent Ontario's trade is with the United States; 70 per cent of that 90 per cent relates to the Auto Pact. Indeed, a dominant part of Ontario's export economy is the Auto Pact business that takes place. In British Columbia, slightly over 50 per cent of our export is to the United States, but half of that is to the West Coast, the trillion dollar market in Washington, Oregon and California. Thirty-five per cent of our trade is to Asia; 25 of that 35 per cent is to Japan.

One could argue that 60 per cent of British Columbia's trade is to the Asia Pacific region. My guess -- and I do not have models simulating this or I have not done a great deal of academic work on it -- is that within ten years British Columbia's trade will be 80 per cent trade based on the Asia Pacific region. Much of that is trans-shipment for the rest of Canada. Whether it is grains, potash, sulphur or incoming goods going to the rest of Canada, our port and airport will play an increasingly strategic role for the whole country to the increased trade.

I want to stress an area that Canadians are far too smug about: that is, that trade is not important and that when the politicians go on trade missions, they are junkets and a waste of taxpayers' money. The fact is that nothing could be more naïve. The amount of work required to successfully trade and export is massive, and success does not necessarily follow in the wake of all that work. We need to wake up Canadians to the fact that you trade or you perish. If we are going to deal with 10-per-cent unemployment or higher than that, we have to be a more aggressive trading nation. Our economy is 37 per cent dependent on trade. We are one of the most trade-dependent countries in the world. If you look at where our opportunities are, they are flat into Europe, at least for British Columbia; there are targeted opportunities into the United States, but we have a mature trading relationship there. In Central and South America and Africa, the opportunities are from risky to disastrous. It is a fact that the real opportunities are into Asia. The federal government is quietly shifting some of the best people in the Departments of External Affairs and International Trade from Europe, from those bloated embassies that used to exist there. The anorexia of resources into Asia has changed. We have been very fortunate to have some superb Ambassadors, High Commissioners, trade reps and cultural and political attachés into the Asia Pacific region in my experience over the last 15 years of travel to the Asia Pacific region, and that has been a very important strategic change. If we are going to reduce the 10-per-cent unemployment, particularly youth unemployment, I would argue that our opportunity is to Asia.

John Bell, our ambassador to the Asia Pacific region, quoted the following figure: that for every $1 billion in exports, it means 14,000 jobs in Canada. We have to make real, as I hope the committee will, the importance of trade to people throughout this country, to understand that it means jobs. It means jobs for young people who are struggling to find a way to be able to make enough money to raise a family and afford a house -- what people expect in this country.

I say that we trade or we perish, and we have to do a lot better job than we are doing at the present time. Some of the initiatives we have taken, such as the Team Canada trade missions, have been quite successful.

I remember a First Ministers' meeting that I attended with newly elected Prime Minister Chrétien in December 1993. Ironically, I had to cut short a trade visit to Southeast Asia and Malaysia to attend that First Ministers' meeting. In my stead, I sent one of my bright young cabinet ministers, a fellow named Glen Clark, to Asia. I took up the northern part of the Asian trip after we our First Ministers' meeting.

In response to the Prime Minister asking for some advice for a "new Prime Minister", my suggestion was sending Team Canada to Asia. I suggested that we need to get into Asia aggressively and to have a strong presence there; that the best way to do that is to have the Prime Minister and the Premiers open doors at the highest level so that our business people can the sell their products and services. Our job in the partnership is to open those doors. Their job is to close the deal. That is the formula.

To this end, $9 billion worth of deals was the figure from the first Team Canada trade mission, the largest trade mission that Canada had ever organized to China; $8.5 billion to $9 billion from the second Team Canada trade mission to India, Pakistan, Indonesia and Malaysia; and the latest trade mission to Korea, the Philippines and Thailand resulted in about $20 billion of deals, either in Memorandums of Understanding, Agreements-in-Principle or contracts.

We are now getting quite sophisticated. I tell our business people, if it will help them to put the pressure on the person they are bargaining or negotiating with for us to come over and to try to get a signature on an agreement, to go for it; also, that if they are being pressured to get into a bad deal, then do not it -- to use us strategically. That is one example of how we can build a greater presence.

It was quite impressive to be able to work with Senator Austin within the Canada-Chinese Business Council and to witness the leadership he showed in getting the business community on board to go to China. It is quite something to see 1,700 people attending a banquet in the Great Hall with the Chinese leadership and the Canadian leadership, to witness the impact it had. That was the largest trade mission that had ever come to China. It was even bigger that Chancellor Kohl's visit the year previous.

That is the way in which a medium-sized power like Canada can have a strategic presence and then build on the long-term relationships into Asia.

The year of the Asia Pacific region, 1997, is an immense opportunity. We should be quite strategic about it. The importance of Asia to Vancouver you will notice if you are here this weekend. If you were to talk to real estate agents, you would know that the real estate market ebbs and flows around Chinese New Year. If you were in Chinatown, you would be overwhelmed by the turnout of people, both Chinese and non-Chinese, for the celebration of the Year of the Ox and the importance that that has culturally to our city. The Chinese dragonboat races in June are a part of a huge festival that brings people of various cultures together. It is a great provider of cross-cultural understanding. These events are important in Vancouver, and in British Columbia.

July 1, 1997 represents both an opportunity and a threat. It will irrevocably change the nature of Hong Kong. Professor Goldberg has talked about that. We can take great advantage of people wanting to have their assets more strategically located and we should focus on that opportunity for Canada.

We will have an immense opportunity in August 1997 when the World Chinese Entrepreneur Conference comes here to Vancouver, to be held for the first time outside of Asia. It will take place from August 25 to 28, and there will be 2,000 delegates representing $2 trillion in assets.

To reinforce what Dr. Goldberg has said about the Chinese leadership, ethnic Chinese are the key leaders in Thailand, the Philippines, Indonesia, most of the major countries outside of Korea and Japan. That is a great opportunity for us to help our small and medium-sized enterprises particularly, with a parallel trade event, a trade forum.

APEC will also be an excellent opportunity to meet leaders from Asia, who will be coming to Vancouver on November 24 and 25. APEC, if you will recall, is the Asia Pacific Economic Cooperation, and I think Canada has an opportunity to expand that cooperation beyond what the United States would like it to be, which is a liberalization of trade and investment to one that deals with other important issues. The sustainability of cities is a huge problem, particularly in Asia. We must also look at how we can assist our small and medium-sized enterprises. You have heard of some of the difficulties prior to our testimony. It is an immense challenge to us as a country to provide the advice, the resources, and the briefing, before people who are export-ready get involved in these challenging markets.

These are a couple of areas where Canada, through APEC, can expand the range of activities that are considered by our First Ministers. I am working through the National Round Table and with the Asia Pacific Foundation and the Federation of Canadian Municipalities on the whole issue of sustainable cities.

To illustrate what I am talking about, New Delhi is one of the areas I am working on out of UBC on an urban growth strategies initiative. New Delhi, the metropolitan area, will grow from 14 million people to 37 million people in the next 15 years. That is the scale of urbanization that is happening.

The Pearl River Delta is another area we are looking at, which is south Guangdong province, Hong Kong; Macau will grow from 30 million people to 60 million people. The scale is staggering. There is a need for infrastructure to find a balance between economic development, environmental integrity and social progress. What is meant by "sustainability"? It means that you can breathe the air, that you can drink the water, and that you can eat the food without being poisoned. Those are things that we take for granted but which you cannot take for granted in most of the cities that I am talking about.

In the FEEEP Committee -- Food, Energy, Environment, Economy and Population -- which is a committee of APEC, a number of meetings are taking place where Canada can play a role in stressing that economic development is good, but not if you do not have a healthy environment and social progress, in terms of rich and poor, men and women, and some of the other issues such as human rights and child labour.

I put that before you as something we should look at: to use APEC to trigger Canada's role of being a leader on sustainability issues -- with people like Maurice Strong, and many others.

Mr. Chairman and members of the committee, those are my remarks. I can leave the written copy of my notes with you. I am quite prepared to answer any questions you might have for Dr. Goldberg and myself.

Senator Andreychuk: Two or three years ago, the joint committee of the Senate and House of Commons which considered foreign policy heard of many problems with the port here in British Columbia. I will remind you that I come from the prairies and I am not only talking about the wheat problems. Those have been aired and continue to be a sore point for all of us. At that time, we heard there were many small- and medium-sized businesses looking either south or to Asia, that their constant complaint was the port situation in British Columbia. I continue to hear that as a problem. How do you react to that?

In fact, some are saying that they can truck into the United States and use an American port and be better off than using British Columbia, not only because of some of the labour conflicts but also because of the high costs, the down time, the lack of organization that they have experienced, to allow their goods to get on in a competitive way. We are losing again on a national basis because of a port issue. Do you agree or not?

Mr. Harcourt: You are approximately 30 per cent correct. Ten years ago I would have said that you were approximately 90 per cent correct. The port, the shippers, the unions, the railroads and the airport have done a lot of work in the last 10 years to clean up many of the problems and inefficiencies. As a matter of fact, you can get to Chicago more quickly from Vancouver port than from the United States side. CN and CP have improved dramatically their ability to ship goods. The same with the port here. When you talk to the Chinese, Japanese, Taiwanese and Korean shipping companies, the level of criticism is still there but it is far less than it used to be.

I have not had any conversations with some of the potash and sulphur and grain organizations from the prairies, but my sense is that there has been tremendous progress. With the new port facilities here, the new container port at Roberts Bank, the new runway and new terminal, there has been an improvement in the efficiency. There is still work to be done.

Senator Andreychuk: It was not the airport; in fact, I hear compliments on that. But certainly there are complaints about the ports, and it is not from the traditional wheat and potash organizations, but from the new small entrepreneurs who need some space on a container. They do have markets and they do have a niche in Asia. They have made the contacts, they take the risk.

Mr. Goldberg: There has been a significant change in the port, and I am not apologizing for the remaining inefficiencies. The culture of the port has changed in the last half-dozen years. It has accelerated from being a standard public utility, where the job of the port was there because it was mandated by federal legislation to be there; it was a regulated monopoly, except it was not a monopoly because we had to compete with people to the south. With the new legislation and the new organization of the port, the port sees itself as a business and the port sees that it has to complete globally. There has been a number of missions abroad where unions and management and government people have all been represented. When Delta Port opens in June, it will double our container capacity. Not only will it double, but also there will be intermodal transfer. On that site will be a freeway, trains and ships. We will be able to get goods transferred from one mode to another for transhipment across North America or down the coast in as efficient a manner as can be found anywhere in the northwest.

The port had an enormous dose of reality when it had to compete against SeaTac, and now increasing Portland on the Willamette River. That competition more than anything else will get small business the service it needs. It is a very changed organization from what it was five or six years ago.

Senator Grafstein: Mr. Chairman, I apologize to the witnesses if my extraneous remarks were ego-Torontocentric. I am ego-Torontocentric. Toronto has the largest population of Asians, growing faster than any other part of the country. We also look at Asian trade through our prism and let me walk you through my little prism.

I consider one of our roles here to be to provide strategic advice to the governments, federal and provincial, on this very important issue of growth and trade. Let me take you through my analysis briefly and perhaps you can both comment.

There is no question at all that we are here because we all accept that there is explosive growth and opportunity for Canada in the Asian markets.

If one examines our current trade in a strategic sense -- and again these numbers are not current; they are 1994-1995 numbers -- it can be seen that we have a strategic trade deficit with Asia. If you analyze the numbers once again and subtract the traditional trade exports which are resource-based, there is an even larger trade deficit. It brings me to the comment that both of you made about the over dependence that we in central Canada have and I think Canada has with respect to the Auto Pact. But the benefits of the Auto Pact is that it is value-added, it is job-intensive; it is not resource-driven, it is job driven. And those, I think, are unassailable.

Having said that, would it not be better for this committee to focus on sectors of managed trade like the Auto Pact so that we can quickly attack this growing trade deficit with Asia? It is my view that within the next five or seven years Russia, the Ukraine and others will come on very quickly with respect to resources. Our resource-based exports will be under great challenge at lower price structures and that means that we have to move smartly ahead on value-added.

In its 1994 report, the Conference Board concludes that since 1970, we have made very little structural changes in our trade picture, notwithstanding the bells and whistles that we have talked about in the last little while.

Could you give us the benefit of your advice vis-à-vis Asia as to how, if my analysis is correct, we could focus managed trade sectors so that we could deal with job intensity.

Let me throw out one idea. We spend a lot of time on Auto Pact in Ontario trying to incorporate the Japanese auto makers within the Auto Pact. It has been a huge debate and a huge issue, and it has been resolved quite handsomely. I have always thought to myself: Why are we doing that? Why do we not end up with an auto pact with Japan directly? Why do we have to modulate that with the United States?

Therefore, I raise that. Are there sectors and is this a valid line of analysis for us to make, or for me to make?

Mr. Goldberg: Those are certainly useful insights about where we stand currently. One of the facts about the Auto Pact is that it is not an earner of foreign exchange. If we need money to pay for things, the biggest net earner of foreign exchange in Canada continues to be natural resources, because we do not have to pay anything for them. They come off the land and it is 100 per cent foreign exchange value-added. The Auto Pact has to be put in that context.

The vulnerability we face as a result of the Auto Pact does add risk. When we look at the return in terms of jobs, we also have to start looking in terms of the riskiness. I love real estate investment. When foreigners buy real estate, it is fabulous because we keep the money and the property; there is no blackmail value. If I threaten to shut down an office building, be my guest, we will take it over if you do not pay your taxes. On the other hand, if I threaten to shut down an auto plant, the blackmail value is huge in terms of jobs; there is a no question.

There is a second problem with the way the Conference Board and others look at what we do. I will give you some examples. There is a very high valued-added mill that has opened in Prince Rupert. This valued-added mill takes high-grade hemlock and allows wealthy Japanese to come over and pick the hemlock logs they like. The stuff is then numerically milled in a state-of-the-art mill. It is handled by people with white gloves who pull it off the green chain. It is often blessed by a Shinto priest and some of the people in Prince Rupert have also been selling tourist services. It still goes out as cubic metres of log. That log bears no relationship whatsoever to a standard 2x4 we sell into the United States. The same thing with the lumber we send to Japan. Japanese lumber, because we high-grade it and package it differently, is worth three to six times what it would sell for as U.S. dimensional lumber. It still goes out as millions of cubic feet.

The same thing happens with many of our fishing resources that we value-add enormously by packing with local labelling and putting them in fancy packages and pre-cutting them. I have seen salmon go for $5 a pound at the Granville Island Market; smoked salmon, $100 a pound in Tokyo and Hong Kong. That is huge value-added.

Are these things going to make us rich? No, they are not going to make us rich but they do point out that the new economy we live in. The metaphor I like to use is: "Sold by the gram and not by the ton." As a result, it tends to escape the traditional metrics we have because the traditional metrics tended to focus on goods. The greatest value-added we have is now going out as an electronic signal over the Internet, and we do not even calculate that.

When I look at how we have diversified -- and the problem is the new economy involves many subtle things. We have a business here approaching $200 million in hot-house foods. It is not going to rival prairie grain, but it is very high value-added. We sell a lot of flowers around the world that are grown in hot houses in the Fraser Valley. We sell berries. We sell wines as they do in the Niagara Peninsula, very high value-added non-traditional exports. They are very difficult to pick up, as a result. Our tourist business here is a monstrous business. It is very difficult to trap because it shows up in the other places.

Your analysis is accurate when we look at the existing economy. The future economy is not in things we can touch. Things are much more ephemeral -- ideas going on electronic signals; people visiting the country; selling very high value-added things, all of which escape our metric net. We need to have some very different metaphors for the future of trade and start measuring as a result of those metaphors.

Another metaphor I use is that a lot of the stuff we have now is on FM, and all we have is an AM radio. We have to get both bands.

The past is undoubtedly solidly entrenched. When I talk about the past, I am not saying to get rid of resources or the Auto Pact. They are very successful and continue to be important elements of our trade strategy. We have to look elsewhere because the new economy will manifest itself in different ways. We already have some astounding successes. No one would have thought of Canada as a world-class wine producer, both from the Okanagan and from the Niagara Peninsula. We did it. Why? Because free trade gave them no choice but to do it. It was that or extinction.

We are finding ourselves doing some interesting things in terms of being globally competitive. But they are not in places that Canadians traditionally look to, and that is the problem. We need both the old economic metaphors and some new economic metaphors. Then we can have some balance between the two.

Managed trade unfortunately tends to be an older economic metaphor. The new economic metaphor, which is value-added ideas, is one that is not easy to capture in a managed trade relationship.

Senator St. Germain: My question is to former Premier Harcourt. You were doing an excellent job and you replaced yourself with that young fellow; I want you to know that we miss you in many ways.

My question is a question that I posed earlier to Dr. Saywell. How do we reconcile and deal, in a consistent manner, if there is a such a thing as a consistent manner, with violations to human rights? You also mentioned child labour. We speak of labour disruptions that are taking place right now in some of these countries; that the rights of the labour force are being denied.

You have always professed to be a great social democrat, and I am sure you still are, sir. How do we deal with this and show any consistency? Do we allow our economic desires and needs to override these important issues that have to be dealt with? If we are going to showcase ourselves as an example to the world, how do we justify trading with these countries and tying ourselves in, very closely in some cases, with them in various trade relations?

Mr. Harcourt: That is a very difficult set of questions. We have to realize that these are rapidly developing and modernizing countries in Asia, aside from those in Japan which are quite state-of-the-art in terms of being modern. And of course, the new tigers and dragons in Korea, Taiwan, Singapore and Hong Kong are also advancing very quickly.

We should have some modesty in Canada and think of our own history. From 1867 to 1917, women did not have the vote. People without property did not have the vote. Chinese and Japanese did not get the vote until the late 1940s. The Asian community was not allowed to join the professions until the 1950s. When buying a house in the British Properties here in Vancouver, one signed stating that one would not sell to people who were Jewish or Asian. That has gone now, but we should realize that we are not perfect and that we also developed as a democracy.

Our role should be to help, as we are, in very practical ways in China to develop a form of arbitration and some consistency in dealing with patent protection and training for judges and some of other agreements that Prime Minister Chrétien signed with Premier Li Peng when we were there.

CIDA is working in Indonesia and East Timor developing the Human Rights Commission there. These do not have quick pay-offs, but they are practical ways that Canada can share how we developed our democracy over many decades. We did not have instant democracy. As a matter of fact, some people would argue that we still have a ways to go in certain areas of social inequality.

The Chairman: Even in parliamentary institutions.

Mr. Harcourt: I was thinking of calling in a fight referee when I was watching television last night.

The Chairman: I meant the Senate.

Mr. Harcourt: Senator Austin and I have long discussions about that. I will leave those at home today, though.

We have to be sensitive about our role. In some cases, we have to be very clear, such as South Africa. It was the correct policy to boycott South Africa, to basically have international censure. It finally brought some results. For us to say that we are going to boycott China or Indonesia and not do any business with them is not necessarily the best way to go about our relationship with these emerging countries. It is far better the way we are going.

Senator St. Germain: Our trade with South Africa was considerably different in volume as opposed to Asia.

Mr. Harcourt: South Africa and the apartheid system was such an abhorrent system from an outlaw society that the world community quite rightly said that it was going to have an international boycott of South Africa.

There are tremendous opportunities with the World Trade Organization and China wanting to belong to the World Trade Organization, through APEC, through the Canada's strategic approaches that we are taking, to have an impact in helping these countries modernize.

We should not constantly lay our form of government, our liberal capitalist democratic system, on to these emerging countries. Frankly, that is a form of arrogance that James Fellows has wonderfully outlined in his book, Look at the Sun, which shows the fallacy of the United States thinking that everybody thinks like they do. The Asian countries, each of them in their own way, will modernize.

It is my belief, as Bing Thom said, with the grassroots democratization that is occurring in China and the leadership in China attempting to hold on for dear life, when you have 400 million or 500 million middle-class Chinese that are educated, who have access to modern technology and communications, that that will have a profound impact on economic development. Those changes will have a profound impact on the political systems and the legal systems.

We need to put a lot of thought into how we respond to those situations, and we will be doing it. There will be a large NCO forum here when APEC is happening. There will be people protesting what is happening in East Timor and some of the leadership in Indonesia and protesting what is happening with the Tibetans. That will be an example of our open democracy. People have a right to free speech, a right to assemble and a right to express those opinions.

It is difficult to give a quick answer to what I think is a very important and complex issue for Canadians to grapple with into the Asia Pacific region.

Senator Corbin: Mr. Chairman, Mr. Harcourt, I was impressed by your support and boosterism for Team Canada. I happened to pick up yesterday a copy of the current The Economist, the cover of which says, "Why Governments should not be salesmen."

Do you see Team Canada as a permanent feature of our doing business abroad? Or, on the other hand, do you think that at one point it should detach itself from what ought to be, strictly speaking, invasively speaking, a private-enterprise matter?

Mr. Harcourt: I have read that article and I do not agree with it.

Senator Corbin: They also say some good things.

Mr. Harcourt: Our papers are so bad in this city I have to rely on other sources.

Senator St. Germain: Conrad says they are going to improve.

Mr. Harcourt: They have a long way to go.

There is a role but it should be limited. Governments should not overstep what their role is. In Asia, you are doing business with government; it does not matter whether you are in Japan or China. The impact of having the top political leaders going along with our business people in well thought out strategic trade missions is immense, particularly in Asia.

We should analyze the three visits to this date to see what worked and what did not work. Next year, we should go to the United States and to Mexico or to Europe. We have successfully tilled the soil in the last three years into Asia. The concept works very well.

As Senator Grafstein said, let us go to the areas we want to promote. One of the areas we want to promote, and that the trade figures do not illustrate, is the service sector. The trade figures do not register services and they do not register very effectively tourism, which will be bigger than forestry in this province within the next five, six years -- cruise ships and trade and conference facilities will be doubled in capacity. Whistler brings $500 million a year in revenue to the province. Other new four-season playgrounds are opening up.

We are shipping containers full of pre-manufactured homes to Japan now instead of logs. I would like to add pre-manufactured furniture and other goods to go along with the premanufactured homes.

The movie industry brings $500 million a year to British Columbia. Jackie Chan did his latest movie here.

Senator Corbin: Mr. Chairman, with all respect, the witness is not answering my question. At what point do governments get out of this game?

Mr. Harcourt: I do not know if they necessarily need to get out; I think the partnership works. There are many things that governments do badly, though, and one of them is trying to pick winners, in terms of what part of the market is going to be a winner and a loser -- putting in incentives and disincentives or putting out very expensive loan guarantees and subsidies.

I say that, ironically, as a Social Democrat who does not believe in a lot of that. A well-targeted trade mission with follow-up and on-the-ground staff in our embassy working in a partnership with business is still a very useful way into Asia, in particular where you are dealing with government one way or the other.

Senator Carney: In terms of Team Canada, without detracting in from it, our promotion in Asia did not start with Team Canada. It was a conservative minister, Alvin Hamilton, who opened up our trade with China. I would like to have this on the record in view of the comments that have been made, in good partisanship.

Prime Minister Joe Clark laid the foundation for the Asia Pacific Foundation. Conservative Prime Minister Brian Mulroney initiated the free trade agreement and the Asia Pacific initiative, both of which I was involved with, which led to things like the development of our Vancouver airport under local authorities. I want the record to reflect the fact that there has been a strong interest in this area in the past; even today it is not enough.

In that context, what do you think of the shut down of the B.C. Trade Corporation? Do you feel that there is a role for the provinces in the development of trade, a controversial subject because some people feel there is no role for the provinces to play? Do you feel that there is a role for the provinces in what is usually a national initiative on trade?

Mr. Harcourt: This is one of the few areas in Canada where there has been bipartisan support -- and you quite correctly added that Prime Minister Mulroney was very aggressive into the Asia Pacific, as was Joe Clark. Alvin Hamilton opened up many of the wheat opportunities. Many changes to the embassies took place under the Tories. It is important that we keep this area as non-partisan as possible.

The B.C. trade changes are an opportunity to focus on small- and medium-sized enterprises. I am working on some projects with the Canada-China Business Council and the Japan-Canada Business Council to develop a computer base which we have on this side. The trade people in Canada have WinNet, a computer base with 20,000 export-ready firms on it, 3,300 in B.C. We need to have a similar base in the Kansai, and key strategic areas such as Beijing and Guangzhou in China, so that, in order to become distributors or suppliers, our small- and medium-sized businesses can get an Internet printout of firms involved in Beijing. To this end, they could electronically do a lot of business before they get together.

Hopefully, this is an area where B.C. trade can focus, with the scarce resources that it has.

As to whether or not it was a good idea to make those changes, Senator Carney, when the media phone me for comments as to how the government is doing, I have said that my role is not to be the Don Cherry of B.C. politics. Therefore, I am not going to get into whether or not I think the it was wise for the changes to take place. I can say that I think we built up some very good initiatives through B.C. trade, working cooperatively with our federal counterparts and with other provinces.

Senator Carney: That is the central question. Is there a role for provincial involvement in trade development?

Mr. Harcourt: Yes, particularly with the small- and medium-sized export-ready firms, to get them even more ready.

The Lavalins, the West Coast Powers do quite well. It is the small- and medium-sized enterprises we can work with.

Senator Perrault: On a trade promotion visit approximately five years ago, I met one of our trade promotion officers who said told me that jet-lagged business people come from Vancouver and Toronto wanting to put a deal together in 48 hours; that they are absolutely defeated and return disenchanted. He said that we simply cannot do business that way here, and that has been confirmed by what you have said today.

Are we doing enough to give our young people a knowledge of the Pacific Rim, the facility to speak their languages and to know something about the history and social customs? I am informed that a far higher percentage of Pacific Rim countries are offering multilingual training to their young people than is being done in Canada.

I find it difficult to accept a statistic I saw a few months ago, that we have less language training in Canada now than we had 10 years ago. We better determine exactly how we are going to mount this offensive to get our share of Pacific Rim trade. It certainly involves educating young people, to mount our outposts in that area.

There is a program at Capilano College to educate talented young people in the languages of the Rim. Where is the hard information about language training in this country and the mounting of the offensive to capture our share of that market?

Mr. Harcourt: I could not agree more with two of your points: one, our business people being naive about how to do business, assuming that it is similar to taking their samples to a hotel in Toledo, Ohio, sitting down and doing a deal, and then flying home. It is not done in that manner in Asia.

I bluntly advise people who are thinking of trading into Asia that unless they are prepared to put in a year or a year and a half, to make at least four visits and to invest $100,000 or $150,000, to involve capable people, do not do it. It is a waste of our time to have good people go over there without doing any homework or any preparation whatsoever. That is where some training for small- and medium-sized enterprise is important.

One of the changes that I am proud of in this province, which I introduced, is equity for Asian languages in our high schools. We now have accredited high school courses in Japanese, Mandarin, Cantonese, Korean, Punjabi, Tlingit, among others. Young people, from those cultures as well as other cultures, can learn those languages and get credits for them; they can carry them forward into Capilano College and into other programs.

Senator Perrault: Are other provinces following?

Mr. Harcourt: I am not aware of that. It was very important symbolically for our Asian community finally to have equity with the European languages and the languages of the Americas, Spanish, French and English. It has had a profound impact on the Asian community here to have those languages now accredited and respected. Some of them are tough languages to learn, but so what, so is English.

Senator Andreychuk: If we talk about human rights, we are talking about Canadian values and putting them forward. It seems to me that there are many Canadians who are fighting for human rights, both within their country and elsewhere, because they believe in something called the universal code, which is the United Nations human rights code. And therefore it is not Canadian values that we are concerned about but universal values. Regardless of whether you are in Africa, Asia, Canada or the United States, those are the values we want to see. It is a disservice to say that when we raise these issues, we are somehow pushing our values. I would hope that, in the rhetoric, we make a difference between those who are imposing Canadian values and those who truly are working for some universal issues. There are many Canadians who are doing that. If we find ourselves in Haiti, we should find ourselves dealing with the same issues, whether they are in Canada, China or Hong Kong.

Mr. Harcourt: I do not disagree at all. As a matter of fact, I would carry forward the UN Declaration of Human Rights to include economic and social rights, as well political and legal rights. From my political/philosophic viewpoint, I agree with the United Nations Charter of Human Rights. I did my law school thesis on that.

How we do it is the key. It is not that we do not believe in these rights -- I hope that we all believe passionately in democratic individual rights and human rights <#0107>- it is how we express them in each of the cultures we are going in. There are very few countries in this world that have fully developed practical human rights. How we help the countries develop those is a very challenging task.

Senator Andreychuk: I hoped also that we would talk about two covenants on that -<#0107> that is, the question that the rights under the political and civil belong to people, and not to states and governments. For a long time, we, in the Western World have shied away from the second covenant, which is to do with economic, cultural and social rights. I am pleased to see that the east-west debate has stopped and that we are now being held to account on the second covenant. I hope that that debate through your good offices will be enlarged rather than diminished.

Senator Grafstein: I wished to touch on a topic that Senator Corbin raised, and that is the role of government. It struck me that one of the places where government can play a very useful role is that of trade intelligence -- for example, in Asia, a huge percentage of the total activity is based on government procurement; the government goes out and buys things for buildings or whatever.

I was taken by a story that I read in one of the American papers with respect to the tragic death of Secretary of Commerce Brown. The story said that he was on a mission directed by his "war room" in the Department of Commerce. In this room was a chart which illustrated every country that they were actively engaged with in terms of large government procurement contracts. Commerce staff were following every country. When staff decided that it was time to move, Secretary Brown was on a plane with a group of businessmen to make sure that they brought American government pressure to bear. We do not do that. We are quite fragmented in our activities.

Mr. Harcourt: Absolutely.

Senator Grafstein: Would this be a useful thing for our committee to recommend?

Mr. Harcourt: I think it is absolutely vital; it is one of the things that I suggested could be done to assist small- and medium-sized enterprises. Frankly, that Department of Commerce data is extremely sophisticated. MITI in Japan has adopted that system throughout Japan for Japanese business to have access to that Internet information.

It would be a very useful role for government to provide the seed money to get that information. It could then be commercialized or done by the private sector. The Americans have an extremely sophisticated system. They have reached an agreement with MITI and the Japanese, and I think we should do the same.

The Chairman: Thank you very much. You have been very generous and most helpful.

The committee adjourned.

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