Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 2 - Evidence - Meeting of December 4, 2007
OTTAWA, Tuesday, December 4, 2007
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 5:34 p.m. to examine such issues as may arise from time to time relating to Foreign relations generally.
Senator Consiglio Di Nino (Chair) in the chair.
[English]
The Chair: For the record, this committee is operating under the general Senate reference to examine such issues as may arise from time to time relating to foreign relations generally. We are looking at the emerging economic influence of China, India and Russia, as well as Canada's policy response.
We have two special guests with us this evening. Mr. John Helliwell, Professor Emeritus of Economics, University of British Columbia, has been in front of our committee and, likely, other Senate committees in the past. Welcome again. He joins us via videoconference. As well, we have with us Ms. Debra P. Steger, Professor and Director, EDGE Network, University of Ottawa Faculty of Law (Common Law).
Welcome to both of you. We will ask each of you to make a few comments and we will then turn the meeting over to our colleagues for questions and answers. We will start with Mr. Helliwell.
John Helliwell, Professor Emeritus of Economics, University of British Columbia, as an individual: Since I have been given a free hand and your hearings have a broad focus, I will suggest how I would look at these hearings if I were sitting in your place.
What I will say today is a little in line with what I will be saying next week in India where I will be speaking to the Emerald Jubilee of the Indian Statistical Institute. The subject of their memorial conference concerns new approaches to development. They have asked me specifically to talk about life satisfaction as a way of thinking of development differently. That is precisely the message I will be conveying, not just in different countries, but in different communities and different parts of Canada. It is especially important when you are thinking about global development over this next half-century or century.
The countries you asked me to talk about are likely on your list because they are the big three amongst Brazil, Russia, India and China — BRIC — who are, in turn, the next ones outside the G8. They will be coming in by weight as measured by gross domestic product. If you look ahead, there is a sense of speculation as to what a more appropriate weight could be. Some of the people who worry about quotas in the International Monetary Fund and the World Bank have already been there. The answer is population.
The countries listed for discussion today are in a different category. India and China are close to being in the same situation. China is very large and growing fast whereas India is almost as large. Its population is growing faster, but by GDP it is not so large. By the time 30 years have passed, India will have a larger population than China. In five years, the Chinese economy will be bigger than that of the United States in purchasing power parity, or PPP. China and India together are substantially bigger than the U.S. economy already in terms of PPP. Therefore, we are talking about very large countries growing quickly and changing the face of the world enormously.
Russia, on the other hand, is quite a different case; it is a small country getting smaller. It has only a little more than one third of the U.S. population and its GDP per capita is one quarter that of the United States. In terms of GDP measured at PPP, it is about one tenth as big as the U.S. and already China and India are getting ahead of Russia.
What should we be thinking about in terms of Canada facing the rest of the world, and what should we be doing to help this unfolding development? I think I am hinting the action will not be in the older countries — the ex-imperial powers — but rather in the countries that are growing in terms of closing the income gap and that have growing populations.
Those countries are now wondering if they should be trying to emulate us and trying to do as we have done. If you have been following the climate change literature and have wondered what would happen if conventional measures of GDP, produced the way we produce them, were to be equalized in the rest of the countries of the world, it would be impossible. To generalize, everyone understands that to take the bicycles out of Beijing and have cars parked in the middle of Beijing streets is not the right way. They simply cannot do what we have tried and are now finding that they need to change.
One option would be to wait for better ways to do things, of generating good lives that are less material-intensive and let them copy us. However, they are the ones moving, changing, educating and investing "fast.'' If there are good ideas out there, the most important place to have them understood and applied is in these fast-growing countries.
I have gone to these countries and stated that when talking about well-being, we should not look at GDP per capita; we should ask about quality of life. We should find out the answer to the question that Aristotle proposed two millennia ago: On a scale of one to 10, how satisfied are people with their lives? It is a very different picture than you will get from GDP per capita.
It is quite true that the richest countries are generally the happiest populations. Gallup has started to collect measures of life satisfaction from more than 130 countries. A month and a half ago, they produced the first Global Well-Being Report. I will give you some numbers from that. These systematic measures of life satisfaction are not "pie in the sky.'' Gallup is measuring in many dimensions and doing so annually. We will now have another way of looking at what I call the "quality of development''; it is not the quantity that is important but the quality.
The countries you have asked me to focus on today tell a bit of a different story. By richness, Russia has by far the highest GDP per capita. It is 50 per cent more than China, which has roughly almost twice as much as India. In terms of life satisfaction, however, India would be a 5.8 on a 10-point scale. That is an average across India. The numbers would be 5.9 in China and 5.1 in Russia. For comparison, the measures of life satisfaction in the United States and Canada would be 7.6 and 7.8 respectively.
At the high end of income per capita, the ranking of life satisfaction is simply not the same as the ranking of income per capita. In fact, we find that what matters is not just removing poverty, having access to clean, available water and having reasonable health standards in place, but also and especially the nature and quality of the communities in which people live.
This quality is indicated by the nature of the human relations within their family; the relations within their community; and the extent to which they think their neighbours can be trusted, their family looked after and the trust that can be placed in police and government. All of that overshadows the nature of material goods and services. Naturally, they need a level of sufficiency, but beyond that, it is social quality rather than material quality that matters.
In some countries, some people have taken this seriously and tried to do something about it. You may have been told or heard about what Enrique Peñalosa, the Mayor of Bogota, did when he took the well-being research seriously. He said that he was going to change his city to make it possible for people to interact in positive ways rather than in negative ways. There are many applications in the cities of the world where almost everyone will be living 50 years from now.
I will turn to your questions now because, no doubt, I have told you something that you may not have thought about before.
The Chair: We appreciate those very informative comments. We will turn now to our second guest, Ms. Steger, from the University of Ottawa.
Debra P. Steger, Professor and Director, EDGE Network, University of Ottawa Faculty of Law (Common Law), as an individual: I am delighted and pleased to be here today. I will talk about the challenges that I see for Canada arising from the emergence of the major new economic powers of China, India, Brazil, et cetera. I will speak briefly about a fairly new initiative, the EDGE Network — Emerging Dynamic Global Economies Network — which is a research network focused on these very issues.
The world is going through a major economic and political transformation unlike anything we have seen for a very long time. It is being caused by the rise of these emerging economies. World economic growth is higher than it has been for over 30 years, but the world is growing increasingly fragmented. The only constant seems to be change, and the pace of change is really staggering and, to some, frightening.
Growth and prosperity in China, India and Brazil is having major reverberations around the world, including the latest impact on currencies. Obviously, Professor Helliwell is an expert in economics. I am a trade lawyer, essentially, so I will not try to pontificate too much on the economics of what is going on in the world.
The major emerging economies are learning to leverage the global economy, and I think a multi-polar world will emerge in the next few years. What will Canada's place be in that new world economy? Will we continue to enjoy the same prosperity and standard of living in the future, or is there a risk that we could be negatively impacted by the major transformation taking place? There is a need to think strategically to engage in longer term planning, to think at least of the next 10 or 15 years and what changes will take place in the world and how Canada can position itself to remain competitive and prosperous into the future.
Canadian competitiveness could be seriously challenged in the near future. Although our economy seems to be strong at the moment, not all of the economic indicators, as we know, are positive for Canada's future prosperity. On the productivity scale, the Conference Board and a number of other institutions — recently, the Centre for Jurisdictional Advantage and Prosperity at the Rotman School of Management, University of Toronto — have demonstrated that Canada actually ranks low among OECD countries and our productivity is not increasing but is declining.
We also know we have a problem with low investment by companies in research and development. Our current economic boom is being fuelled, as we know, by oil and other resource commodities. It is well understood that we clearly need to do more to enhance productivity, research and development, and innovation. These are all keys to our long-term prosperity and competitiveness. Frankly, we need to do this even more because of this massive competition coming from the emerging economies in the near future.
Responding to the new global economy will provide Canada with not only many challenges but also tremendous opportunities. It will require nothing less than fundamentally changing our mindset and reinventing ourselves in the way we do business and the government policies we adopt in the future. There is a real risk in Canada of complacency, of overreliance on the U.S. market for our future prosperity and of assuming that things will continue as they have before. The challenges and opportunities that face us are major, and there is a tremendous need for an active and engaged partnership between business, government and the academic research communities in order to do the strategic thinking required to meet these new challenges.
The EDGE Network was created in 2006 with funding from the federal Networks of Centres of Excellence Program. It is a pan-Canadian, multidisciplinary research network with an administrative centre at the University of Ottawa. It involves major economic think tanks such as the Asia Pacific Foundation of Canada, the Centre for International governance Innovation and the Conference Board of Canada. Many of the major think tanks that you can name are part of our network. It involves researchers in law, business, economics and public policy from across Canada, federal government departments and agencies such as DFAIT, EDC and Industry Canada, some provincial government departments — Ontario and British Columbia, in particular — as well as business organizations and leading Canadian multinational companies.
We have five key research themes: competitiveness, energy and the environment, technology, human rights and rule of law, and trade and investment. We have been engaged in the past year and a half in a network-building exercise. A number of key projects have started and will begin to show real results over the next year. One of the projects is on global value chains, which is a joint venture with the Department of Foreign Affairs and International Trade, Industry Canada and independent researchers.
Another project commenced recently on the future of the Canadian automobile industry in the face of competition from China and India. In that project, we work with Auto21, which is a major NCE in the auto industry in Canada. We held a workshop recently in the Schulich School of Business in Toronto. On that topic, we brought together companies, unions, researchers, the Ontario government and the federal government so that we could brainstorm on important issues in a collaborative way.
We have a new project called the Brazil Trade Pallet, in which we are working with the Brazil-Canada Chamber of Commerce, Export Development Canada and Scotiabank to develop tool kits for small- and medium-sized businesses to enable them to do business effectively in the Brazilian market.
On energy and the environment, we have a project that has commenced on China. The co-partners are the China Institute at the University of Alberta, the Asia Pacific Foundation of Canada and the Alberta government.
We have some projects in the field that I will call "global economic governance.'' There will be changes not only within Canada to our domestic competitiveness going forward but also to the world's institutional architecture. The main international economic organizations, such as the World Bank, the IMF and the World Trade Organization, are going through major changes caused by the emergence of these new economic superpowers.
Canada can demonstrate leadership in the international community by working together with researchers in other countries to think through the issues relating to reform of these international institutions. We have two major projects in this area, one on institutional reform of the WTO and another on the World Intellectual Property Organization development agenda, in which we are working with key research institutions in other parts of the world, trying to come up with reform proposals for these international organizations.
What are the implications for Canada? The EDGE Network has two aspects to its mandate. First, we are looking at the domestic competitiveness side of the equation, improving Canadian competitiveness at home. On that front, as I said earlier, it is important that we do strategic thinking and that we do it together — business, government and academics working together in partnership. I do not think that government can do this alone, and obviously business cannot do this alone.
Also, we need to do some integrated policy thinking rather than thinking in separate compartments. Traditionally, we have developed tax policy in one compartment, trade policy in another compartment and competition policy in yet another, just as an example. It is important to bring these policies together and to think about them in a more holistic way.
What are the issues for Canadian competitiveness? You are familiar with many of them. I am sure you have discussed these issues before: an open economy within Canada, reducing and eliminating the remaining internal barriers to trade within Canada; improving productivity; research and development.
We recently held an excellent conference in Vancouver on these issues, but in many ways we were preaching to the converted. The message needs to be communicated to a much broader community within Canada.
Another issue is global value chains in the technology ladder. Where do our businesses fit? How can we take advantage of these new ways of doing business? We need tool kits, as I mentioned, for small- and medium-sized enterprises to allow them to take advantage of the opportunities without necessarily suffering from some of the fierce competition that will take place in the future.
Our members have been saying that Canada should focus on industries in which we will have a competitive advantage in the future and that we should structure policies and programs in these areas rather than trying to serve all of the industries in which Canada is currently engaged. They have suggested that rather than being driven sometimes by the losers in trade negotiations — clearly, there will be losers — we need to develop adjustment policies and to think strategically about training and adjustment incentives for business. We know that nothing will remain the same and that the structure of our industries will change. We should be planning for it, anticipate it and help businesses through those adjustments.
Movement of persons is an extremely important area, including immigration difficulties in obtaining visas for skilled workers. We have labour shortages in Alberta and British Columbia. We will have labour shortages in the health care field in the very near future. Recognition of professional credentials is a huge barrier and allowing students to move more freely with easier requirements for visas. These are important issues that we have not yet begun to properly grasp.
Another important area is competition and investment policies. The government is currently conducting a major review in that area.
Corporate social responsibility is another area I would highlight. Our multinational companies are models of good governance internationally, but some of the companies — I am thinking particularly of companies in China — that we are now competing with on the international stage in places like Africa and Latin America do not follow the same models of good governance that we do, which will create problems in the near future.
I am not an expert on tax policy. I am sure you have had much discussion about that topic in the past. This is obviously important for our future competitiveness.
Our second mandate is about Canada showing leadership internationally. The international institutional architecture needs to be reformed. The major international economic institutions — the IMF, the World Bank, the GATT and the WTO — were created back in the 1940s for a very different world. As we move into a multi-polar world with major new economic powerhouses — China and India in particular — the geopolitical power relationships are changing and the international economic institutions will need to change to meet the new realities.
Superpowers have a tendency to want to change the international system to meet their own interests. In the past, Canada has shown tremendous leadership and has punched above its weight in the international community. However, with these new major superpowers coming on stream, we risk losing influence in the future. I think there is an historic opportunity to show leadership on the world stage as these major economic institutions are being reformed.
What is the solution on this front? Canada needs to work together with the emerging economies to help fashion and influence the shape of the new economic order. This is what we are doing with our EDGE international partnerships in the global economic governance area. As I mentioned earlier, we have two projects, one on institutional reform of the World Trade Organization and another on the World Intellectual Property Organization. We are working together with highly respected international research institutions to develop practical proposals for reform of these two international economic organizations.
With that opening, I would like to thank you for this opportunity to appear before your committee and I look forward to our ensuing discussion.
The Chair: Thank you, Professor Steger, and also to Mr. Helliwell for his previous comments.
Senator Stollery: Your testimony has been very interesting. I would like to join with the chair in welcoming you and explaining that this is the beginning of a project. We are finding our way in this new world that is developing — I suppose that is how some of us look at it — and how our committee can assist Canada in developing ways of dealing with this new world.
Most committee members are quite familiar with some of the international institutions. We are familiar with the WTO, the IMF and the World Bank.
I do not know to whom this question should be addressed. On the front page of the Financial Times today, I saw what I thought was a very startling headline regarding Ms. Clinton being skeptical about the Doha, which is code for me to say that she is not particularly interested in fast-tracking. I took from the article that if Ms. Clinton became president after the election, she would not be very interested in facilitating the Doha — which is the agricultural negotiations. I do not want to bore my colleagues because they have heard about this many times before. When I saw that headline, it was code for me. The Americans are, after all, our neighbours. We do a lot of trade with them.
Mr. Helliwell, you said that measuring quality of life could be considered as important as measuring GDP or per capita income.
With respect to this new world, where does that put Canada? We are an independent country and will develop our own ways of dealing with this. Our country has spent a lifetime dealing with the Americans, which has given us a certain expertise in dealing with countries bigger than Canada.
What is Canada's situation if our neighbour to the south resists this new world that seems to be developing? What if Senator Clinton says she is skeptical about Doha, the World Trade Organization and the international rules? We all know about the balance of payments issue and currency problem in the U.S. If they resist, to use your words, the multi- polar world, which is the rise of the Chinese and Indian markets, could this not make things very difficult for everybody? I know it is a disjointed question, but it is a complicated situation.
Mr. Helliwell: Any time a big player backs out of or refuses to play the game with others, it poses difficulties for the rest.
If you think, as I do, that a new world needs to be approached in a new way, a country like Canada is well placed to do something about it if there are no established U.S. positions — or positions from any of the major powerhouses — that run against looking at things a new way.
You are saying, in practical terms, that further international negotiation of the main rules of the main games on trade is likely to be stalled during this environment. You are saying there is a real risk of that happening.
I think that pause in the development of trading rules opens a window of opportunity for getting people to think about the basics more clearly; to move away from this "bicycle theory'' that suggests that every country needs to increase trade openness if it is to improve quality of life. This is simply wrong, and now may be the time for making progress in other life-improving directions.
The more research I do in this field and the more I hear about it, the more I understand: For the countries that trade is supposed to benefit, there are many ways of getting more benefits faster.
If you are held up on what are increasingly small gains from trade in an already very open world, and there are major gains from international cooperation in ways that allow countries to live better lives in harmony with each other — I have lots of specifics — my advice is to take those gains.
If there were to be any stalling by one of the parties in the U.S. with respect to Doha or any other set of rules, I might say to just relax and go on with the more important things; it is not that that is not worth doing in its time. As you well know, I am very much a fan of multilateral solutions over bilateral solutions. However, you do not push it; you do not invest time flogging a dead horse. You just go through doors that are profitably open. Those profits are defined in social and human terms, not in GDP per capita.
The Chair: Professor Steger, would you like to add a comment?
Ms. Steger: With respect to the comment regarding Senator Clinton, the view I hear from my American friends is that saying one thing on the campaign trail is quite different from what she may actually do if she is elected president. I have a lot of hope that she would approach the trade agenda in the same way that her husband did when he was president. Although he seemed to toe an anti-trade line earlier, he was certainly positive for the multilateral trading system and helped to conclude the Uruguay Round in the first place.
I agree completely with Professor Helliwell. My experience in talking to the business community is that the Doha Round is mainly about an old agenda; it is not even a new business or trade agenda. With the Doha Round being stuck at an impasse, it is leading to many important issues for business not being dealt with in international trade negotiations, and companies find ways around some of the existing barriers and problems.
Here I agree with Professor Helliwell again: I think that, to show some leadership, Canada could work together with other countries in some of the most-recently-new trade areas in which the WTO negotiations are not even engaged as yet. Some of the areas that I hear business talking about as real problem areas are movement of persons, corporate social responsibility, corruption and domestic rule of law problems that occur once they have invested in China.
There is a role for Canada and Canadian researchers to play in setting the stage for future negotiations by thinking together with researchers and government officials in the emerging economies about some of the new areas for negotiations in the future.
Senator Downe: In your remarks, you talked about competition and domestic governance; how Canadian corporations have international standards and many of these companies in emerging economies do not. Do you have any concerns about Canadian companies that may be taken over by foreign governments who have a front company heading them up? Is the EDGE Network looking at that area?
Ms. Steger: I am currently writing a commentary on that topic. I have not completed it yet, but the Asia Pacific Foundation of Canada asked me to write a commentary that would be published in the next month or so.
Industry Minister Prentice has signalled that the government may be looking at state-owned enterprises, in particular, and a possible national security exception.
This is one area where I think it is important to negotiate some multilateral rules. G7 ministers recently called upon the IMF and the World Bank to develop an international code regarding state-owned enterprises, particularly the operations of sovereign wealth funds.
Quite frankly, Canada has a lot to gain from foreign investment, and I would be leery about creating new barriers to investment in Canada. I do not see it as a major threat yet. I think we have the capacity with the existing Investment Canada Act to review certain takeovers and transactions.
I am not the economist; Professor Helliwell is. I worry a little bit about a downturn or a major recession in the United States which is followed by the United States reacting in a protectionist way. Who are they going to focus on? They are going to focus on China.
I can see a scenario in which the U.S. raises new restrictions against imports and investment from China. Canada may then have to react. That worries me a great deal.
The Chair: Senator Downe, would you like Professor Helliwell to comment on that?
Senator Downe: Yes.
Mr. Helliwell: The idea of focusing on whether a foreign company is owned by a government seems a little simplistic to me in the first place. If you think about the ways in which the American government, through its businesses, acquires influence on foreign government policies, it has not been through state-owned companies. It has been through private companies that are then regulated by the Trading With the Enemy Act applied in various ways. Governments have many ways of influencing the businesses that are located there, including their operations elsewhere.
What is needed is an international frame of corporate conduct that limits that, whether the company be one that is owned by a foreign government or owned by foreign corporations. We have seen lots of this sort of thing already in our local forest industry where, under the existing arrangement, it is much better for the foreign-owned forest companies to shut down their Canadian operated plants and leave the U.S. ones going rather than pay the export tax on the lumber going to the United States.
This is just part of living in a complicated world. You have to have domestic laws that limit as much as you can the damage that that kind of direct or indirect behaviour by foreign powers can do.
In general, multilateral rules that set standards plus a diversified structure of your own industry so you do not have too many hostages with a particular foreign power, firm or influence, are the safest way to proceed.
In general, the gains are bigger from trying to maximize the positive relations rather than from trying to build fences against the negative ones.
Senator Downe: Is either of you concerned that some of these emerging economies have restrictions on their economies? For example, in Russia one cannot own an energy company that has a majority foreign ownership. In this country, we do not have as many rules. Do you have a concern in that area?
Ms. Steger: I agree fully with Professor Helliwell's comment. I do not have a major concern in the areas of financial services, broadcasting and many others. Certainly, I am not one who believes that we should extend the restrictions to other areas. I do not think that would be a good thing.
We need foreign investment in Canada, in part so that we will have companies that have the ability to truly compete globally. If we start restricting investment in Canada, then the problem might be that we protect Canadian companies while relegating them to being small players internationally. There is a trade-off, clearly.
Mr. Helliwell: Let me qualify that point a bit. I have seen enough circumstances — because I spend a lot of time looking at how life is lived in communities in different geographic areas — to say that it turns out that life is lived much more locally than people think it is. It turns out it does matter where a company is owned and whether the management lives near the place where the activity is going on. It is very hard for a long-distance head office to get engaged in important ways with the community in which it lives. Our Vancouver Board of Trade pushes very hard on encouraging engagement between business and the community. They will tell you that it is much easier to do that when the management that makes the decisions in those firms actually lives in the local community and it is their community.
Just as you would find it difficult if your government levers were all run by another government, you would find it difficult if all your corporate levers were being pulled by people who did not have their eye on the local ball. If they have to choose between the welfare of plant X, which is in their own community, and plant Y, which is in Canada, it is easy for them to make up their minds. That is a definite downside.
In general, the idea of mergers and acquisitions leading to bigger and often more ungainly firms has probably gone beyond the stage where major economic gains can be achieved. Hence, you find that smaller countries, which might have an odd champion or two but no global leaders, are just as likely to make innovations as are the larger countries. Often it is easier for smaller enterprises to be nimble and go where the action is and not get too heavy.
Senator Downe: In the absence of the international framework you talked about earlier, what role does the Government of Canada have in this area?
Mr. Helliwell: I was unhappy when they removed the information gathering system whereby we could know more than we now know about how well-managed these firms are with different patterns of ownership. I have suggested a number of these things about firms owned hither and yon and the way they are managed in terms of their benefits to the local community. It is difficult to test these possibilities now and better information would make it easier to do so.
The things that the Vancouver Board of Trade and other business organizations are doing to get enterprises to take their communities seriously end up being, in some sense, good for the foreign-owned firms too. Peer pressure among firms will be extraordinarily important. Fewer foreign-owned firms would actually pull back from engagement in local communities if the locally owned firms were setting high standards for local engagement. Increasingly, you will find firms that once pooh-poohed the idea of environmental responsibility are now interested in the concepts, especially when they learn that their workers want it, the shareholders want it and all the fund managers want it. The idea is to find a whole community of interest deciding to have higher values attached to community interests, whether this be the long-term future of the global environment, which has to be thought of as a community interest because the gainers are the people a generation or two hence, or life in the local community, which has its same long-term effects. In the end, you will find increasing community of interest between the business leaders, which can include not only the locally owned but also the foreign-owned businesses.
Much of the impact that governments have in thinking in these directions will solve some of the conflicts that have appeared often because businesses were not as focused then on the broader effects as I think they are increasingly focused today.
Ms. Steger: A very interesting report on foreign investment was issued by the OECD recently, and I would highly recommend it to the committee. It looked at some of these things, including the impact of foreign investments through merger and acquisition activity. It showed that foreign ownership often leads to greater employment and higher salaries, but it does not lead to job loss and other stereotypical myths. I would commend that report to the committee as part of its further work. It is a recent report on foreign investment.
The Chair: Our clerk is taking a note of that suggestion.
The three countries we are talking about, including Brazil and the U.S., are major greenhouse emitters and they are growing. Is the Government of Canada on the right track by insisting that any agreement on climate change should or must include the participation of these countries?
Mr. Helliwell: It is important that the action include all countries. The idea of governments making commitments often when they are not sure how they will implement them is increasingly of second order importance. The real importance is in providing the mechanisms and exploiting the opportunities for doing things better. Increasingly, we will find that changes in the world view in countries where global warming has been seen and the urgency has been emphasized will begin to spread to other countries. What really matters is harnessing and developing ways of getting an equivalent amount of well-being with less material and getting a greater amount of connectedness and life satisfaction with less material support. The underlying research shows that this is what makes people happy; it is not the material goods as much as the circumstances in which they are developed.
If you think about global warming in that context, it turns out that people actually like doing things for other people. The other people include those living a couple of generations hence. You will probably find a big willingness to change, once it is possible, first, to think of the appropriate things to do in the circumstance and, second, to have some reasonable view that other people will play the game the same way.
That is what the Kyoto agreement was all about, trying to establish some rules for that. Now we are shorter of opportunities for people who want to do the right thing, to do it in a sensible way. The United States ends up subsidizing ethanol for gasoline when it is completely uneconomic to do so, and then using high tariffs to exclude the sugar-cane based ethanol from Brazil. The sugar-cane based ethanol is much more efficient environmentally and economically. This is one example of the many links between conventional trade and global warming. Kyoto and subsequent agreements are only part of the story.
As I said about the trade agreements, if you are held up at one part of it, do not worry about it. Get your action in another dimension. I think the same thing is true in respect of the environmental agreements.
Ms. Steger: It is very important to include the countries that are major emitters and major industrialized nations, China and India in particular.
The OECD and the World Bank say that we should be thinking about probably 30 rapidly emerging economies in the world. China and India are the biggest, but if you look at the growth of other countries in Asia and South America, a number of them are developing at a rapid pace. We should be thinking about these countries as well. I would certainly add countries that are rapidly industrializing, such as Vietnam, Mexico, Brazil and South Africa. There is a whole group of countries that we should be looking at in the future.
Senator Corbin: I would like to put my question to Professor Steger because of a number of things she mentioned.
Specifically, when you were talking earlier about Brazil, you suggested that our medium and small business people should be equipped with a proper tool kit. I think I understand what you mean by a tool kit. What is wrong with the current way of doing business, and how should we go about improving the contents of the tool box?
Ms. Steger: I hear frequently from business that one of the biggest challenges they have in foreign markets is learning the culture of how to do business in other countries. Clearly, we cannot do business and negotiate contracts in Brazil or in China in exactly the same way as we would in the United States, for example. That seems to be a barrier to a number of countries; at least, that is what the business associations, such as the Brazil-Canada Chamber of Commerce, tell me.
What we are trying to do in this particular project is develop an online tool kit that businesses can tap into that will help them develop better business relations in Brazil. There are many elements involved. There is a learning curve to understanding the culture, how to make contacts, how to negotiate contracts, all those kinds of issues. The Brazil- Canada Chamber of Commerce is trying to put together the elements of the tool kit. They are working in conjunction with Export Development Canada, which has a lot of experience in putting deals together, but trying to teach smaller- and medium-sized businesses what some of the major multinationals may know and do very well. However, the others need to learn some of the tricks of the trade as well.
Mr. Helliwell: One of the benefits — which has only recently been seen — about the diversity and scale of Canada's migration history is that now we have quite naturally built in many links with diasporas and have a lot of two-way population movements. The resulting lines of communication build the sort of trust-based linkages that help to reveal what might be profitable trade, investment and other exchanges. Just as Silicon Valley spun off to Bangalore, similar things are happening, not just in off-shoring of various services, but these trust linkages built on personal contacts in fact open doors for countries like Canada that are much richer and deeper than for most other countries. This is one of Canada's comparative strengths.
Canadians have always been less likely than Americans to go abroad and expect people to do things our way, in part because there has not been an "our way,'' but also because when you start out smaller and are not used to having any power, you want to do things collaboratively with people. You go in with your eyes open instead of your mouth open, and that is the way to make contacts that in the long run can generate business and, more importantly, can generate friends.
The Chair: I do not think Canada has done a good job at establishing these trust linkages. I wonder if you agree or disagree with me.
Mr. Helliwell: I do not think anyone has taken these trust linkages as seriously as they ought to. Ten years ago I did not take them as seriously as I do now. It is only because I have been lucky enough to get hold of data that convinced me that it is essential to establish trust linkages before anything is done. Hardly anything worthwhile will happen in a cost-effective way, in a humanly effective way, unless those trust linkages are there. People have been cutting those linkages in corporations, in communities and across countries. People have been giving away the long-term relationship in favour of the short-term profit or bottom line. I think that only now people are starting to learn that that is not good enough.
The Chair: Professor, if you run for election, I will vote for you. You sound like a great politician. I do not mean that as an insult.
Professor Steger, would you like to respond to my comment about Canada not having done a good job at establishing these linkages?
Ms. Steger: I agree with Professor Helliwell. We could certainly do more and are only beginning to realize the importance of the diaspora and how we could use the diaspora more effectively. We are probably learning this from doing business in countries like China or Brazil, where trust does matter a lot and it takes a long time to develop the trust relationships before they will do business with you. Canadian companies that have been successful in those markets are companies that have taken the time 20 or 30 years to develop long-term relationships. That is very difficult for small- or medium-sized businesses to do, unless there is the diaspora element or some other element. That is why that component must be part of the tool kit. It is not an easy thing to do. Big companies can put the investment into developing relationships over longer periods of time. Smaller companies cannot necessarily make the investment, so it is a challenge.
The Chair: Other than when the diasporas themselves create the opportunities.
Senator Johnson: I am still not convinced that we are doing the right thing in terms of greenhouse gases. I know we are trying to get agreements and trying to get people to cooperate and kick in. If we do not have a decent environment, all the business and trade and commerce in the world will not work. Look at the predictions in terms of CO2. The countries we are discussing are the worst offenders in the universe compared to Canada, which is at 2 per cent.
When we are in these countries, is there anything we can do to promote improvement in this respect in addition promoting trade and investment?
Mr. Helliwell: Once you get outside Canada, the idea that Canada is not a major polluter because we are only 2 per cent does not cut ice at all. They say if you are not at the top, you are number two in the world per capita, and per capita is where it counts. If the world is to become a better place, it will happen because all the people living there are managing themselves responsibly with respect to the future environment. The per capita uses of energy in any of these countries we are talking about are way less than they are in Canada. The only reason they get up in the total figures is because they have very large populations.
That gets back to what I was suggesting at the beginning: The really big solutions will only come when those countries that are building their future get things right. India provides us with marvellous examples. There is something called the Barefoot College where this wonderful man goes from one village to another to find the least advantaged person. They then make that individual a solar engineer and send them back with solar panels. They do the same thing with clean water. Villages with no electricity and no clean water end up with a social structure and a new dynamic within the community. This is done through collaboration and virtually no invasion.
A Canadian eye surgeon went over to India to make eyes work. He could not do it himself. He mobilized Indians to look after each other. That is all-around happiness: He gets the life satisfaction of enabling them to give each other better lives. The parallel efforts in the environmental area will bring greener and cleaner lives.
A lot of technologies that can be very green are easy to distribute to these off-grid communities in those countries. They will then have the capacity; you will then find that some of the best and cheapest solar panels will be coming from these countries. This will not be for their use alone, but for use elsewhere in the world. The payoffs for world improvement are huge. There may be commercial payoffs for Canadians involved, but you can bet your boots that they will not be doing it for that reason. That would be a side benefit.
Ms. Steger: I said in my opening statement that I think we should be focusing on certain niche industries where we can really make a significant impact on the future. One of them is in the area of environmental services. We have the technology and a number of small, very successful enterprises. Generally, we are not doing enough to take advantage of the immense opportunities in the emerging economies and in the developing world to promote our companies and industries that have this niche. They could be doing wonderful things in those markets.
With regard to all of the various federal- and provincial-led trade missions in the past, I have been told by people in the B.C. government that it is very hard to change Canadian business attitudes. The small- and medium-sized businesses will go on these trade missions one or two times. Then, if they really do not see what is in it for them, they will not try to adapt or explore potentially huge market opportunities for themselves.
Government officials that have been trying to figure out how businesses can be encouraged to think more broadly have told me to look for opportunities in those markets from an export investment perspective. However, it is a hard sell to Canadian companies and Canadian business for some reason. Many of our companies are exporters of raw resources, yet they do not seem to want to go the extra mile to develop further manufactured products and take advantage of the huge market potential in those countries.
Our investment of that sort abroad is not very significant; it is low compared to other countries such as Australia.
I do not understand. I do not think fault lies with the government; government has been trying to do a lot to encourage Canadian business to be more outward looking. There is something about the Canadian business psyche that I do not really understand. Perhaps it is a lack of entrepreneurship or a fear of risk. There are huge opportunities. Governments are trying to encourage Canadian businesses to look outside of North America, but they are just not getting the message yet.
Mr. Helliwell: Leading by example is much more important than talk. Governments are saying people should operate more environmentally responsibly and seek out trading opportunities for doing so. However, the federal government is the biggest landlord in the country. Is it running the most energy-efficient building stock in the country? You bet it is not. Is anyone else in a position to make the federal government a green landlord? No. You get your own house in order and then point to your own example as something to be emulated. It is very hard to encourage other people to do a thing when you have not done it yourself. It is hard to get that kind of message out.
Senator Johnson: Ms. Steger was talking about business abroad in those countries in particular. What about Canadian business attitudes?
Mr. Helliwell: I am less pessimistic than Ms. Steger. I have a lot of involvement there, especially with small and emerging technology enterprises coming out from younger people. They have the world in their genes. As soon as they get the right products, they will be out there. They have some of the proactive attitudes I am talking about in terms of increasing people's own feelings of feeling right in their own skins. They want to not only make money going out there, but they want to help the world. They want to ensure they have something that will work. A lot of them have patience and are prepared to develop these networks and then have these business ideas roll out.
When we look back in 20 years, I believe that if these people are as numerous as I think they are, we will have seen opportunities being understood, developed and outreaches will have been happening. Canadians have always been psychologically good at the non-invasive establishment of connections with other people for mutual advantage. I mean that in a big sense, not a small one. I am quite optimistic.
Senator Johnson: Do either of you have a quick comment on how these rising economies view Canada?
Mr. Helliwell: The people I run across continually imply that it is very good. We get the same good ice that the Nordics get for roughly the same reasons: We do not have agendas; we have resources, ideas and goodwill. They do not have to watch their backs. They know we are not in there because there is some particular commercial advantage we are pushing. That is mostly the case, anyway. In general, they do not feel wary of our NGOs, our knowledge linkages or intergovernmental linkages. To have that backdrop of trust in this evolution of common approaches to common world-level problems is a real asset. To not use it would be a tragedy.
Senator Johnson: I like your passion.
Ms. Steger: I think that Canada is trusted and viewed as not having an agenda. I am a bit concerned, though, that we are losing influence in those countries. They do not view us as a major power, and I am a bit concerned that if we do not engage China, in particular, by developing a true China strategy, we might miss out on some tremendous opportunities. China could decide to simply ignore us. They do not consider us to be of great influence or importance in the world as a whole. We are riding a bit on our past influence and status, this general image that we are not the U.S. and that we can be trusted.
There is a narrow window of opportunity with China that could close soon. I and other members of the EDGE Network feel that we need urgently to develop a serious China strategy. We have not done that, which is a major problem.
Senator Johnson: That is what we are here for.
Senator Mahovlich: You mentioned quality of life and rated Canada as being quite high. Can we improve our quality of life?
Mr. Helliwell: Yes, for sure. We now have, through the good work of Statistics Canada, maps of the well-being of communities across Canada. We know communities where people experience high levels of satisfaction and we know that people need places and spaces to establish good connections with each other. We know that kids are better off if they are walking to school and not being driven. There are many big and small things that relate to the way in which cities are designed and used and the way in which public services are designed and delivered. Process is often more important than product. There are millions of lessons that come out of both the experimental side of this literature and also the survey side, with which I operate more directly.
Senator Mahovlich: You mentioned transportation and walking to school. I am from the city of Toronto where we have a problem with our traffic. Some new highways, such as Highway 407, have been privatized by corporations from other countries. Spain is one of them. They are thinking of building another bridge in Windsor and there will be private U.S. money. All the profits are going out of Canada. What do you think of privatizing highways and bridges?
Mr. Helliwell: The important thing about public infrastructure is less about who put up the money than it is about how the process is managed. For much of city design and layout and highways, those basic powers are still there. I do not think any government has done much in that area. Part of the problem is that it is difficult to get a reversal. We are luckier in Vancouver because we made an initial decision a long time ago not to have highways come into the city but to make the city more dependent on other forms of transport. It can lead to some traffic, but it leads to people living much closer to work and gives a sense of a city core that is more lived in.
I was describing earlier the things that Enrique Peñalosa, the Mayor of Bogota, was doing in his city — getting the cars back into their spaces, as it were, and letting people have human contact with each other. It takes a coordinated view if it is to work effectively, and we know it is important. If I rank all the cities of the country according to their wealth and size against their life satisfaction, the happiest cities are the smaller, quieter ones, not the biggest richer ones.
Senator Mahovlich: We have a lot of quality in Toronto, such as theatre and sports. We have everything we want. They built Highway 407 to get the transport trucks off the highways through the city, but because it is a toll road, the truckers will not use it. They continue to travel through the city and it is causing a real problem.
Mr. Helliwell: I was on a royal commission on transportation 15 years ago, and the biggest problem we had was that the prices of driving trucks, especially for axle weight charges, were not high enough. It was difficult to get past the trucking lobby. What had to happen was get those heavy trucks off the highways and piggybacked on the rail lines. That was the solution then and is still the longer-term solution. Develop better intermodal linkages so you do not have heavy axle weight trucks on the roads because they are killers of cars and roads.
Ms. Steger: I will not comment because I am not an expert on transportation.
The Chair: Some years ago, we negotiated NAFTA with Mexico and the U.S., which created an integrated economic system. Given the competitive challenges we face with the BRIC countries and others, would we be better off as an integrated North American economic block to deal with these challenges and this competition, or should Canada be looking at one-offs?
Mr. Helliwell: Neither. Canada should be looking at the global system. It was always argued when NAFTA came along, or the Canada-U.S. Free Trade Agreement before it, that it was to be a template for global arrangements. Unfortunately, the biggest spinoff has been other bilateral agreements. Canada was the leader in that, and these agreements have been very expensive in administrative terms and damaging in other terms because of all the rules of origin that apply within these areas. They have been a force stopping sensible integration of the world economy. You have to learn the lessons from that, which is, by all means be more multilateral and less linked to a specific region, specifically the North American one. I have been arguing that for quite some time. Your hearings support the notion that growth in the world economy is coming to the rest of the world, and we want to be there for both social and economic reasons. We will not do that as a North American bloc, as you can see by looking in an even trivial way at what we would do as a North American bloc.
Ms. Steger: I agree wholeheartedly. I do not think we should look only to North America. I have always been a strong believer in the multilateral system. There are such tremendous advantages and opportunities to doing business in other parts of the world. We are seeing what is happening in the U.S. economy right now, and so it is important to not be tied completely to that one economy and to diversify our investments and develop good trading relationships with other countries. Certainly, there are advantages to having a closer economic partnership with the U.S, but I do not think it is a reality. I do not think the Americans are interested in it because it is not a political reality. Therefore, we should be looking at closer relationships with other countries. We should be practical and pragmatic. As Mr. Helliwell says, we should look at where the growth is, at our diaspora and at the opportunity to develop new relationships to diversify our own relationships and interests.
Senator Stollery: We certainly have moved around here, from Highway 407 to Bogota.
Mr. Helliwell, I just have to get a word in for Mayor Antanas Mockus, who preceded Enrique Peñalosa and for whom many would give the credit for the renovation of Bogota. I agree — and I have known the city for 30 years — that it is unbelievable what one person can do in such a chaotic situation. When Mr. Mockus was mayor and the FARC threatened to shoot him, he had a heart painted on his chest that meant: Right here; let them try it. The FARC never dared to shoot him because he became so popular. Believe me, they shoot a lot of people in Colombia.
I wanted to go back to China, India and Russia. Privately, not as a member of the Senate, I have been to China, India and Russia. I know those countries a little bit. India has always been a major producer of cloth. There have been serious cloth mills since the 19th century. My family bought a lot of cloth from India in the 1950s. There is nothing new about dealing with these countries. We were just a family business, but we bought a lot of good cloth from India.
China and India are two very different countries. From my own experience, I see them quite differently. I know that recent growth rates are high in both countries.
Senator Di Nino and I were in Hong Kong at the last Doha Round, the Hong Kong ministerial conferences. I went birdwatching on the border. It was one of the most amazing sights I had ever seen in my life. I was on that border in 1975 when there was a railway station and you drank a lot of tea out of those big thermoses. I looked through my binoculars. The border is right across the bay. China is not more than a few hundred yards away. I do not want to exaggerate, but I would say there were 100 apartment buildings, 20 stories high, where there was once just a railway station so that people could get on to the Kowloon-Canton Railway. I can imagine the size of the container port. It is massive in Hong Kong, and I have known Hong Kong since the 1950s. The manufacturing is just unbelievable. I think that is different from India, but I do not know. I am out of date with India.
We do have a diaspora. For four terms I was the member of Parliament for Chinatown in Toronto when it was exploding and they had to change the gas line on Dundas Street because there was not enough gas for the new restaurants. They had to put in a new gas line. They ran out of pressure. I know that many successful Chinese- Canadians are now living in Hong Kong and in China, and there is a lot of contact there.
It sounds to me, from what you are saying, that we need about 50 Schreibers — salesmen. You know what they say about salesmen. Salesmen make the world go around.
We have to focus. It is all very well to talk about the environment and all of these things, but the question the committee is asking is this: In terms of India and China, for example, what can we do to improve what many people say is not good enough Canadian policy in an effort to increase not just our trade, which is important, but to contribute to the recognition that the world is changing, that the world of 50 years ago no longer exists and that a new world is developing in India and China?
Again, I am talking about India and China. Russia is a producer of raw materials. It is quite different; very interesting but different. We know about Vietnam and Singapore, but let us concentrate on the countries with huge populations. What can we do to increase our consciousness and change Canadian attitudes toward this emerging world? I focus, as I say, on India and China and one can throw in Russia, but let us not go to Bogota.
Mr. Helliwell: Fewer and fewer of the linkages I am studying and talking about are done state to state; more are done people to people, community to community and firm to firm.
I think you are right to emphasize the manufacturing basis of China. Growth has not come that way in India. There is a debate in India as to whether they should be using industrialization in the manufacturing sector as a way of doing that, which would then acquire more links of that sort with countries like Canada. Others say no, that India has the capacity and the option, coming from where they are, to leapfrog into a more post-industrial society. To the extent they do that, I think that provides many more open doors in the Canadian context. The role of government at that point is more about facilitation rather than leadership or direction.
It is always helpful to remember that are those very large countries. They are not just countries. Either of those countries, in any other distribution of geography in the world, would be many countries. India would be many countries, as well as China. They just happen to have a supra level of government. What goes on in the provinces of India and China is so diverse that a lot of the real contacts that matter will be done at that level and far below.
Ms. Steger: I think we should focus on persons. I agree wholeheartedly that we should not focus on just trade. Much of the economic activity that we see is through investment and not so much through trade, in any case.
One area that will be very important in the future is that of the movement of persons. Here I am talking partly about the diaspora. People move around a lot more than they used to, and there are real problems in terms of companies moving people around and individuals wishing to work in other countries. There are real problems with mobility because of immigration, visa restrictions, lack of recognition of professional credentials and those kinds of issues. That is one area where Canada could make a real contribution. We need international rules in this area. Mobility is happening, but it can be difficult and can hamper progress with companies. They have great difficulty, even their CEOs. I am told that Tata has great difficulty sometimes with profiling and their executives moving around and entering countries to do business on a temporary basis.
Recognition of professional credentials is very important. I have talked to taxi drivers in Ottawa who are oil and gas engineers. I am told there are four or five taxi drivers who drive for the airport taxi company in Ottawa who are oil and gas engineers. Why are they driving taxis? These people issues are important.
The Chair: I am sure that both of you have realized that we are still trying to focus on this issue. This is our first meeting after a long layoff. We are looking at this subject matter as a potential topic for a major study by our committee. Both of you have been very useful in helping us to start to focus. I think my colleagues will agree that some of the thoughts we may have had a couple of weeks ago when we spoke about this topic are beginning to change. You have helped us to take a look at this issue in a clearer way. Over the next week or two, before we rise for Christmas, we will have a better idea of how we want to proceed. I agree with Senator Stollery; we are all struggling a little with all of this information, but you have been very useful and helpful to us. We want to thank you for joining us tonight.
Mr. Helliwell: Seeing the tree in the background, I take this opportunity to send the best of season's greetings to all.
The Chair: To you, Professor Helliwell, and to Professor Steger, best of the season.
The committee adjourned.