Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 2 - Evidence - Meeting of December 11, 2007
OTTAWA, Tuesday, December 11, 2007
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 5:37 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: I welcome everyone to this meeting of the Standing Senate Committee on Foreign Affairs and International Trade. This committee is currently examining the emerging economic influence of China, India and Russia, and Canada's policy response.
To help us better understand the issues surrounding this topic, we have with us this evening Mr. Michael Murphy, Executive Vice-President, Policy, Canadian Chamber of Commerce, and Mr. Zeiler-Kligman, International Policy Analyst. As well, we have Mr. John M. Curtis, Distinguished Fellow from the Centre for International Governance Innovation.
We will commence with opening remarks from our guests and then we will move to questions from the members of the committee. We are not in any particular hurry but we may all have to be in the Senate by 7 o'clock, so we will try to put a bit of a time pressure on ourselves to have this meeting end around quarter to 7 or so.
Michael Murphy, Executive Vice-President, Policy, Canadian Chamber of Commerce: It is a privilege for my colleague, Mr. Zeiler-Kligman, and I to be here with you today. We thank you for the invitation.
The Canadian Chamber of Commerce believes that these three countries present opportunities as well as challenges to Canadian business, and we would like to talk about that this evening. At the direction of our board, the Chamber has turned its attention to both China and India, in particular, within the last two years. The result has been two strategy papers outlining practical strategies and solutions driven by grassroots input from Canadian business. This has substantially increased the bilateral trade and investment relationship with each of these two countries.
We brought with us copies of each of these strategy papers as well as a one-page synopsis of each. I think members present here today and honourable senators will have copies of that.
We believe that all companies, regardless of whether they intend to enter into any commercial activity with India or China, should understand the impact that competition from both these economies will have on their business in Canada, their business in foreign markets where they are active, and in China and India themselves. It must be acknowledged that it is not in every company's best interest to pursue these markets. Unfortunately, the majority of Canadian companies, including those active in these markets, have not stopped to consider these effects enough.
With respect to China, we found that to substantially increase our commercial relations, just as much is needed to be done in Canada as in China. Improvements need to be made in our transportation infrastructure, which is something that the government has started to address. Canadian officials also need to recognize the reality of the inseparable nature of the Chinese economy and state, and how decisions made in Canada in one area will have a direct impact on the other.
With respect to India, we found that beyond the need for improvements on our infrastructure, the majority of the barriers to our bilateral commercial relationship were in India. It would be a mistake to dwell on this as the time for Canadian companies to engage in the Indian market is now. If we wait for optimal conditions in India, Canada will miss out. At present, companies from other countries are investing in India and finding ways to compete there.
Given our research on China and India, the Canadian Chamber of Commerce is more familiar with what is needed in respect of these countries. However, in our remarks today we would like to emphasize four key points that are pertinent for China, India and Russia.
First is the need for a pan-Canadian strategy and action plan. A dialogue needs to occur between federal, provincial, territorial and municipal governments and businesses to develop a forward-looking strategy toward each of these countries. We have seen a plethora of federal and provincial visits to India, for example. However, these do not seem to be part of an overall framework, nor is there a means to ensure consistent messages are being conveyed. We must understand that the real competitors are not the companies next door but international ones.
Second, Canada needs to make a strategic focus and approach to its international strategy. This strategy should be developed in consultation with, and reflect the priorities of, Canadian business. It is unrealistic to expect a small business to enter multiple markets at the same time, and we must recognize that Canada cannot successfully implement market strategies in all economies at the same time. There is a clear need for prioritization, which should come from formal consultations with Canadian business on this topic. The specific market strategies developed should target those sectors where there are Canadian strengths and our resources could be put to greatest effect. Increasing the presence of our trade commissioners in these strategic markets in second and third tier cities would complement these strategies. Given our small footprints in China and India, it is our recommendation to ensure that we keep our focus on these countries.
Third, the federal government needs to support its international ambitions with adequate resources. The Chamber of Commerce applauds the government's global commerce strategy recently announced which devoted $60 million in the last budget. We believe that is a start, but greater commitment will be needed to underpin a successful international strategy. While Canada has devoted much to our commercial relations globally, many of our competitors devote much more funding to their relations with a single country. While it is good to see that the federal government has a global strategy and that committees such as this one are considering our international engagement, it is now time to actually back up these words with the required resources.
Finally, we need to remember that, to succeed internationally, we need to be strong domestically. A successful international strategy begins at home with an evaluation of our domestic policy to ensure it facilitates international commerce. Our international commerce policy should be intrinsically linked to our domestic policy and be seen as an integral part of Canada's economic strategy. Consequently, we need to put our house in order, which includes such measures as the removal of barriers that prevent a single Canadian market and a clear commitment to addressing infrastructure requirements in Canada. We applaud the government for unveiling a gateway strategy. However, much more is still needed even in this area.
These are some of the comments we wanted to make. We will be happy to engage in a dialogue and answer any questions you may have. Thank you for your time.
John M. Curtis, Distinguished Fellow, Centre for International Governance Innovation: I do not have a prepared statement but I would like to make ten points to help the committee reflect on what might be part of its work plan.
I am a part of the Centre for International Governance Innovation, established by the RIM, Research in Motion, Co-CEO Mr. Jim Balsillie with the help of the governments of Canada and Ontario. We are working on China, India, Brazil and Russia, the so-called BRIC countries. I am hoping the committee will feel free to draw on our extensive research.
The first point is that this is the beginning of an Asian century. Canada will have to adapt to this concept. Napoleon said, "Let China sleep, for when she wakes, she will shake the world.'' That is what we are going through now. Put in a very Canadian context, I suggest that perhaps the CPR was built 100 years too early. We are entering what the builders of the CPR thought was a road to Asia. Maybe Vancouver is not the end of the line but the beginning of our bridge to Asia. Therefore, the Pacific gateway to which Mr. Murphy referred was very appropriate.
Second, the four countries mentioned are significant because they are large and they are growing. All four of them already have a gross national product of more than $1 trillion. This is big. They are different from the other developing countries. What we used to call the Asian tigers — Thailand, South Korea, Hong Kong, Singapore, et cetera — are very dynamic. However, the four BRIC countries are particularly large and, I think, therefore deserving of attention, partly because they are large.
Third, they are regional centres of powers. Brazil is a regional centre for Latin America, although some Spanish speakers will not agree. Russia is a regional centre for central Asia, in competition with the Chinese, and the Americans to some extent, over that commodity that the British were concerned about in the 1920s when they set up Iraq — oil.
Similarly, India is the centre of the subcontinent. Its neighbourhood is difficult, but it is a regional centre. China is in competition with Japan, which is pulled both ways. It is pulled for security reasons across the Pacific this way, but for economic reasons it is pulled the other way, and China is increasingly the regional centre of Asia.
My third point is that we are talking about major economies, but we are talking about centres of regionalism as well, with very important foci of activity.
Fourth, all of these countries are large traders in the world economy. Their volume of trade is increasing very rapidly. We know, of course, of China, but all of them are becoming major traders in the world economy, almost double the size they were collectively a decade ago. They are also well-heeled in financial terms. The Chinese control $1.4 trillion in so-called sovereign wealth, to which Mr. Murphy referred indirectly. This is big stuff, and it is very important.
Fifth, because they sit on so much wealth, even India and Brazil, they are becoming major investors abroad. Their multinational enterprises are becoming significant factors in the world economy. It is an important factor that multi- national enterprises in the so-called BRIC economies are becoming major players in the world economy. This is something that we struggle with because many of them are state-owned, and we are not always sure of their practices. How to respond and integrate them into the world economy becomes a matter of public policy.
Sixth, because of increased information and communications technology in the world in general, these countries and other dynamic emerging economies are becoming part of what we call, in business economics, "global value chains.'' They are all becoming part of elements of the world economy. Increasingly, we worry less about goods and services being traded and more about various specific activities taking place anywhere in the world, including particularly in China, which to some extent is in fact becoming the workshop of the world, much of it with the United States, Japanese and European Union money. It is all part of the global value chain, and one question I suggest the committee might reflect on is where Canada fits into the global value chain. How do our small- and medium-sized enterprises fit in? What about our bigger enterprises? Should we have the same instruments of policy and the same export financing? How should our trade commissioners involve themselves in the global value chain of which, as I said, these four large economies in particular are all part of.
The seventh point is that the growth of new, emerging economies tends to be very commodity intensive and energy intensive. We know what happens when demand increases for resources in energy — the price goes up. That is exactly what we are seeing now, and this will go on for a significant period of time. We went through a low commodity price period in the 1970s, 1980s and 1990s. Our dollar, being to some extent a resource dollar, reflected that relative decline in prices. The reverse is now taking place and it is largely driven by these big economies with a demand. Of course, that affects the international value of our dollar, as well as that of Australia, New Zealand and South Africa. This is not permanent, but certainly in the foreseeable future we will have a fairly high valued currency in terms of other currencies.
That leads to the discussion that some senators may have seen of the decoupling of Canada from the United States, which I think is overstated, but it is clear that there is a medium and long-term increase of prices because of the energy and the resource intensity of growth in these economies.
The eighth point I would make is that there is also a price point, but quite the reverse. Do not forget that the benefit of these economies coming into the world economy, with hundreds of millions of people joining the world economy, means that consumer prices in the OECD and G7 countries such as ours are much lower than they otherwise might be. It is the so-called Wal-Mart affect. The downward pressure on consumer prices in Canada, the United States and Western Europe has been staggering. The increase of the price of oil, for example, which was so devastating in the 1970s, was not nearly as bad in this decade partly because we use less energy per capita relatively, but more important is the flood of goods and to a lesser extent services from these four big economies, particularly from China, having a major positive impact on our prices and on the consumer well-being of the individual Canadian.
The ninth point to bear in mind echoes what Mr. Murphy said. Good policy begins at home. Therefore, if we participate more fully with these emerging large economies, then we must ensure that our infrastructure, such as our Pacific gateway, our railways and trains, our human resource skills and training, are world class because soon in the future there will be an enormous number of highly trained Chinese engineers and a whole range of Indian software manufacturers and individuals. This will increasingly be the reality of competition as time goes on. It is something we must deal with. I am not saying this is good or bad, but I am saying that this is a reality of the labour markets of the world. We will all be affected by it in different ways. Some wages will go up in our part of the world and some will go down. It is just part of the evolution of the international marketplace.
My tenth point, and one of the senators present here will remember my views on this because I think these changes are so complex, so big, and Canada has so many opportunities in this context and changes to face, together with the rest of the western world, that I would suggest the committee might consider proposing, ultimately, a serious, forward- looking review — call it a royal commission or commission of inquiry — into the future of the Canadian economy. We are at a very important point in our history. We are in a sweet spot economically, but it will not last forever. This is the time to reflect on how we will respond positively and enthusiastically with our young people, through our languages, our human resource training, our investment policy, our trade policy, our infrastructure policy, and even our health policy. Many of these countries are developing strong computer and health services, health at long distance, and all of this is on the plate. I suggest it could be very helpful in this period of major transition, where Canada relatively is not as large and will be less large. By 2050, five of the top 10 economies of the world will be Asian economies. We are not on that list in terms of the size of our economy. We have all sorts of change going on out there, and it might help the public to understand that this is not necessarily a bad thing at all. We can take advantage of this.
The Chair: I thank you both for your very interesting presentations. We will now start with questions from the senators.
Senator Dawson: You both mentioned separating what we have to do here and what we have to do over there, "over there'' probably being all different. Senator Johnson and I are on the Standing Senate Committee on Transport and Communications, and we are studying the question of gateways and containerization. What do you think should be done on those two issues? The gateway aspect is important, but the modernization of transport via containerization is changing the way that people deal with and import and export products. Could you make recommendations as to what should be done? When we look at ways to invest in the gateways, whether it be Halifax for India or Prince Rupert for Asia, should we consider foreign partnerships? You mentioned sovereign wealth. If governments do not have the aggressiveness to want to invest in port and train infrastructure, should we consider foreign partnerships?
What should we do for commercialization? What kind of staff should we send? In what country should we raise Canada's profile in respect of commercial agents?
We will also have to address prioritization. With regard to the wonderful opportunities offered in the BRIC countries, should we consider prioritizing one over the other?
Mr. Murphy: There are many questions, opportunities and things to talk about that are quite important to the positioning for our country. The overall context is Canadian competitiveness, and a number of measures need to be taken to ensure our standard of living in the future. One enemy we have is saying that things are not bad. In our presentation today, we did not spend time speaking to where Canada sits in a global environment. We need to look at some of the macro-fundamentals, which are quite good, and that might lull you into a sense of complacency. I do not think it should, and we need to keep our eye on it. Competitiveness is the challenge.
I will start with your first question on transportation infrastructure, in particular as it relates to gateways. Government got off to a very good start with respect to the Pacific gateway. We have had not only an announcement about its importance but also some significant resourcing to back it up. We had a couple of announcements over the last couple of years and another one this spring. We are into about $1 billion over the next several years and some idea on where we want to apply our resources, from Manitoba, essentially, to B.C.
We have two other focus areas on gateways that are important as well. First, we have the Atlantic gateway with its connection between the Port of Halifax and India. The Port of Halifax has a strategy with respect to dealing with India in a pretty aggressive way. From the federal standpoint, it is in the early stages, so there is more to talk about. Second, we have the central gateway, which includes Ontario and Quebec. There is significant strategizing and resourcing to do in that regard between now and the time that we build our overall strategy.
Sovereign wealth funds, state-owned enterprises and foreign partnerships are very important in terms of dealing with the essence of investment in Canada. Recently, we answered the government's questions on this so I will not take too much time to talk about these.
We will have to be very creative on the question of investment and infrastructure. We talk a lot about P3s — public- private partnerships — that can come in many forms. We have seen them in various parts of the economy, at times in transportation. That is part of the answer. We submitted our comments to the government about three weeks ago and Minister Prentice just made an announcement about state-owned enterprises and relevant government policy last Friday in Calgary. We were very pleased with the nature of that announcement.
In terms of our investment review, it persists not only from China and other countries but also from state-owned enterprises around the world. I believe we have some 28 such enterprises operating in Canada today that provide valuable capital and expertise to our economy. We need to encourage that, but we did not need the sense that we were about to discourage that or make it more difficult through the Investment Canada Review and the net benefit test under the act to add to the burden of investment. In both of those cases, we would be looking at regulations.
I did not spend time on this in my initial comments, but regulation is hugely important. In terms of infrastructure, one of the difficulties we often have in Canada is approval for major capital projects and how difficult and complex that can be. That issue must be on the table when we look at our domestic side.
Concerning our priorities for countries and where we need to beef up resources, we have put a focus on China and India of the four that Mr. Curtis mentioned. We did that for a couple of reasons, one being member feedback. We spent quite a bit of time talking to our members. Everyone's major priority is our relationship with the United States; that goes without saying. There are many issues in terms of that relationship but we will not have time to get into that today. Thinking outside the NAFTA relationship, China and India were the two countries that came back to us via feedback from our members across the country on where they want us to spend time and about public policy barriers to improving trade and investment. That is why we picked those two. We have suggested in both of our papers that the government think about resourcing on a greater basis into those countries, not just in capital cities and other major cities but in some of the tier-two and tier-three cities. If we were asked to prioritize, we would put China and India on the list.
Mr. Curtis: I certainly agree with virtually everything that Mr. Murphy has stated. I would emphasize two points. One is the importance of regulation. When I said that one starts at home, it includes the regulatory environment, not to say we have to harmonize with everyone else or have to get rid of all our regulations. These are important elements of Canadian public policy. However, we must ensure that our regulations — health and occupational safety, weights and measures, or whatever — meet international rules, being part of the World Trade Organization and other trade groups. As well, they should be pro-growth and pro-trade, while protecting our existing social framework and social policies. This is not to say that we should just let the market rip. Rather, it means that we should be quite careful and be certain that our regulations are reviewed in the context in which they should be. One does not have to worry overly about foreigners buying up everything, et cetera, because we have national sovereignty over our regulatory regime. We can insist on certain rules about transparency, corporate directors and the whole list of corporate social responsibility, and that is fine as long as whoever owns it behaves in the way that we want them to behave, according to our values and our system.
In terms of priorities, I will answer the other one quickly, Mr. Chair. I have not done surveys, but as a professional economist I look at the statistics, look at the numbers, and China stands out. When you look at who is trading most, you look at all the numbers that I have here, and China is probably five times more involved in the world economy than are India, Brazil or Russia. China, in a sense, is the story — not to minimize the others, but China is the issue. However, I would not look only at the country to answer the question finally. I would urge the committee, as you think about your work program, to focus on what I call the global value chain. There are bits and pieces of activity in which Canadian-based enterprises and firms can be involved, not only in China and not only in the various provinces of China but everywhere in the world including, of course, the United States.
It is a matter not of country focus as much as what should our trade commissioners be doing in the future, what our investment promotion guys and gals should be doing in the future. I would suggest that they need retraining; skills to focus on those areas of Canadian competitive strength and where we can participate effectively in the long term, particularly our small- and medium-sized businesses that do not have all the information. It is impossible for them to have all the information.
That is where government has a role to help bring information to bear so that they can participate in every aspect of the global value chain, right from research and development through commercialization, through product development, through services and helping production to after-sales service. This is all part of the chain.
Canadians are everywhere, and I think they need to be supported where there is market failure: in effect, where we do not have as much information as desirable to enable small company A or medium company B to benefit from those skills by getting into those markets.
The Chair: Regarding the state-owned enterprise and the clarification of the rules on it that Minister Prentice outlined, we had some comment from Mr. Murphy. Do you have a thought on that? Are we going in the right direction? Mr. Murphy commented; I wonder if you, Mr. Curtis, would care to comment?
Mr. Curtis: I have not followed it closely. My sense is that, yes, it was in the right direction. There is always the danger for any government, of any colour in any country, to be overly protectionist. My sense, from a cursory look at what the minister set out, was that in fact the direction was towards making use of investment. Also, investment is more than money; it is management skills, access to markets and the whole ball of wax. I sense that this was a step in the right direction and it was not nearly as protectionist as it could have been, and by saying that, I am not suggesting that it would be for Canada but for any country.
Second, it gives certainty and predictability, which is what rules are about. Either your domestic or your international rules are to bring stability and predictability into the economy, and that is what investors need.
Senator Downe: I thank the witnesses. There is a host of questions we could ask. Mr. Murphy, in relation to these trade officials that you spoke about, and the need for them, I appreciate your comment that most of our trade is currently with the United States by a large margin. As a government, we have not invested in many trade officials. Mexico, for example, has many more trade officials in offices throughout the United States than does Canada. We often hear from the business community — and I will make the argument simplistic in the viewpoint, although it is more elaborate when they make it — that we do not need bureaucrats trying to do business; we need business people in these countries doing business. How does that square with your view that we need more trade officials in these developing markets?
Mr. Murphy: We have had some direct contact with some of our representatives, and more recently related in particular to China and India, and I look at the horsepower that we have in the trade commissioner service, for example, and I am a believer in the trade commissioner service. I believe they perform a very valuable service for our members across the country, and they do it in different ways. Obviously, this is an area that is part of what is strained in terms of budgeting and looking at resources, and we have closed some offices in some countries — Japan, I think, if I am not mistaken, and Italy — and we have beefed up in other locations. That is part of the challenge here. Obviously, we will always have those kinds of resourcing challenges.
However, I am a believer, and I think our members have had good value. We could give you some specific examples. We hear lots of good things from our representatives in these locations. I can recall one particular session that Mr. Zeiler-Kligman and I had last summer on this India paper. One of the things of which we try to take advantage, when the trade commissioners get back into Canada, as they do from time to time, they will make themselves available to us and to others in the business community and other stakeholders. We take advantage of that and the opportunity to pick the brains of people who are on the ground and have a day-to-day understanding of what is going on in those countries and what we can do to improve our competitive position. I have found that to be very valuable, and I know our members have as well, because they have told me that.
Senator Downe: In your opinion, then, and I agree with the view I am hearing, it is really an investment; it is not a cost to the government?
Mr. Murphy: I would say so, absolutely. We have certainly encouraged additional resourcing in that area. If we are to think of China and India in a strategic way, it must be part of the answer here. It really must be.
Senator Downe: Mr. Curtis, your intriguing comment about the need for a royal commission is very interesting, as well as your opening statement that we are on the verge of the century of Asia. We talked about foreign state-owned enterprises operating in Canada under our rules. Are you concerned about the stability of some of these countries we are talking about, the corporate governance? We hear, for example, about riots among the large peasant class in China; we hear about corruption in Russia; India is a democracy, but other countries — with the exception of Brazil — are not. Do you see that playing out as to how it relates to our trade with these countries, over time?
Mr. Curtis: It is a concern for me as a global citizen, but I do not think it relates particularly to the operation of state-owned or their quasi-privately owned movement of capital. I would think it is more a concern for their prospective economic growth or social development, their internal stability, but probably not overly related to the state-traded investment that we have been talking about because, if you know the Chinese or even the Indians, they are as profit-oriented as anybody else is. I do not think that is a serious problem in that context. It is serious in other areas, as I say, and it is not clear to me that there will be the kind of growth — or, negatively put, the environmental consequences of their growth should not be ignored. However, in the context in which you asked the question, yes, I am concerned more as a global citizen than I am of the potential of their investment in our countries or how their multinationals will operate in our countries.
Senator Downe: I am not clear on one point, and you may not be able to answer this question, Mr. Murphy. I think you referred to 28 state-owned corporations. How are these identified? If someone is coming out of China and they are senior officials and they have a company, do we know if it is state-owned or do they tell us it is state-owned?
Brian Zeiler-Kligman, International Policy Analyst, Canadian Chamber of Commerce: The figure for 28 state-owned enterprises operating in Canada actually was information we got from Industry Canada, from the actual investment review branch. It is part of the requirement of companies seeking to make investments in Canada that they do have to provide information as to their owners and who owns equitable stock in the company.
Senator Downe: That is a question better asked of Industry Canada, but it is quite clear that people could be playing fast and loose with the rules, too.
Mr. Curtis: If I may, the real key is thinking what is owned and what is controlled. The control factor is probably more important, senator, than the ownership issue. When you look at China, it is fairly difficult to sort out control. Normally, without overstating it, many Chinese economic enterprises have some sort of tie to government, and it is difficult to distinguish them. The real issue for the receiving country — Canada, in that context — is who controls the capital? It is a broader point. Historically, those trained in economics were taught that capital is largely private, and that it is purely the movement of money and management skills, et cetera. Once it is state controlled — and we have not sorted this out in our discipline yet — there is an issue.
The committee might want to consider whether state-owned/controlled capital is different in substance, and therefore carries policy consequences and implications other than what we consider historically to be capital that is largely privately owned. That is a major question. The discipline has not sorted it out, and no country has sorted it out.
Senator Downe: That is most interesting. The easy definition of `private' would be the pursuit of profit. State-owned capital might have a different policy objective — supply, influence of public policy, and so on. It will be an interesting study.
The Chair: In the challenge to compete for opportunities in BRIC and other countries, should we consider a North American strategy in cooperation with the NAFTA countries to better compete with some of these larger emerging economies that we face, with particular emphasis on China and India?
Mr. Murphy: We threw that idea into this paper as a way of being more strategic in our outlook towards China and India. We had a number of suggestions on how to structure an approach to thinking more strategically, including appointing some senior level resources in the government to act as point people to do that. We also raised the prospect of thinking within our trading relationship in North America, with Canada and the U.S as well. It might present some strategic advantages. That in itself is a significant objective.
We have had the experience in the last couple of years of the Strategic Security and Prosperity Partnership, SSPP, with three meetings of leaders within North America, the last one being in Montebello last summer. We have a long list of challenges among the three countries in trying to work on regulation, infrastructure and border changes, which is probably the number one issue. We would have to get those resolved before we think about how to work strategically together to deal with other trading blocks — the EU, China or India. In other words, we must deal with domestic policy first, and that would be part of the challenge.
Mr. Curtis: If I may, my overall response would be no, we should work largely on our own, but not exclusively, for a couple of reasons. I am sure senators recognize that we are integrated with the United States in several sectors but not in all sectors. In those sectors where we are integrated for historic and prospective reasons, I would say, yes, but I would make it a sectoral policy overall. In terms of using NAFTA, whether we use the United States as a whole, I would say the answer is, broadly, no. I should not say this as a former official in a protocol-based ministry, Foreign Affairs and International Trade, but the United States' moral authority is at an all-time low, frankly, and we have to recognize and understand this.
As well, our involvement with the United States multilaterally, relative to the world, is such that the market will take care of it. We do not need any public policy to drive the NAFTA and, indeed, if we extend it to Mexico, our partner in NAFTA who is so nervous and preoccupied with the Chinese threat, it will undermine any kind of positive approach that we would take to China or India.
I would minimize that except in particular sectors, for example research, which could be part of the broad agenda. Recall, senators, that our merchandise trade peaked with the United States in 2001 at 87 per cent and combined goods and services at 82 per cent. It is now at 75 per cent and 74 per cent respectively. It is declining rapidly because of the growth of these other countries. I would not jump automatically into saying that we will do everything the Americans do. I would do that when it is to our advantage, as they will do with us, and not use it when it is not to our advantage. As I say, their international and moral credentials, I would suggest, as reflected in other things such as in their dollar, is at an all-time low. Certainly, it is the lowest since I have been around.
Senator Johnson: This is such an amazing subject. We are enjoying a nice time in Canada right now economically. After listening to you, I sense that we are slow to recognize that the Asian century is coming upon the world. Where would we be on the scale in terms of government and business recognizing what has to be done in this respect? We cannot study this and do what is appropriate unless we know. A commission on the economy is an excellent idea. Who knows where it is truly at, given what is coming down the line? Where are we now? You have given us a lot of great information but I still do not know where we are, relatively speaking.
Mr. Murphy: Are you thinking in terms of whether this hits the radar screen as a key priority?
Senator Johnson: I am wondering whether Canadian companies are becoming more active in investing in the global supply chains, for example, located in the countries we are talking about, specifically in Asia. Is there still considerable reluctance in our business community to focus investments outside of the United States and the European settings?
Mr. Murphy: I think it is ramping up, quite frankly. If we were sitting here two or three years ago when we first started doing our work on this aspect, we would be looking at a very different picture. Clearly, we are focused on looking at public policy and barriers to improving trade and investment opportunities between our two countries, whether it is India or China. Therefore, our messages tend to be focused on government.
One of our primary reasons for engaging in the work was to talk to our members and to put the material before them. We not only produced the paper but also we did an extensive consultation exercise with our members. We held two policy summits, one in Calgary and one in Toronto, on each of these areas. It brought a number of members together along with other thinkers from various segments of society. That did a lot to raise the bar, so I would say that it is, from our own members' standpoint, definitely a business challenge. It is clearly marked by one significant factor: The number of small- and medium-sized enterprises in our economy, which differentiates us from the United States. That presents a bit of a unique issue, and is part of the reason why we were very hawkish in terms of the number of resources that might be required here to help Canadian companies. However, I think we have moved the yardstick there.
I would say the same is true in terms of dealing with government. We struggled at the beginning of this exercise to get the message heard. I do not know the numbers anymore in terms of how many discussions we have had about this matter now in town, but it is very significant. I think there is a great appetite within government to try to think much more strategically about these economies.
Senator Johnson: You have been giving more tools to Canadian businesses to take advantage through the programs you are running. Is government doing this? Are we enhancing this? Do you know?
Mr. Murphy: We talked gateways, for example. Dollars have been put there. I mentioned the global commerce strategy and we have not spent a lot of time talking about that. It is a relatively new initiative. I think I would be right if I said that there is $60 million in the budget for that this year. It is a new initiative within Foreign Affairs and International Trade. It has some promise. We have certainly exposed the thinking behind it to a number of our members. I think it would be safe to say that the response has been positive. It is a start, but not the end result. We have interesting examples of a country such as Italy, and the resources that they were intending to dedicate in India, in terms of marketing Italy in India or helping Italian companies do business with India. Compared to what we are doing, it is just staggeringly different. We have a long way to go here. To start down a road where you deal with solutions, you start with understanding the nature of the challenge, raise the educational level about what is important and why, and hopefully then start to get the resources flowing.
Senator Johnson: Is there a fear of the state-owned capital side of it with regard to our business people and dealing with that situation?
Mr. Murphy: In terms of Canadian companies?
Senator Johnson: Yes.
Mr. Murphy: No, not at all. Mr. Zeiler-Kligman and my staff just spent quite a bit of time talking to a great many of our members across the country to help us pull our comments together back into Industry Canada, prior to them announcing their policy, and it was a very good exercise. The winning card here is the fact that we need to continuously encourage foreign direct investment into our economy. That is the overall guiding principle here. Our concern was, if you went back two or three years to the Minmetals example that generated so much fuss, a lot of good, deep thinking has happened since then and the right approach has now been taken. I am encouraged by that.
Mr. Curtis: My first point is it is not only business but also the generation behind most of us, the younger generation that is not necessarily in business yet, but the amount of travel, certainly in my own family, that the young people are doing. They are not as interested in going to France, Germany and Britain. They are all going to Asia. They all can use chopsticks much more effectively than our generation can. This is on-the-ground kind of stuff, but there is a slow understanding of the importance of Asia amongst our young. The study of Mandarin is increasing in the Ottawa public school boards. Calgary and Edmonton both have first-class Mandarin programs for non-Mandarin speakers. Technology will increasingly be written in Mandarin, not necessarily in English or German. Therefore, the next generation will have to understand that and use it.
That is with respect to the young. The other point, going back to Senator Dawson's question earlier, I think one thing this committee could consider looking at is whether, with respect to the trade and investment commissioners, a different skill set is needed for China and India, for example, than with the United States, which is a different way of answering your question. In my own view, we need more political officers in the United States going to chambers of commerce, citizenship groups, high school groups, but those are largely political trade officers. What you need in China and India, particularly in China, are highly trained investment prospectors and those who can help fill in the information gap, which is much deeper. That might help the government look at trade commissioners and investment commissioners of the future.
Senator Johnson: That is a good point. In terms of infrastructure in this country, what about our dear port of Churchill, Manitoba? The Russians came in with a big ship two or three weeks ago, and they did not even have a forklift to take off the load. We are getting a lot of comments about that port in terms of the northern nations too, particularly with respect to Russia and Scandinavia. What do you think about that in terms of development on the infrastructure side in relation to ports?
Mr. Murphy: To be frank, no, we have not got into the specifics of talking about the individual ports. Everyone talks about Prince Rupert, Vancouver and Halifax as part of the discussion. The reality, in terms of the so-called Northwest Passage, in terms of increased shipping in the North, the reality is that Hudson Bay will become an opportunity there. Then it is a matter of how to connect Churchill to the right kind of infrastructure, and to think about a link down in through Chicago.
What does the term "gateway'' mean? It is a gateway to something. The gateway for us to something is not only into our own country from Asia but also into the United States. That must be part of the thinking here.
The Chair: To round out the information, our researcher tells me that your report, Mr. Murphy, says that Italy is investing 300 million Euros in their Go India project to help small- and medium-sized businesses. Italy being the country of my birth, they have a secret weapon and that is Sonia Gandhi, who was born in Italy, and that is why they are all rushing over there.
Senator Stollery: This is a very interesting topic. It is hard to know where to start. In my mind I have excluded Brazil. I know that the acronym is for Brazil, Russia, China and India. I do not exclude it because it is not important. I know it well and I am fluently Spanish-speaking, though not Portuguese, although I can read it and understand it. For the committee's purposes, though, it is sort of there. The others are here and it is there. I have a sort of map in my mind.
Senator Di Nino and I were at the Doha Round ministerial meetings in Hong Kong about two years ago. The first time I was in Hong Kong was in 1959 or 1960. We went to the meetings with 10,000 other people and I took a day off. There is quite a famous swamp between Hong Kong and China, on the border. It is a World Wildlife Fund place. I am a bird watcher. I took my binoculars and I went off and it was very interesting. To get there, I had to take the underground, the subway to the train station. I had to take the train, which is in the new territories. As I say, I have known Hong Kong for a long time, from colonial times, and I had a friend who was with the Hong Kong police. The changes were unbelievable, from what I remembered from before. I am glad I did it because I never would have imagined an underground system far superior to what we have in Toronto, London or Paris. The quality of the trains to the railway station and then the train to go to this place where I had to get off and get a taxi was unbelievable. Then there is a boardwalk that goes for several miles. They have these blinds and you can sit and look at the water and just over there is China. It is not more than maybe half a mile or so.
As I was saying, the last time I was there was in 1975, and I was in a railway station. You sat and drank tea out of thermoses while you waited for the train to change the bogies to go on the Canton-Kowloon railway. It was unbelievable. There are 50 or more 20-storey apartment buildings behind the station. The size of the container port in Hong Kong is huge. When you land at the airport, you spend 20 minutes going past the container port. I was told that much of the manufacturing is there at Shenzhen.
I wonder if the committee can really seize on the significance of all this without actually travelling a bit. It is amazing. I have taken the train from Beijing to Moscow. It was a seven-day train ride. How do we engage with such a massive land mass? Russia covers eleven time zones, and Asia starts on the east side of the Volga River. We say the divide is the Ural Mountains, but as much as anything, it is the Volga.
What our witnesses are saying is important to Canada and to our future. We heard testimony that trade commissioners were completely useless. I forget who said they never do anything.
Mr. Curtis: It was Michael Hart.
Senator Stollery: Was it him? They used to have people called political officers, POs, in the British colonial service. There were the POs and they made a distinction between the consular services and the diplomatic corps. Is that not important to have someone in country who has a handle on the situation? Or is Michael Hart right and it is all useless?
Mr. Murphy: I will stay with my previous answer. I think that we have some very good resources. I have met some of them. We have members who deal with them continuously. I respect the feedback I get from my members telling me that if it were not for some of our people on the ground, they would not have done as well as they have. For example, in India, I have heard some of our financial services companies, who do well and are well established there, say this.
You mentioned local resources. That is part of the reality of dealing in countries like China and India. Who will you partner with and what kind of relationship do you end up having with someone who knows how to do business there? Hong Kong has presented an interesting opportunity as a gateway for doing business in China. A lot of our members have chosen that as a stepping stone into mainland China.
Mr. Zeiler-Kligman: Trade commissioners are important in China because it is often necessary for your Chinese partner to see that there is government involvement or backing for business to be conducted. Until the relationship is created and established, some Canadian government involvement is needed for that initial contact and connection to take place.
Mr. Curtis: I think it would be useful for the committee to consider our resources abroad relating to trade and investment, partly for contact on the ground and also to look ahead. In economics, we call that market failure. It is more difficult in China than in the United States. Different types of skill packages are needed for different things. I hate to sound radical but you can look at privatizing certain of those services. Private consultants can work in certain countries which would save government resources for where they would be most useful, or where such services would cost too much, or in particular sectors where technical knowledge is needed that you do not have.
Looking at Brazil, it is the slowest of the four countries we are discussing. It has the lowest proportion of trade in the international economy. However, it is now the world's ninth largest economy, immediately following Canada. Projections up to the year 2050 estimate it will be the fourth largest economy.
Senator Stollery: I think Brazil is a very important country. I know South America well. There is a South American way, which is a different dynamic.
Mr. Curtis: All four countries are different.
Senator Stollery: Yes, that is right.
Mr. Curtis: They are all big.
Senator Stollery: They are huge. Russia is on the Chinese border, but has only 145 million people in the whole country. This is a huge problem for the Russians because of the emptiness of the countryside and the massive population in China.
It seems to me that is where the future is. We must do something about it.
The Chair: During the FTA review three or four years ago, we looked at the resources Canada had in the U.S., particularly in the southern states. We made some strong recommendations. It was a pleasure to see that they were acted upon to some degree. We have some experience with that.
Senator Mahovlich: A few days ago, I picked up the phone to cancel my phone service with Bell Canada at the cottage for six months. I finally got to talk to someone. They were in India. Is this something new? If I want my car fixed, will I be phoning someone in China to tell me where to get it fixed? Is Bell Canada in control of those people in India?
Mr. Curtis: That is called outsourcing.
Senator Mahovlich: Are the Americans doing the same thing?
Mr. Curtis: Yes, big time.
Mr. Murphy: Canada is, too. You will find call centres in New Brunswick, Manitoba and a number of parts of the country. In establishing call centres and other customer relations organizations for dealing with your customer base, you look at the availability of labour. In our case, we have a great deal of bilingual labour available. I was talking to our local chamber folks up in Pembroke the other day. They are running two of the biggest call centres for major firms in the world out of Pembroke. We are in this business big time. So are other countries. India certainly is.
Mr. Curtis: You make a fine point that not only will some of our young people need to learn Mandarin, but others will have to understand English with a very strong Indian accent, and be comfortable.
Senator Mahovlich: Canada is noted for its mining companies. Are we still aggressive down in Brazil? A friend of mine who is on a company's board is going to India next month. We are still active in mining throughout the world.
Mr. Murphy: Absolutely. Canadian extraction companies are very active. That is one of the strengths of our economy. We have highlighted that. That does not mean there are not challenges in terms of getting into a market such as China, for example, where there are restrictions on your ability to do more than the exploratory part of the mining job. You cannot actually do the extraction of resources. There are challenges there. Canadian mining companies are operating actively in North America, South America, Asia, Africa and Russia.
The Chair: This whole undertaking must be more than just about trade. One of the concerns that I have is the influence that China will have around the world. We heard this week that the EU-Africa talks collapsed. They have decided to disagree, and they will probably continue some other time. We have heard that one of the reasons was that, because of China and India's influence in Africa, the EU is not quite as important as it used to be.
One concern I have is the impact that situation has on governance, values and rights. Consider China's role in Darfur. Our colleague, Senator Dallaire, brutalized them recently on CBC's Newsworld when he talked about the Chinese being most virulent, considering them worse than any of the colonial powers, particularly in Africa.
Is there an issue that the Chamber of Commerce and yourself in your position, Mr. Curtis, have some concerns about or are dealing with?
Mr. Curtis: That was to be my eleventh point, but I was respecting your original clock. I think the answer to that is "yes,'' but a larger question that the committee might consider as part of its committee work is the potential impact of the Chinas, the Indias, the Russias and the Brazils on our whole structure of laws and regulations. For example, if they have industrial development policies or investment or human rights policies that push against international norms, what do we do about it? Will the WTO be capable of handling that? Will the International Monetary Fund? What if they start doing things that are not as we have developed them in the post-war era which, after all, was an Anglo- American construct? You have raised a serious question of governance, one that the committee may seriously want to think about and perhaps call witnesses upon that would be helpful to the government. It would be helpful to all of the OECD/G7 countries.
Mr. Murphy: I certainly do not disagree with Mr. Curtis. He mentioned the WTO in his answer, and I think that is important. It has only been about six years since China's accession into the WTO. That is important because it is part of bringing China into the world community. That is a rules-based system, and I think it is exceedingly important to be part of it. The cultural shocks here in order for an economy like China to live up to its succession requirements are significant. We have challenges in that area today. However, I think that is the right way to go here. You want to engage with China. We come at it obviously from an economic perspective. Our members want to ensure that we are not just looking at our domestic market but also thinking more broadly. For China, it is important that we have them engage, not only at WTO but at other fora as well. I think that is a positive step.
The Chair: The point, as far as the Chamber of Commerce is concerned, is that we do not really have a level playing field, Canadian companies with Chinese companies, if our rules and commitments are different than theirs. Is that not of concern to your members?
Mr. Murphy: It is very much so. We spent some time in our China paper talking specifically about the requirements that China will have to live up to as a WTO member. We highlighted a number of areas. One that gets a lot of publicity today, and one that is crucially important to our members as a competitiveness issue, is that of intellectual property protection. We could spend a great deal of time talking about that and how important it is to our members.
I mentioned culture a minute ago. While laws are changing in China, there is a cultural divide there that we need to get over in terms of what is out there in the public domain versus what private rights are and how those are defined under the law. There is a very different view in China from what we have here in North America and in Europe. It was an important step to be able to engage on issues like that. There are others as well, but that one stands out for us.
Senator Grafstein: Mr. Murphy, you and your organization have taken a tremendous leadership role in bringing to the attention of decision-makers in Canada, those who are not making decisions, our problems with the United States, particularly the border. It remains far and beyond any unbelievable problem. The border is getting worse every day. I read your reports carefully. I quote them in the Senate and in all of the speeches I give in the United States. Keep up the good work. Somehow, somewhere, someone in Ottawa may start listening. We can talk about trade with China, India, Africa and Europe, but unless we can handle two border points, Buffalo and New York, we cannot go anywhere. Keep up the good work. Maybe we can drive a wedge into the minds of government thinkers to work on those two problems. If we do not solve them, we are talking about chicken feed. I think you will agree with me.
Let us talk about these wonderful terms of reference we are about to engage upon. For me, it is almost beyond imagination that we could grasp an economic and trade policy for even one of these countries, let alone three. Let us make a start. Let us look at history.
I would like you, if you could, to focus our attention. Do not give us more; give us less. Keep it simple. I say that because we cannot chew gum and walk at the same time. We can chew gum perhaps, and walk perhaps, but we cannot do both. Let us see if we can focus.
Let me give you a bit of history and, if you accept that history, we can then see whether you can help us focus these terms of reference. Let us approach it in a duplex way, which is at the top. Let us see if we can end up with a series of strategic policies that are applicable to all three countries that are similar, yet obviously in application will be vastly different in Russia, China and India because they are different worlds. I have not spent much time in India, but I have spent a lot of time in China and Russia, and they are different worlds right across the border from one another.
Following that, let us talk about the strategic part and not the application in each country. Let us look at the same problem we had between Canada and the U.S. We had this ongoing discussion in Canada from 1911 to 1964 or 1965 about a free trade agreement with the United States. Each time we got to the cup, we moved back. Mr. Pearson's government decided to do something that was the foundation of the free trade agreement and that was manage trade; to take a look at one sector where we could end up with true reciprocity, and the government of the day decided that that one place would be in automobiles. The automobile, which is outside the free trade agreement but is part and parcel of free trade, has been far and away the most important part of our two-way trade. Everyone accepts that.
Apply that example to this situation. Let us imagine, if we could, that we are applying our value-added in dealing with India — leaving China and Russia aside for the moment — where would you see us having a useful exchange with the Indians on two-way, fair, balanced, managed trade? Let me give you one example that you have used in your discussion paper. Services would be one, but what type of services? Let me move to one which is our natural advantage, and that is natural resources. I see that Australia has been successful in that regard, and now when it comes to their trade, they have a huge trade surplus with India and a great deal of it happens to be in natural resources: Coal, gold and copper.
Give us some help, instead of broadening our focus. If we were narrowing our focus, what would be the two or three areas of managed trade as it would applied to India where we might achieve some mutual benefit as opposed to a one- way street?
Mr. Murphy: I will start, and I will ask Mr. Zeiler-Kligman to join in here. I will start with the notion you mentioned of services, and those are clearly very important. I will pick two: Information communications technology and financial services. We have significant strengths in both, within Canada. There are strengths in India in those sectors as well, but we should have a focus in that area, and we have highlighted that in our paper. That would be my short answer.
Mr. Zeiler-Kligman: I would actually add a third service to that, which would be education services. This would also help create greater links between Canada and India or China. At the moment, Canada attracts about 3 per cent of the international students around the world. At one point we were in the top five. We are now ranking fourteenth. We have seen other countries, such as Australia and the U.K., jump ahead of us. In Australia, from 1998 to 1999, to 2004, 2005, their foreign student intake increased 169 per cent and ours increased by approximately 15 per cent during that time. Therefore that is one way we could really market what opportunities we have in Canada in foreign countries to really start to help create linkages between the two countries and lasting connections.
Mr. Curtis: Education, even distance learning, is a very important element. In fact, senator, we have left the Commonwealth scholarships. We cannot even track who was here 25 years ago, never mind from India, Singapore, wherever; we have not even built on what we had in the past.
One other sector I would suggest over and above financial services, and I quite agree with that, and computer software and systems, is pharmaceutical: Clinical testing and surgery. There is a great deal of offshore surgery under way now involving India and that is something that could be explored. We are not finding all the answers. I think you are asking us where might the committee focus on, and I think that is another major area that I would turn to. As I say, both medical and pharmaceutical are both very important elements.
The Chair: I would like to give Mr. Murphy a little information before continuing. This morning there was a meeting of the Canada-India Parliamentary Group, at which His Excellency the ambassador spoke, and he talked about three areas where there are great opportunities for the two countries. Those areas were financial services, clean energy and education, so you see, he is in agreement with you.
Senator Grafstein: Again, this is called mixing and matching. It is called the random theory of mixing and matching trade opportunities. When you have a huge trade surplus, this is where you want to mix and match with someone who has an ability to ingest your surplus. Again, I want to focus on India for a moment. The same could be applied to China, using different parameters.
The game theory says that you take a look at your own natural advantages where you have a surplus, and let me mention three: We have a problem in three areas, where the costs are down, and these are three areas seeking desperately for export markets. One would be softwood lumber. There is a great need in India for construction materials. Two would be gas. Our gas prices now are the lowest they have been in a decade. We have a huge surplus, we do not know where to ship it and we are producing it like crazy. Third, and the thing that is of most interest to us in Ontario, is cars. Give us your views about those three areas in terms of working out a deal with India.
Mr. Murphy: I am not sure I can answer the question specifically with each one of them. I will start with infrastructure, because it deals with the first one that you raised and maybe the second one, too. As we identified in our paper, one of the great needs in India in terms of its growth is that they have a deficiency in all kinds of infrastructure that is just overwhelming, whether it be electricity or ports. We have the numbers here, but they are just not in my head, in terms of how many people do not have access to electricity or access to telecommunications. We can talk about the road system that links cities, which are all two-lane roads, or airports, or ports; every conceivable area of infrastructure. We are really good at all that stuff. You are right, you need materials to do it, you also need engineering expertise, and we are very good at that as well.
One of the things we suggested in our paper is why not have a starting-point discussion about what is the art of the possible with India, and ultimately lead even to some kind of a trade agreement with them, perhaps. Those areas would be obvious ones for targeting originally, I would think, to focus in that area.
I cannot add anything specifically at the moment on automobiles.
Mr. Zeiler-Kligman: I cannot specifically add anything on automobiles.
Senator Smith: They make automobiles.
Mr. Curtis: They make parts and have the technology, especially in clean air because the country is so crowded in any case. Companies like Magna are already in China. This is a potential, although the Indians have been protecting their automobile industry so it will be tough. They are in a different stage of technological development.
Mr. Zeiler-Kligman: I was about to mention that in our India strategy paper, we did take the same approach that the honourable senator is suggesting. We suggested that we could not really get into all parts of India in all sectors, and we identified services, specifically with financial services, energy services, education services as focuses, but also in terms of infrastructure. Our suggestion was to really be able to make sort of a beach-head into the Indian market at specific locations within India where we feel we can do this successfully and use that as our entrance into the Indian market fully.
Mr. Curtis: I would also suggest to the senator not to underestimate the global value chain that I keep coming back to. It is unclear in this decade, as against the 1960s, that sectors are as clearly stove-piped. In fact, the whole idea of the global value chain is the little activities all the way along. It would be very much more difficult now, irrespective of the politics and the foreign relations, to pick out sectors that are sufficiently self-contained where you could make a deal. We would not even be able to get at the statistics in order to persuade ourselves, or India, as to whether it would be a benefit or a cost. You would have to pick specific services within these sectors, or specific functions on which to work together. It would be quite a bit more complicated because the structure of corporations and economic activity has become more complex in the last 50 years.
Senator De Bané: Today the size of the economy of the United States is number one, Japan is number two, and I think Germany is number three. When do you think that the economy of one of those countries, size wise, will become number one?
Mr. Curtis: In 2006, China passed Germany as the world's third largest economy.
Senator De Bané: When do you think the size of China's economy will bypass the United States?
Mr. Curtis: I have seen estimates that by 2050, certainly, China's economy will be larger than that of the United States. There are different estimates as to when. It is somewhere between 2025 and 2030.
Senator De Bané: Do you agree with those who say we are entering an era where those countries — the Orient — will, for the first time in the history of mankind, lead the planet, where up until now it has been the Western World?
Mr. Curtis: No, when you look at economic history. I have the estimates of the economic historians. According to Angus Madison, the economic historian, in the 18th century, China and India together represented just over 50 per cent of world activity. The circle is getting back to where we were.
Senator De Bané: In 1970, when I became a member of Parliament, Taiwan was selling nothing to Canada. Hong Kong, a city of 6 million people, was already quite a dynamic centre. Today, of course, Taiwan, with 20 million people, has a huge surplus with Canada. Taiwan and Hong Kong are major investors in China, and they have the same people. If it is true that the first economic factor of development is the mentality of a country, of the people, the Chinese are hard-working, very good trades people, very talented in computers, technology, et cetera. I see what they have achieved already in Taiwan, Hong Kong, Macau, et cetera. I see that Shenzhen, which had 25,000 people 25 years ago, today has 15 million people and are already number one or two in transport, high tech and in the financial sector. I wonder if we can compete with them. I see their students in Canada. They outlast our students. They are number one in their studies.
At the same time, I see world-class companies such as PCL from Alberta, who say that they will never try to do business there anymore because they do not play by the rules, et cetera. I would love to hear your views.
Mr. Curtis: The story continues. Things evolve; the universe will unfold as it should, over time. There are imperfections, but we are not doing that badly. It is not clear to me, head to head, that we cannot compete. We are doing quite well; we could do better. I would not be as concerned.
To some extent, this is a catch-up period. In the period you are referring to, after 1700 and 1800, the preindustrial revolution, 1950 was extraordinary. That is when those countries were at their lowest. To some extent, we are watching a catch-up going on. I am not, by any means, convinced that with our system of government, our system of law, the flexibility of our culture, in the long term we cannot outperform them, person to person. There is no question, in my mind.
Mr. Murphy: It gets us back to this fundamental question that we started with, which is Canadian competitiveness. Any sense of complacency, either from public policy-makers, people in business, my members, and we are in trouble. That is what we are fighting against continuously. We are a large economy in terms of the statistics and being one of the top 10 economies in the world. We have some incredible strengths in terms of natural resources and others, and we have a skilled population. The percentage of well-educated people in Canada with postsecondary education is very high. What are the key things that we need to do? We have tried to outline that some of it is domestic, some is externally focused.
For Canada, trade is essential — given the size of our domestic market — within North America, but globally as well. Mr. Curtis's point about the participation of Canadians within global value chains is absolutely critical as well. That is an opportunity for us.
The Chair: Gentlemen, this has been fascinating. As Senator Grafstein said a moment ago, we are still trying to focus on this, and we have not yet asked for a specific mandate or a reference from the Senate, precisely for that reason. You have helped immensely in moving that focus along. As we reflect, I am sure your words of wisdom will be much appreciated.
I want to thank you for taking the time to join us tonight, and wish you the best for the holiday season.
The committee adjourned.