Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 2 - Evidence - March 24, 2010
OTTAWA, Wednesday, March 24, 2010
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:17 p.m. to study the rise of China, India and Russia in the global economy and the implications for Canadian policy.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, we are reconvened to continue the study on the rise of China, India and Russia in the global economy and the implications for Canadian policy.
We have appearing from Foreign Affairs and International Trade Canada, Mr. Ken Sunquist, Assistant Deputy Minister (Asia and Africa) and Chief Trade Commissioner; Mr. Ken Macartney, Director General, South, Southeast Asia and Oceania; and Mr. Luc Santerre, Director, South, Southeast Asia and Oceania Commercial Relations.
Welcome to the Senate. You are familiar with this committee since you have testified before. The emphasis at this moment is India as we wrap up the three countries.
Mr. Sunquist, you are first on the program. I do not know if your colleagues will simply answer questions or will have a presentation.
Ken Sunquist, Assistant Deputy Minister (Asia and Africa) and Chief Trade Commissioner, Foreign Affairs and International Trade Canada: They will answer all the difficult questions, honourable senators.
Thank you for the invitation and for having me back again. I believe this is my third time to appear before this committee. I worry sometimes that I will wear out my welcome, but it is a pleasure to be here this afternoon to speak to the Standing Senate Committee on Foreign Affairs and International Trade on the topic of India.
As I understand, the committee is continuing its work on the rise of China, India and Russia in the global economy and implications for Canadian policy. I have given presentations on Canadian commercial strategy and our China, India and Brazil overview focusing on China in particular. I am happy to see the committee's continued interest in India.
As Senator Andreychuk mentioned, I am joined by two colleagues and a couple of others who are in the room to help out if necessary.
In my role as Assistant Deputy Minister (Asia and Africa) and Chief Trade Commissioner, I am called upon to speak about India on a regular basis. In the past few years, India has become the focus of attention not only for the Government of Canada, but also for many provincial governments as well as the private sector. Recent high-level trips to India include those by Prime Minister Stephen Harper in November, Premier Dalton McGuinty in December and Premier Jean Charest in January. They have all highlighted the growing importance of India for Canada. I could cite additional trips, but I was trying to give a couple of representative examples from two of the larger provinces. I am pleased to hear your committee may plan to visit India later this year as part of your study.
This afternoon, I will provide a quick overview of Canada-India bilateral relations. We will be pleased to answer any and all questions you may have. I have mentioned before that we watch this committee rather carefully because some of the witnesses you have are of great interest to us. They have creative ideas and we seek to implement them into our strategies quickly. For example, the Canadian Manufacturers and Exporters, the Canadian Council of Chief Executives and many others that have come before you often have different insights that are important to us as we plan our activities.
Canada-India relations are in a transformative stage. Both Canada and India have invested heavily in recent years in building institutional linkages and engaging at senior levels in various key areas. We are on the cusp of a more strategic partnership — I will return to that term later — that will help to realize bilateral and multilateral benefits in a host of areas. These areas range from enhanced trade and investment, innovation, regional and global security, education, cultural and health linkages, to collaboration on energy, mining, environment and development.
Since 2006, 14 ministerial visits have taken place to India by members of the Canadian cabinet and, of course, Prime Minister Harper's official visit last November. In 2009, Canada opened three new trade offices in India — Hyderabad, Kolkata and Ahmedabad — to complement Canada's diplomatic missions in New Delhi, Mumbai, Chandigarh and Chennai and our existing trade office in Bangalore. What many of you may find a surprise is that the total of eight offices in the DFAIT network in India is now the third largest in worldwide behind only the U.S. and China.
We also have members of our portfolio such as Export Development Canada, the Canadian Commercial Corporation and other government departments that are very active in this market. In addition, Canadian provinces promote trade and investment linkages.
Our diplomatic mission in Mumbai houses representatives from both Ontario and Quebec. The mission in Delhi accommodates a representative from Ontario. Other provinces such as British Columbia and Manitoba have agents in various other cities in India.
Indian ministerial and senior level visits to Canada have also increased in recent years. This week, Canada is hosting India's former Minister of Commerce and Industry and currently the Minister of Road Transport and Highways, Kamal Nath, who I understand will meet with this committee tomorrow. Minister of Commerce and Industry Anand Sharma may also visit this spring and the Prime Minister, Manmohan Singh, will be in Canada for the G20 meetings in June. I believe several members of this group will attend a reception hosted by the inter-parliamentary group for Mr. Kamal Nath after this meeting.
Canada and India have built the institutional architecture, such as the annual trade policy consultations and the foreign policy consultations. We are cooperating on a wide range of security, trade and economic issues. This is to ensure more regular export-level dialogue in areas as diverse as counterterrorism, science, technology, trade policy, agricultural cooperation, environment and energy. We are currently undertaking a joint study to look at the possible parameters of a comprehensive economic partnership agreement and are negotiating a foreign investment promotion and protection agreement.
Following Prime Minister Harper's visit to India, we concluded a nuclear cooperation agreement to allow Canadian companies to participate in the commercial civil nuclear power opportunities and to promote nuclear safety and other forms of civil nuclear cooperation. An administrative arrangement must still be negotiated before the nuclear cooperation agreement can be implemented. We are awaiting confirmation from India on a possible spring meeting to begin those negotiations on the administrative structure.
Canada and India may be geographically distant, but our partnership is grounded in certain fundamental values and principles cherished by both countries — democracy, freedom, rule of law, pluralism and diversity. Our commonwealth traditions, including parliamentary and legal systems, serve to unify our relationship.
All of this is buttressed by strong people-to-people linkages. The flow of 25,000 Indian immigrants every year to Canada is ultimately an asset for both countries as they build bridges — personal and professional — between their families and careers in both Canada and India. Canadians of Indian origin number about 1 million people. This active and vibrant Indo-Canadian community makes significant contributions to Canada's economy as well as the people-to- people linkages between our two countries.
India's unyielding attachment to democracy and its ability to manage elections involving 700 million voters is both a wonder and an example for others. We share similar experiences with federalism that allows us to compare notes about many common issues. Canada and India cooperate closely in the Canada-based Forum of Federations, whose new chair is an eminent Indian, Dr. Vijay Kelkar.
Canada and India are committed to advancing peace and security regionally and globally. We stand shoulder to shoulder in the global fight against terrorism. We are reminded that 2010 marks the twenty-fifth anniversary of the horrific mid-air bombing of an Air India flight originating in Vancouver and one year ago, terrorists unleashed carnage in Mumbai where two Canadians were among the large number of Indian and foreign victims.
India's role and responsibility as a major actor on the world stage continues to grow. As G8 host and G20 co-host in 2010, Canada will be playing a leading role in the major challenges that we face globally and that must be addressed in coordinated fashion.
We are beginning to cooperate more intensely on energy issues. Sustaining India's growth rate and meeting basic energy needs requires an ever-increasing source of power. Canada can share expertise in areas such as hydroelectric power and clean coal technology. We can learn from India in areas where it is a world leader, such as in wind and solar power technology. We have also established an expert group on environmental issues to share best practices and ideas.
Innovation is of critical importance to both Canada and India. Our researchers are making mutually beneficial linkages through our science and technology agreement. Canadian universities and colleges are recruiting larger numbers of Indian students and building institutional partnerships in India. These student flows can build institution to institution cooperation advancing Canadian and Indian technology agendas. Many of these students stay and become productive Canadian citizens. Those who return to India create invaluable trade and social linkages and serve as key intermediaries between Canada and India. Furthermore, Canada continues to support the efforts of the Shastri Indo-Canadian Institute that promotes the study of Canada in India.
Within the next five years, India plans to build 14 new central universities, 373 new colleges and 55 elite technology and management schools. The acute shortage of qualified PhDs to teach in these new institutions, in particular, presents a great opportunity for Canadian engagement. Canadian institutions are stepping up efforts to develop partnerships with Indian counterparts. Canadians and Indians are also connecting with one another through culture. Canadians watch Bollywood films and Indians listen to Canadian pop music.
I will update you on a few economic and trade issues. As you know, India is a priority market for Canadian commercial engagement for various reasons. Its rapidly growing economy, with growth rates of 6 per cent to 7 per cent even through a global economic crisis, is predicted to be the fourth largest economy by 2025, and the third largest by 2050. It is expected to become the world's most populous nation by 2050, and its growing middle class, estimated between 150,000,000 and 250,000,000 people, is likely to become a $400-billion market this year.
India also has a remarkable entrepreneurial spirit, a large pool of increasingly educated workers, enormous infrastructure needs and a vast global diaspora — further reasons that it is a priority market for Canada. India is country on the move and Canada needs to move with it. Canadian business has not yet seized the vast potential that India has to offer. Two-way merchandise trade reached a record level in 2008 at $4.6 billion, but it is disappointing that it is not more.
While this decreased somewhat in 2009 due in large part to the global economic crisis, it was less significant than Canada's overall trade decline. Furthermore, the general trend lines are positive with bilateral trade having increased by 70 per cent over the past five years. Our goal of tripling bilateral trade to $15 billion by 2015 will be assisted by the conclusion of the Foreign Investment Promotion and Protection Agreement, the nuclear cooperation agreement, the comprehensive economic partnership agreement, as well as Canada's increased presence in India and the team dedicated to promoting trade and investment.
Most encouraging is the two-way flow of foreign direct investment between Canadian and India. In 2008, two-way direct investment reached $1.8 billion. This includes a large investment by major Indian and Canadian corporations. India's expanding economy and the government's continued commitment to liberalizing its investment regime should provide significant opportunities for Canadian investors in a variety of sectors.
Some examples of Canada and India's long history of partnership include Bombardier's train cars for the New Delhi metro system and airplanes for India's aviation sectors. Sun Life Financial is celebrating over a century of providing financial services in India. I point to SNC-Lavalin's active role in India's hydropower sector and to Research In Motion's BlackBerry, which is becoming the wireless device of choice for India's people. Other companies, such as CGI, have over 2,000 employees in Bangalore. Indian companies, such as Essar Global Limited, the Tata Group and Birla are equally active in the Canadian market.
As in Canada, the banking sector in India was not seriously affected by the financial crisis. In the last year, Canada and India, both member of the G20, worked closely together to address the global economic crisis, notably by co- chairing the G20 Working Group on Enhancing Sound Regulation and Strengthening Transparency. One Indian bank, ICICI, has more than 12 branches in Canada today. The strong financial sectors of our two countries provide a common pillar for future economic development and a shared agenda of collaboration in multilateral financial institutions. While Canada and India have fared better than most, it is important that our businesses and investors understand the fundamental strengths and opportunities inherent in our respective markets. We have so much to gain from each other.
Canada has innovative research, leading technology, advanced products and expertise that answer India's needs. Canada can respond to India's growing consumer market. India's needs include priority sectors such as infrastructure and energy, education, agriculture, biotechnology, pharmaceuticals, automotive parts, aerospace and transportation, the Internet/communications/telephony, environmental goods and services, and several others. These needs are tied directly to Canada's expertise and capabilities, and the corresponding interest in India.
I will conclude by looking forward. The Canada-India science and technology relationship is long-standing, having been formalized in 2005 with the signing of the Canada-India Science and Technology Agreement, and provides the road map for the future. Our two countries have collaborated on a number of initiatives including, biotechnology, health research, medical devices, sustainable environment technology, alternative energy, nano-science, nano-medicine, information, communications, earth sciences disaster management, et cetera. Canada has provided funding under the agreement in the amount of $6.75 million over five years ending in 2010. Continuing funding was announced in Budget 2010 for the next two years.
A few concluding thoughts: High-level political exchanges are providing opportunities to inject new vitality into our relationship with India. To take that bilateral relationship to a new level, a visit to India by this committee could serve to advance Canada's objectives as we seek to expand our economic, parliamentary and people-to-people linkages.
I leave the committee with two questions: First, will Canada take full advantage of the opportunities offered by India? Second, will India respond in kind to Canada's interest in a strategic relationship, because it takes both?
I would be pleased to answer questions or explore ideas. It is a pleasure to be here to discuss what I believe is a priority not only for now but also into the future.
[Translation]
Senator Fortin-Duplessis: Thank you very much, Madam Chair. Welcome, Mr. Sunquist, Mr. Macartney and Mr.Santerre. It is always a pleasure to have you join us. India is going to have to double its spending on infrastructure to $1,000 billion under its five-year economic program if the country wants to attain a growth rate of 10 per cent, according to a statement made on March 16 by its Prime Minister.
In India, the level of infrastructure in fairly dilapidated condition is regarded by economists as the chief obstacle to greater growth that could close the gap with China, its main economic rival.
Can you tell us more, you mentioned something, about the Canadian government's action plan with respect to Indian infrastructure? First of all, does Canada have a plan or were you just making some suggestions when you mentioned those sectors a moment ago?
Mr. Sunquist: Thank you, we have a very active action plan.
[English]
We need to expand our people-to-people linkages so that we can move to the next level of economic opportunities. That is why I ended my presentation by saying that we know the sectors that we need to be in, that they need, and that they have the capability for. We need to ensure that the Indians are receptive to our action plan. We have looked at how we can move to $15 billion in two-way trade and how we can move the education marketing and how we can do things in science and technology, with all of it designed around results.
Perhaps it would be easiest if I were to provide the clerk of the committee with a deck that we prepared. It gives a greater outline, in particular if the committee is considering travel to India. It is prepared by sectors and I can give you the kinds of things that we want to do.
You asked a question about infrastructure. Today, China is 50 per cent urban and 50 per cent rural. India is only 20 per cent urban and 80 per cent rural. For the next decade, you will see a huge movement of people from rural to urban, which means that education, infrastructure, and so many other aspects will need to be addressed. The opportunities exist but the focus is needed. We are way past the time of a shotgun approach. To be honest, the infrastructure needs are so great that we could probably be successful in any field if we focus our total resources from government, the private sector, the provinces, and other funding and financing sources. That is only part of your answer but we will provide to the clerk more details on our action plan.
[Translation]
Senator Fortin-Duplessis: Thank you very much. I think we are going to enjoy reading the presentation that you have prepared. The committee is looking forward to it.
[English]
Senator Jaffer: My question is for clarification. I am interested in the increased relationship. Obviously, we are gearing up. How many consulates do we have in India? What are the plans for the future?
Mr. Sunquist: We have eight offices, if you take the four purely trade offices, plus our consulate in Chennai, a Consulate General in Mumbai and Chandigarh and the High Commission in New Delhi. Whether we can afford a larger footprint is one question, but we are also increasing the number of people in each of those places as we evolve.
Ten years ago, I would have said we would have lots of trade commissioners to do exports. Today we have more people doing things on innovation, science, technology, education, marketing and market access issues. We are continuing to increase the number of people in each of the offices, or more particularly, where we think there is a good opportunity to use them.
We have eight offices, which is second only to the network we have in the United States and China. This is our third largest network of offices in a country.
Senator Jaffer: To be clear, you have three consulates and others are just offices?
Mr. Sunquist: A high commission, two consulates general, a consulate and four trade offices.
Senator Jaffer: I have some clarification questions on your presentation.
On page 2, you talked about bilateral relations. I am interested in what kind of development work we are doing with India, especially concerning women.
Mr. Sunquist: The first comment is that India has asked us not to have a development program per se, so CIDA does not have an active bilateral program, but we do have some thematic points. I would ask Mr. Macartney to answer that question more fully. Until this last year, he was our deputy head of mission in New Delhi, responsible for the full range of bilateral relations.
Ken Macartney, Director General, South, Southeast Asia and Oceania, Foreign Affairs and International Trade Canada: CIDA had a very long history in India, going back to the Colombo Plan. It played an important role in developing some of the infrastructure — the hydro projects and what not — in India, and in later years was very much engaged in projects promoting gender equality and other issues.
As Mr. Sunquist has mentioned, CIDA no longer has a bilateral program in India. However, there still is a partnership program so that Canadian NGOs active in India can receive funding from CIDA to carry on.
I would also like to point out that IDRC has a very active program in India. In fact, one of their regional centres is in New Delhi.
Senator Jaffer: I am glad you clarified that because I understood we did not have development programs.
The other question I would like to clarify in your presentation is on page 4. You talked about how we stand shoulder to shoulder in the global fight against terrorism. Obviously, issues concerning countries around India where we are involved are very important. Are you able to expand on what you mean by that statement?
Mr. Sunquist: Let me try to expand. As you know, a year ago there were terrorist attacks in Mumbai. Our Minister of Trade at the time, Stockwell Day, went to Mumbai shortly afterwards, and clearly articulated that all people in the world abhor terrorism. He made that point with the Prime Minister and others as well.
We are also cooperating in Afghanistan right now, where India has a large aid program that meshes with our own. We deal at the G20 around some of the terrorism issues. We have annual bilateral consultations on many of these issues, and we have ongoing discussions in other fora as well.
You made the point about other countries. We see an interest in making sure that India itself is secure; and we see that it is very difficult to talk about peace and security, in a regional sense, without looking at who is in the region. Clearly, in the case of China, India, Pakistan and Afghanistan, how can you talk about any one of those countries without talking about the others as well, and how they coordinate their actions?
We are very cognizant of the fact that Canada can play a role in trying to help bring people together to talk about some of the issues, and we are doing so.
Senator Jaffer: I come from British Columbia, so the Air India issue is still very much alive in my province.
You talked about bilateral relations and I found this very helpful and useful. However, one place where I would like you to expand on it is that, as you mentioned, we have not just newcomers; we have a very established, over 100-year- old Canadian India community here. How do you involve them in your work? Do you involve them in helping you build bridges? You did say you do, but I would like more specific answers.
Also, when we went to China, we were very impressed with our people on the ground, who spoke Mandarin and were very conversant with the culture. I was very impressed with how Foreign Affairs was doing work in China on our behalf.
Does your staff speak Hindi in India? Do you have courses in Hindi? What are the language courses that you do in India? While I am talking about that — it is a bit of an aside — what is our presence in Bangalore?
Mr. Sunquist: Let me answer part of that question and I will ask Mr. Macartney to provide more detail.
On the Indian diaspora — it is actually the wrong term because, as you said, people have come from India over the last 100 years. There are recent immigrants and people who have been here for more than three generations. I am looking forward to reading your report on how we can better involve the diaspora because I think we can do a better job.
We contribute to help the various organizations, from the Canada-India Business Council to the Canada India Foundation, so we work with many associations. We recruit people of Indian ancestry to work in the Foreign Service, not just for India but to join our Foreign Service, and that provides us with some linguistic capabilities. I do not have the number of people who speak Hindi.
We have a trade office in Bangalore; about seven people are employed — four professional staff and a few others.
Mr. Macartney: It is hard to say at any one time how many Hindi speakers we have at our missions in India. I would point out that there are 22 official languages in India. Hindi is spoken mostly in the north, and other Indians in the south do not speak Hindi. In the Indian government, English is the language that is used. Certainly, we have, at any given time, some Indo-Canadian Foreign Service officers, and a very large local staff works with us.
In Mumbai, we have local staff who speak the local language, and in Chennai and those places as well. We do have some Hindi capacity among our Foreign Service staff. However, English tends to be the language that is used, both in business and in government.
Senator Wallin: Without any puns, could we drill down for just a moment on the energy question? Could we compare and contrast the relationship that we have with China.
I understand there are shared projects on hydroelectric and clean coal — sort of technology exchanges — but are they looking to exploit our market or buy into our market for some of the more traditional sources?
Mr. Sunquist: There are several quick answers to that question. The first is that in 2006 India proposed that we would have an MOU on energy. They would like to progress in this area. They have been doing more investment in commodities other than oil and gas, but they are getting there.
Without contrasting China too much, I would say that China is far ahead in terms of investments right now in the energy sector. We are starting to see India's desire in looking at clean technologies and, as I said, wind and solar issues. However, they are short of oil and gas and want to do more. NRCan is very active there well. We are doing it as a whole of government on the energy side.
Mr. Macartney: I would like to add that we did conclude an energy MOU at the time of the Prime Minister's visit. We are starting to work actively and bilaterally on energy issues. As mentioned, this includes renewables, clean technology, issues like hydro transmission and a number of other areas. In a way, we are really at the beginning stages in terms of that bilateral cooperation. We do have energy companies involved in India in the oil and gas sector.
Senator Wallin: That was my next question. I will display my ignorance on this subject, but do they have a big supply; is this the future? Is it more that they would be looking for our technology to extract that, as opposed to investing here in existing services?
Mr. Sunquist: I think you would see more of the latter on oil and gas. They will probably be more interested in investing in Canada. I think they are asking Canadian companies, primarily from Western Canada, for technology related to trying to exploit reserves that were already well used, going back in tertiary development and things like that. I do not think there has been many new finds of oil and gas that we have been involved in.
Senator Di Nino: Mr. Sunquist, as you know, those of us who have been India watchers for a long time were extremely pleased with the way our government has commenced to take seriously the opportunities that exist in India. In the last three years, as you have said, 14 ministers, including or perhaps in addition to the Prime Minister, have visited India. We now have the third largest worldwide network in India. That is recent and I believe it will pay dividends.
Could you tell us what barriers we still face in dealing with India? Particularly, I am interested in market access and regulations.
Mr. Sunquist: I think it is also indicative of why we are coming in now. For a long time, India was a difficult market. I do not want to leave an impression it was a closed market, but it was difficult. The percentage of ownership you could do kind of stalled Scotiabank and Sun Life and how they could develop. In terms of the issue of importation and regulation, regulation in India was probably second to none anywhere. They invented the word, I am sure.
In fact, it is because India has seen that their future is a global future that they have willingly advanced toward a global economy. If we had suggested three or four years ago to talk about a comprehensive economic framework or a free trade agreement, they would still be studying it and they would not have any interest in it.
Today, India understands it is in their interests to see how they can integrate into the world. They will be very active in the G20. Prime Minister Singh will be here for the G20. There is a real emphasis to try to clear out that web of rules in India as well to encourage investment.
There will be limits to it; there are real limits in terms of majority ownership in a number of sectors. You can explore but not exploit some of the resources. As you move into the manufacturing and service systems, however, there are greater opportunities for Canadian companies. Though I should not use names of individual companies all the time, I will because they were already witnesses here at this committee. If I take a look at Bombardier or Sun Life or others like that, Bombardier itself has probably about 1,800 employees, much on the rail system, but now moving into supplying as part of global supply chains to Canada. In fact, the planes are made here, but parts of it are made there. You can take a company like SNC-Lavalin as an example, with 2,000 employees and with everything from nuclear to civil to infrastructure.
In the last two years, perhaps, the Canadian government with their expansion of offices and people and emphasis on visits by parliamentarians and ministers, we have had so many provincial delegations the last two years that at times they trip over each other. If you have five premier visits, premier one gets to see everyone. By the time you are premier five in the sixth week, the Indians are tired of us.
We are trying to spread them out a little more. We just had a federal-provincial meeting and India was one of the components of trying to stage how we have a sort of ``team Canada,'' though I do not want to use that phrase out of context. However, it is useful to have the premier of Saskatchewan going one time and the premier of Ontario going another. They carry a message, and as long as we have a common message about the importance of India to Canada, and the importance that Canada places upon that relationship — people to people, economic, education, science and technology — we will be much better off.
As I also mentioned, in talking about the numbers of people we have had, we have actually put many more people on market access issues than we would have in the past because we are gradually overcoming some of these issues. That is a long answer to a very short question.
Senator Di Nino: You talked about the large number of provincial visits. Did groups of businesspeople accompany them? Were they large groups or small? As an example, 18 months ago two or three dozen Indian businesses came to Canada accompanied by one or more ministers looking for business. Are we doing similar things?
Mr. Sunquist: For example, the Quebec delegation with Premier Charest had 150 people. Some other provinces will go with the premier and two or three others because it is focused and they know exactly what they want.
There are all kinds of sizes. We welcome them all and work with them. The federal Trade Commissioner's political officers set up the programs. We sometimes accompany them out of Canada, with our officers here, always with our officers on the ground.
We see this as an effort where no one jurisdiction can do it all; we need to involve the provinces and they need us to do some of the opening of the markets, as well.
Senator Di Nino: The opening of the trade office in Ahmedabad was a smart move. Gujarat could arguably be called the engine of the economy at this point. Have we seen an improvement in dialogue between Gujarat and Canada because of that?
Mr. Sunquist: We are seeing more Canadian companies going there because we have opened and we know the people on the ground and are sort of forming the networks. What you are not saying is of course that we held off in opening Ahmedabad for a long time for other reasons. Therefore, the dialogue with the government is not yet where it should be.
However, we have people on the ground, helping more and more Canadian companies to be active in the market and helping Indian companies from the province. It is almost the commercial centre of India. It is in our best interests to find a way to do business there.
[Translation]
Senator Nolin: Welcome to the three of you. I understand that our study has a major economic aspect. But for the economy to be good and the relationship with Canada effective, we have to live in a stable environment.
I am leading up to the topic of regional security. Since the beginning of the decade, Canadians have been discovering this region of the world, mainly because of our presence in Afghanistan. When we think about regional stability, we think about Pakistan and, when we think about Pakistan, we cannot but think about India.
Do you think that India is playing its security role in the region fully? And, if not, what could Canada do to help ensure that India's role is much more effective, given the scope and volume, India undeniably being an emerging power? It does not take a degree in rocket science to figure out that, in the next 15 years, India will have a fundamental role to play in global security. Is India playing this role and is it preparing to play this role?
[English]
Mr. Sunquist: You ask a difficult question Senator Nolin. Perhaps Mr. Nath, one of your witnesses tomorrow, will be better able to answer that question.
Senator Nolin: I will try today, and I will try to get an answer tomorrow.
Mr. Sunquist: Let me put it this way: I think that for a long time India did not have closed borders but saw itself internally. I believe that they have wholeheartedly embraced the concept of regional security. I think we need to work with them in our security, counterterrorism and everything else we are doing with them to see them also play more of a global role.
They were worried about internal security, which is the concern of every country. In historic terms, it was a Pakistan-India issue. Now you put Afghanistan and the other issues in there, and I believe that the policy-makers — maybe not necessarily the people on the street — the policy-makers that I have met at all levels in the Indian government understand that regional security and stability is paramount to their prosperity and survival in the long term.
Yes, they are on the regional security side, and the next step is how to play into a wider role.
Senator Nolin: That is my next question. That is fine when talking globally, but what are the steps and how can Canada accompany India to move in that direction. We have quite a lot of experience in those international fora when dealing with international and global security.
Mr. Macartney: Canada and India of course share a long history of working together in peacekeeping. India has provided huge numbers of peacekeepers over the years, so we have had that commonality.
India lives in a fairly dangerous neighbourhood, so I think your point about trying to achieve regional stability is very important. They do play a role. I think they have been playing a role in Nepal, moving from a civil war situation to now a situation of democracy and stability. They have been trying to assist in Sri Lanka as well; they have huge interests in that country. We have talked to India about the situation in the neighbourhood as well, so we do have a dialogue with them. As mentioned, they provide over $1 billion in development assistance in Afghanistan, and that is something we appreciate very much. India is more and more engaged on the world stage. They are a member of the G20 and of course will be here in Canada for that meeting.
Absolutely, they will be an extremely important force in the world for stability.
Mr. Sunquist: As another comment, the ``but for,'' clearly there is the UN and regional security fora in which they have been participating. There are regional ministers of defence kind of issues, all sorts of things. Where India may not have participated fully even 10 years ago, maybe not even five years ago, we are seeing a real change and desire to play a productive role.
When we introduced annual consultations on security, we asked them to do so before they were ready to, but now it is a good partnership. We are finding them a ready and welcome partner on regional issues currently.
Senator Smith: In recent years, in terms of immigration to Canada, China and India have always been one and two. I think India was number one for one year. The number of people is growing at a dramatic rate.
With respect to the economic growth rate of these two countries, there are no comparable countries in the West, but there are a couple of unique plus factors about India that are not necessarily the case in China. One is that English is the working language. In Bangalore, I can tell you they have all kinds of call centres there — I visited them — that do work in Canada. The level of English is good enough for them to do so.
In China and India, free enterprise is very strong, but in China it is quite recent, whereas in India, it has been going on forever at a high level. You have, for example, Canadians here from India, Prem Watsa and Rai Sahi, who are tier one by anyone's standard. If you go around Mumbai, you will see Canadian insurance company's billboards. You mentioned a bank. I should disclose that I am a director of that bank. I will not get into that, but I know about the remittances and they are mind-boggling.
My sense is that the potential between Canada and India will just get better and better. I am interested in your reactions to my thoughts and whether I am missing something.
Mr. Sunquist: You are not missing anything. In fact, you are ahead of the game on some of this.
To start off with the immigration flows, the people-to-people ties with India are strong. There are family ties, business ties, it does not matter; it is there. Anytime you are trying to have a good relationship with another country, it helps when you have a large number of people who understand cultures and languages and make them a priority. You are right in that regard.
I would hasten to say that one of the strongest parts about the Indian economy is the growing entrepreneurship, as you said. The huge middle class and small- and medium-sized enterprises fuel much of the trade we have at present, which is why it also does not grow. We need to get the Tata's and Essar's and the other big companies —
Senator Smith: Who were here lately.
Mr. Sunquist: Exactly. They are investing in steel mills and other things as well, which means Canadian jobs and prosperity in Canada. We have the two-way trade and investment flows. I mentioned the global supply chain issues with other companies like Bombardier, RIM and others.
My only point is that for too long we have talked about it as potential, and I do not think that Canada has exploited our relationship with India to the degree that we should or could have. Yes, we are at record levels, but record levels from a low level. Yes, we have all these things happening. One of my busiest officers we have is Mr. Santerre here who is responsible for the commercial-economic relationship as the director.
The potential is there, but it is no good talking about it; we have to do things about it. That is why I welcome this whole committee and am looking to the witnesses you have had for some creative ideas. I look to you and your reports as we go down this path. As I said before, we will provide our action plans, but those plans will be informed and changed by people like you. What more can we do? Right now, we are tinkering and we are moving forward. Each year is better than the last.
We need things like an inter-cooperation agreement, a foreign investment protection agreement or an MOU on energy, just a few more things like that to bring us to a tipping point to get us on the stage. We think of India in big terms, and that is why I posed those two questions. From an Indian perspective, we are the twenty-eighth trading partner. We are flying far below the radar in India. It looms large to us, but it does not move the other way. We have to move that next step to ensure we have impact in India, and education and innovation may be among the ways we do it. That is what we are working at now.
Senator Smith: I agree.
Senator Stollery: I have been following along your observations about our level of trade with India. I am very dated when it comes to India, but I do know the country more or less from Afghanistan to Rangoon. I have never been in the southern part of the country, but the UP, Bihar, Punjab and Bengal I know well.
Some members of the committee might not know how India got heavily into the self-sufficient business in the 1950s and 1960s. It became difficult to do business with India because they did not import anything for quite a long time. I have never understood it, but I felt it even in my time in India that Canada seemed to get it.
India is not an unknown country to Canadians. I am 74 years old. We took imperial geography when I went to school in Toronto, so I know Indian geography. I know that Uttar Pradesh used to be United Provinces before it became UP because we studied that in school. It is not like China, which we did not know much about when I was a kid. Yet, after independence, we never followed up. We had a major diplomatic arrangement in India in the 1950s and 1960s, but trade never followed. It did not seem to me that much was happening, which is what you seem to have been saying.
Why is it we are doing very well in China, and we are working on Russia and these other places? I do not mean to single any one out, but I never could understand it, and I have read a fair amount about India; I just finished reading Twilight in Delhi, which is a masterpiece from the 1930s.
What happened?
Mr. Sunquist: I could give you four or five different responses.
First, India is behind China in terms of its development right now. China moved faster. India, for the reasons you said, tried to stay an internal looking society for a long time. More recently, they have recognized that they should also be a global player. If you are going to have the largest population and the third largest economy, you cannot escape that role.
From a Canadian perspective, here is an unguarded comment; I am ADM at the Department of Foreign Affairs and International Trade Canada. For 35 years, we have also had them in the penalty box on nuclear issues. That stopped Canadian companies from a lot of interest there.
Senator Stollery: We did not do anything even before 35 years.
Mr. Sunquist: That part I do not know.
Senator Stollery: I was here when that happened in Parliament, and we were not Johnny-on-the-spot before the 35 years.
Mr. Sunquist: We had a portion of time in there when we did not do as much as we could, but probably as much as we should have, in the sense that there was a timeframe in there when our relationships were not as strong as they are today. We have the right relationship today. We have the right preconditions on both sides, in India and Canada. We have the people who wish to push it forward — let us do it. The potential has been there for a long time. We have not activated it.
Senator Stollery: One of our witnesses — I do not remember which one it was — gave us the percentage of the Indian economy that is self sufficient. Even today, India has a huge self-generated economy, which allows them to ignore to a larger degree than other countries the world recession problems and all the rest of it. We should trot out that figure when we get a chance.
Mr. Sunquist: Somewhere around 40 per cent plus is still internalized. At the same time, that is a constraint to prosperity for the Indian people. If you are happy with slow growth, that is an appropriate government response, I guess, but if you are trying, as they are, with a very enlightened group of cabinet and people looking to the future, I believe that figure will go down as they seek to take a role.
Senator Stollery: It was said, I did not say it and I am not certain that I agree with it, that Mr. Kamal Nath did not help during the Doha Round of negotiations. He was scolded in the international press. I heard him defend himself vigorously. Have you any thoughts on that?
Mr. Sunquist: A number of developing countries looked at the Doha Development Round. They took a look at what they were trying to do, and, for a number of them, it was the first time they were involved in large, multilateral economic discussions, so the discussions did not go as far and as fast as they might have. They do not all have the same outlook, but if you took Brazil, China, some of the Group of 77 and a few others, they were not prepared to move as far and as fast as others were.
Senator Stollery: The Financial Times picked on Mr. Nath.
Mr. Sunquist: He is a spokesperson for the Indian economy. I do not say I have a blame sense, but he is a senior minister who is reflected Indian government policy for a number of years. He is an articulate and good minister. I say with a smile that we were sorry to lose him as Minister of Commerce because he knows the issues. He was pushing modernization policy, and Canadian companies have been successful while he was the minister responsible for the economy. Now he has infrastructure and a major one, so we hope that will continue.
Senator Stollery: He did say at a meeting that I was at that if the Americans would cut $1 on their agricultural subsidies, he would have signed up.
Senator Finley: Could you comment on the internal political stability in India?
Mr. Sunquist: I could, but I will leave it to someone who might have better knowledge of the subject.
Mr. Macartney: India is a vast country of 1.2 billion people, with many different regions. It is more multicultural and more diverse than Canada, one could argue, and many say it is a minor miracle that they have actually been able to keep themselves together; however, they do so on the basis of a vibrant democracy.
India recently had elections, with over 700 million voters. They have to conduct the elections in a bit of a staged process, but they do so without any real problems. There were 700 million voters and the turnout was close to 70 per cent. I think a strong argument for why the country remains together is that strong democratic backbone. Successive governments have been good at accommodating different interests in the country through constitutional changes and creating new states. They have a lot of challenges, unquestionably. They have some internal problems with the Naxal movement, Maoist forces in the central part of the country, in the tribal areas. They have many other challenges, but the country is strong and stable.
[Translation]
Senator Robichaud: Mr. Sunquist, you said that, in India, 20 per cent of the population is urban. Do you expect that India will follow the same trends as elsewhere with people from rural communities moving into the large urban centres? Could this have an effect on the production of food, the self-sufficiency we were talking about? For us, being a member of the Committee on Agriculture, with Senator Finley, might there be some opportunities? Would it actually be a good idea to visit this country or could we provide some relief for the problem that this might cause?
Mr. Sunquist: Yes, of course.
[English]
The trend is the same in every developing country in the world. People are moving from rural to urban. It may be small urban or large urban, but the trend is that people are going there for better lives for their children, for education and for health reasons. They want to get away from subsistence level to something better.
The impact will be large. That is why the government is no longer everything self-sufficient. We are shipping more wheat today. It goes up and down, but food is a big issue for us in India, and there are other things.
One of the interesting issues for Mr. Nath may be the infrastructure: housing, roads, schools and power. As people move into an urban environment, they need electric power, which means energy. For instance, they are looking at up to 40 nuclear reactors that they have to build. Just imagine the scale.
My colleague mentioned the challenges. You cannot be seen to favour one part of the country over another. This is widespread. I have some figures on schools and universities. The millions of people who move into urban areas want to have better lives and that mean they have to be better educated. They will change their food. They will change everything.
This brings us back to the first question of what sectors and what kind of areas we can look at. We are looking at areas where we can compete and where we can cooperate. It all comes together.
You asked the question that I think most India watchers want to know. This will change the society and how India works.
Let me give you the best example. Someone mentioned Bangalore. Bangalore was a huge city, and it did not work because the infrastructure fell apart; it was growing too fast. All they did was build another city right beside it, a modern kind of science city. Yes, they are fixing Bangalore, but they do not care; they are just building a whole new city. The airport was connected to the new city as opposed to the old city.
The pace of change India is going through and the opportunities for Canada are enormous. However, not just so that we can take advantage ourselves, but we need to find a way to cooperate. That is why I like the word you used. What can we do to assist in that development?
Senator Mahovlich: I thank our excellent witnesses.
About a month ago I was in the United States. Condoleezza Rice came into town and I thought I would listen to her speak. She did not speak about Russia or India. She spoke about how China will be the economic leader within the next 10 years. She that China would take over.
China will have many problems as it becomes more successful. People will have two or three cars. I was in China in 1988. Condoleezza Rice happened to be there in 1988, and she spoke about the bicycles. I was a witness to this. If you looked out on the road, there were more bicycles than cars. In the present day, we see more cars than bicycles, and there are new highways.
As the growth of India becomes more successful, we will have more pollution. China has addressed its population problem. Does India have any game plan for the future? Maybe you can address the pollution problem too.
Mr. Sunquist: A short answer is that pollution and quality of life go hand in hand. As people flock to the cities and they build coal-fired plants and so on, pollution will get worse in the short term. However, quality of life becomes more and more important to parents and to children.
Especially after the Copenhagen summit and the issues around climate change, it is clear that most nations in the world want to improve the quality of life for their citizens. You will see more effort placed on that. China has made initial steps and so has India. That is why they are interested in clean coal technologies and renewable energies. You will see more of those types of technologies in the future.
If you look at the corridor between Japan and India — and the countries north and south, China and Vietnam — today, roughly 50 per cent of the world's goods and services are produced there, and this is increasing, at the cost of the North American and European settings. If you want to look to your future, you need to look at the dynamic growth of the region and then figure out what are the policy options, what are the issues we have to deal with, and how do we proceed. You have kind of buttressed it between China and India.
I do not always believe economists who could not predict the downfall of certain financial institutions, but some of them predicted that China will be the number one economy around 2030. Who cares whether it is first or second; the point is that it will be up there. India will be number three. If you look at the top five OECD economies, only one will remain in the top five within the next 15 years, and that is the U.S. That is the focus of this committee. You are looking at the growth of Russia, Brazil, India and China. Everyone would say that, with the percentage of trade we have with the U.S., that is where we need to be and must be today. If you look at who will be sitting in these chairs in 20 years' time, it may be that India and China are the ones you will need the public policy perspective on. You put those two countries in juxtaposed positions and comment that they are the future, and that is why we are looking to you for ideas of what we should do as a country. I do not want to put the whole onus on you, though.
The Chair: Most of the analysts point out that India needs infrastructure, which you have discussed. The environment will be one of its challenges. Another is technology. They put an incredible amount of attention on technologies and they exported it. Wherever they went with their technologies, they were the winners for quite some time. It appears they are trying to reinvent their technologies back home. To what extent can we be part of that and what type of technologies are they now desperately looking for? There are differences of opinion from the analysts of India.
Mr. Sunquist: My figures may be dated because this is a figure from three years ago. There were about 300,000 Indian engineering graduates three years ago. If you go back a decade, you would say that India needed to import everything. Now, with 300,000 engineers per year, and even if 1 per cent are at MIT level, that is more engineers than we graduate in total in Canada. The old stereotype that they needed to import everything and they had no brilliant thoughts themselves is not true. They are at the forefront in many technologies.
Yes, they want technologies from Canada. That is why the science and technology relationship is particularly important and where we can, for small dollars, leverage huge relationships.
We have $6 million or $8 million on our science and technology program now, with 100-plus MOUs, science agreements, all sorts of things. India is looking to Canada for advanced technologies, the nano-technologies and environment. However, Canadian companies and Canadian research institutions and universities are looking at the same areas. It is something we have and they need, and something we can do together. Our list probably has too many, but there are 10 or 12 sectors we have jointly agreed upon between the Indians and the Canadians as the kinds of issues we want to do together.
Education, science and technology are going to be the parameters of the future relationship with India because it is on the economic and trade side. That is what they need, what we are good at and where we can cooperate.
[Translation]
Senator Fortin-Duplessis: Thank you, Madam Chair. Mr. Deputy Minister, my question is about protectionism. At the recent G20 summit, the Indian Prime Minister, Manmohan Singh, stated that India would like to see a very strong message emerge from Pittsburgh against protectionism in all its forms in the trade in goods, services, investments and monetary flow. According to India, the industrialized countries have been putting up more trade barriers for a year now to slow down development.
But India itself shows signs of protectionism. For example, India, which ensures 80 per cent of the world's IT outsourcing, is not playing fairly. At the head of a group of emerging countries, India refuses to open up some of its markets to competition, notably in agriculture. When it comes to the Singapore subjects, that is, government contracts, investments, competition, facilitation of trade, it is the same thing, and this causes breakdowns in trade negotiations. India demands and gets, in multilateral talks under the General Agreement on Trade in Services, the largest possible opening in western service contracts, mainly in IT.
Do you agree that India is at the same time demonstrating growing protectionism in its own markets? Have you heard about Canadian companies or investors or people offering services that have had to deal with India's protectionism?
[English]
Mr. Sunquist: You could have been at our last joint economic and trade consultations because you have just expressed almost word for word our opening statement in our relationship with the Indian government.
The only part I would disagree with is whether it is growing protectionism. I think protectionism is decreasing, but too slowly. Canadian companies believe there are a number of impediments around the regulatory approach. We continue to seek action by the Government of India on a whole host of areas, from food to technology to investment to financial services. We have quite a list of what I would call the trade impediments. You have expressed almost where we would come out.
We believe that India should move farther and faster on opening their markets. It is no good to say that we should open ours unilaterally — maybe we might do that on textiles or something else — but you cannot go around the world saying everyone else should open them and we will keep them closed. I am not saying that that is where they are, but it was discussed at Doha. The discussions indicated that the industrialized West should make unilateral openness and it would not affect developing nations. That is not the way multilateral talks work.
I agree with everything you said except for the growing protectionism. I think it is moving the other way. There is no question that it is the number one issue our companies have. Once you get into a country, it is easy to do business. Once you work with Indian partners, it is great, but the challenge is getting that initial market access for a range of issues.
As I mentioned, our insurance companies and others have mentioned they see signs up everywhere, but there is a limit to the percentage of ownership you can have in the companies. Our banks would like to do more there to help expand economic opportunities, but there is a limit to the percentage that a Canadian bank can own, unless they can do something special.
Senator Jaffer: I was not too happy with your answer about involving the diaspora, to wait for our report. I hope you can say a little more.
Following what Senator Finley said about stability, I would very much like to hear from you on the issue of the stability of Kashmir. What will happen with Kashmir?
Mr. Sunquist: I did not mean to shortchange in my answer. We continue to have as a fundamental bedrock of our relationship with India how we deal with the diaspora here. We look for ideas. We look to people of Indian descent to help in business in the economy. We look for ideas. We are engaging all the time and doing more and more of that.
I am saying that I do not think we have gone as far as we might with the Indian diaspora. We are working with the Indo-Canada Chamber of Commerce, the Canada India Foundation and the Canada-India Business Council. We are working with individual companies and people. We have regional offices across Canada that deal with small- to medium-sized companies owned in Canada by former residents of India that we are trying to encourage to go into the trade business. We are doing many things, but it is incremental. I would like to see some insights, and we are trying to do that all the time. The current President of the University of Alberta comes with a certain background. She has been creative in how to get Canadian universities more involved in India. We need to do that in different sectors. I am sorry I left the impression that we are waiting for that right answer. We are doing many things but could do more from a creative perspective.
Mr. Macartney: If I could just add a word, I would say that the diaspora is not shy about involving themselves. Every time a trade delegation that goes to India, whether it is provincial or federal, many Indo-Canadians are represented. Every time there are groups of Canadian educational institutions, many of the professors and academics, the officers of the institutions, are Indo-Canadians. They play an important role in mainstreaming the idea of India within their institutions or companies. We have the linkages at the political level as well, the Indo-Canadian parliamentarians, who are very active.
The diaspora is extraordinarily active and helpful in terms of building those bridges. Each year the Indian Ministry of Overseas Indian Affairs hosts a big conference of the diaspora from around the world. There is always a large group from Canada, and depending on where they have this meeting, our High Commissioner or consulates work with them and host them and do some networking. They are very active.
Kashmir is an intensely bilateral issue between India and Pakistan and one that certainly India does not want other countries to be involved in. They have had, in the recent past, a composite dialogue with Pakistan that has included issues around Kashmir. That dialogue came to a bit of an end after the Mumbai attacks, but they have just recently had talks again at the foreign secretary level just about a month ago. They are continuing that dialogue.
Of course, in Jammu and Kashmir itself, there is a lot of activity with local representatives and the Indian government. They had an election in that state not too long ago, and I think over 60 per cent voted in the election, so they have a government there that is dealing with some of the issues. I would say that it is an intensely bilateral issue between India and Pakistan.
The Chair: Mr. Santerre, I think you are the rock that stabilized the answers. Thank you for the preparation of the materials and for being here with us today. Mr. Macartney and Mr. Sunquist, thank you for your thoughts and sharing the information. It is no accident that this is the third time that you have been here. It is extremely helpful to our work, and anything else that you think may be of benefit in the coming weeks, please provide to us, in addition to what you had said on some of the issues. Honourable senators, we are adjourned until tomorrow.
(The committee adjourned.)