Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 23 - Evidence - Meeting of March 12, 2015
OTTAWA, Thursday, March 12, 2015
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:30 a.m. to examine such issues as may arise from time to time relating to foreign relations and international trade generally (topic: trade promotion).
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, welcome. The Standing Senate Committee on Foreign Affairs and International Trade is continuing its examination of such issues as may arise from time to time relating to foreign relations and international trade generally. Our topic of discussion is trade promotion.
I'm very pleased that we have, by video conference, Ms. Danielle Goldfarb, Associate Director, Global Commerce Centre, Conference Board of Canada. Can you hear me?
Danielle Goldfarb, Associate Director, Global Commerce Centre, Conference Board of Canada: I can hear you well. Good morning.
The Chair: In his individual capacity, we have Mr. Jean Michel Laurin, Vice President and Director, Ottawa Office for Octane Strategies. Welcome to the committee.
Jean Michel Laurin, Vice President and Director, Ottawa Office for Octane Strategies, as an individual: Good morning.
The Chair: We will turn first to Ms. Goldfarb, followed by Mr. Laurin, after which we will go to questions.
Ms. Goldfarb, the floor is yours.
Ms. Goldfarb: Thank you very much for the invitation to appear before the committee. Because the Conference Board of Canada is a research institute, I'm going to focus my remarks on the research we've done. While we haven't focused explicitly on trade promotion programming, I think a lot of the research we've done related to global commerce and global commerce trends and strategies has important public policy and programming implications; so I'm going to speak to that and make five points.
The first point I want to start with is that although the Canadian public media and business tend to focus on Canada's oil and natural resources, there is a mostly hidden set of exports that accounts for some of Canada's strongest trade growth and trade potential and that is traded services. I want to just point out that three of the five fastest-growing export sectors over the past decade for Canada have actually been services. They have been things that you can't drop on your foot, so to speak.
We often think of services as being marginal to Canada's trade but, in fact, when you account for services properly, our research has shown that they represent about 40 per cent of Canada's trade; so this is not insignificant. This is not marginal. This is central to Canada's trade. There are massive and growing opportunities to sell Canada's services, both in our traditional markets and in emerging markets. Moreover, there are opportunities to add high-value services to our sales of resources and manufactured products. This is really an important point to make when we think about trade promotion policies.
The first implication to me seems to be that policies and programs related to trade promotion should be integrating services into them and that facilitating traded services should be given more prominence in our programming.
Barriers to traded services are much more complex than are those for goods. They get into all sorts of issues like visas and air access — issues that relate to moving people.
Moreover, more services tend to be sold via Canadian affiliates abroad rather than directly exported, so investment also needs to be considered and taken into the picture as we develop our trade and promotion activities.
We also need to consider that those who provide loans to Canadian exporters need to reframe their thinking. Traditionally, we've thought about using factories as collateral for loans. When we're talking about services and knowledge-based industries, we need to think a little bit more about how we can use intellectual property as collateral for loans. It's just a different way of thinking about trade.
That is the first point and it is about services and the importance of traded services.
Second, I want to make the point about the rise of emerging markets, which no doubt the committee has heard about. Over the past decade, a period in which global trade has expanded dramatically, we've seen that Canada's trade, in fact, has been essentially flat. It's been largely focused on the U.S. market, even though the global economy has changed dramatically with the dramatic rise of emerging markets now accounting for half of global trade and a good share of global investment.
Canada's trade to emerging markets has grown, in particular to Asia; but it has been narrowly focused on commodities while the commodities super-cycle is ending. We are finding in our research, which will be released shortly, that Canada is struggling to keep up its market share in Asia, despite its proximity and the fact that we actually have what Asia needs and what Asia wants. Our research actually shows that many of Canada's competitors are faring better in the Asian markets by shifting to services exports or by focusing on niche and high-value-added products. Export promotion policies need to take that reality into account.
The third point I want to make is about the U.S. opportunity now and the importance of not forgetting about the U.S., because Canada's companies are going to remain focused on the U.S. market. With the U.S. economy now rebounding and a low dollar in play, it is really a tremendous time of opportunity for Canadian companies in the U.S. Even as we seek to expand Canada's commercial links outside the U.S., we need to continue to recognize the significant advantage the U.S. relationship provides Canada.
We also need to keep in mind that there is an important role to play that perhaps may limit our ability to take advantage of the U.S. market. Many Canadian companies have not invested in their capacity over the last number of years. They have not invested in their information and communications technology, ICT, and their capacity to be able to take advantage of this U.S. opportunity. There may be only some industries or some companies best positioned to take advantage of this opportunity. In fact, the Conference Board of Canada is going to be studying which companies and industries they are over the coming months.
I want to make two last points, one being the importance of both companies and government doing their homework before going into both emerging and traditional markets. We're opening doors via trade deals, but there's evidence in our research that some companies are doing a better job of doing their homework before they go abroad than others are doing. In particular, I want to note two findings from our research.
First, when we looked at all Canadian companies over the recent 15-year period that went to emerging markets, we looked at the rate at which they introduced new products into these markets. We found that new product introductions, on their own and taking out the impact of all other factors, boosted Canadian companies' success in the emerging markets and boosted their ability to stay in emerging markets for longer periods of time. Innovation and introducing new products has proven to be critically important to success in these markets. This is not just something that we can talk about anecdotally. We actually proved this in our research. It's critical, whether in emerging markets or not. Frankly, we also did a research study on the European Union and we found that the same factor, introducing new products, was critically important in terms of determining companies' success and longevity in the European Union.
Second, in terms of doing your homework, we found in our research that Canadian companies do not increase their profits in the short term as a result of exporting to Europe. We think that this is because they are encountering unanticipated regulatory barriers and other barriers. They're not anticipating the differences between European sub-regional markets, and they're not doing their homework before they go into these markets. This just highlights the importance of companies doing their homework. Perhaps there may be an information gap and a role for governments to play in terms of addressing that.
Finally, there's a lot of focus on trying to increase the number of companies we have going to global markets. I just want to highlight that not all companies are destined to be successful in global markets. Our research shows, when we looked at every Canadian company that's exported over the past 15 years, we actually found that some failed spectacularly and some were tremendously successful.
We found the top 25 per cent of companies doubled their sales in emerging markets year after year. It is possible for companies to succeed in emerging markets and traditional markets, but our research shows that there are a number of companies that are unlikely to succeed in global markets. We need to think about leveraging the benefits of the global economy in different ways. Some companies may be better off selling into Canadian multinationals or U.S. multinationals and thereby being exposed to emerging markets.
It's important to think about different ways to be exposed to emerging markets. Not all companies should go directly into emerging markets. Rather than focusing on specific companies or sectors' sizes, our policies and programming need to focus on those companies that are prepared for global markets with innovative products and services, that have connections to global markets, and that are really prepared for the challenges that global markets raise.
Thank you very much. I look forward to comments and questions.
The Chair: Thank you, Ms. Goldfarb, and now we'll turn to Mr. Laurin for his presentation.
Mr. Laurin: Thank you very much for having me here this morning. I'm pleased to be back before this committee to appear as an individual this time and share my thoughts on the government's trade promotion efforts.
As you indicated, I'm currently vice-president at Octane Strategies. Our firm provides advisory services in strategic planning, marketing, public affairs and community relations, and our areas of expertise include international trade.
You may remember me. My previous appearances before this committee were as vice-president for global business policy at the Canadian Manufacturers & Exporters Association. I spent 11 years at CME where I worked closely with the businesses that are competing in global markets every day, and also with government officials that are actively promoting Canadian trade.
I'm pleased that the committee is studying the government's trade promotion initiatives. We all need to recognize that our prosperity is increasingly tied to the private sector's ability to take advantage of opportunities in fast-growing emerging markets. Those markets now account for half of global GDP and 80 per cent of global growth. Yet, when compared with our peers, Canada's direct exposure to emerging markets remains relatively small, as Danielle just noted.
Trade promotion is an area where I believe it is critical that our government play a strong role for four main reasons. The first refers to what economists call market failure. We all know that by diversifying our trade we will have a stronger and more resilient economy; yet, there are greater costs and greater risks associated with doing business in foreign markets, so businesses tend to focus more on the markets they already know and they're already comfortable working in. Trade commissioners, for instance, help address that issue by reducing the costs and the risks associated with foreign markets by sharing key information and market intelligence with businesses.
A second argument is that trade promotion works. DFATD's own assessment and analysis that they released back in 2011 revealed that every dollar invested in the Canadian Trade Commissioner Service generates $27 in increased exports.
A third reason is that, given that other countries provide such services, making trade promotion services available to our Canadian businesses matters if we want them to compete on a level playing field in international markets.
Finally — and I know that others have raised this here in some of your previous meetings — there is a role that can only be played by our government, and that is providing commercial diplomacy. Using our diplomatic tools to advance Canada's commercial interests is often necessary, especially when the host government has a significant say in business decisions, something that is not uncommon in many of the world's fastest-growing economies.
I believe the government deserves to be lauded for setting a bold objective by stating that we will raise the number of SMEs doing business in emerging markets from 11,000 to 21,000 SMEs by 2018, but I do worry that we are trying to achieve different results by doing more or less the same thing that we have done in the past. I will explain what I mean here.
If the government and SMEs want to boost Canada's trade performance, especially with fast-growing emerging markets, it's clear that neither can operate on a business-as-usual model.
While the government's Global Markets Action Plan does a good job of setting priorities, it essentially proposes to shift existing trade resources towards areas where there are growing business needs. In other words, it does not provide new resources to the government's existing trade promotion efforts, nor does it expand the government's suite of trade services. That concerns me.
I'm pleased to note the government is partnering with associations and visiting communities across Canada to increase awareness of its trade promotion services with its Go Global series of events. According to a paper that Deloitte released last year, only 20 per cent of Canadian exporters are aware of those services, so giving them more visibility is important if we are to significantly grow the number of companies that are succeeding in international markets.
Assuming that this will lead to greater awareness of the government's trade promotion services, the questions we should be asking ourselves are, first, are we doing enough; and, second, could we do this trade promotion thing better?
As for whether we're doing enough, I believe that it's important that we in Canada benchmark ourselves against other countries. Something I often heard from Canadian SMEs is that their overseas competitors had better access to direct funding to support their business development. We have an excellent program in Canada called Global Opportunities for Associations. You might have heard about it. It's used by sector associations to support their members, but it has limited funding and can only be accessed by companies through sector associations. Other countries, and the U.K. and Australia come to mind; also provide matching funds to companies directly to offset part of the risk of entering new markets.
Another issue is one of overall funding for trade promotion. The Canadian Chamber of Commerce — and I know you had Cam Vidler here recently — noted in one of their reports last year that the demand for the Trade Commissioner Service is growing and that resources are increasingly being spread thin across the department.
Some might say that the current fiscal environment is not conducive to requests for major investments in new government programs or significant increases in departmental spending. That might be true if you only look at the Trade Commissioner Service in isolation, but the reality is that if you include EDC, which is part of the government's trade portfolio, this generates significant surpluses for the government every year. In fact, EDC expects to generate surpluses of over $600 million per year over the next four years — that's an average — and those surpluses will grow as more Canadian companies succeed internationally. By comparison, the Trade Commissioner Service probably costs somewhere between $200 million and $300 million a year. In other words, through EDC the government is benefiting financially from the new trade that it helps create through its trade commissioners.
Finally, I also want to state that support for investment promotion — Danielle mentioned this topic — and ensuring that we have a competitive business environment domestically are also very critical to growing exports and seeing Canadian SMEs succeed in global markets.
I would be pleased to discuss these two issues at greater length over the next hour or so. Thanks again for your invitation. I would be pleased to answer your questions and I look forward to our discussion.
The Chair: Thank you. Both presentations have elicited a lot of questioners, so I will start with Senator Eaton.
Senator Eaton: Thank you very much. My question is for Ms. Goldfarb.
You talked about hidden sets of exports, i.e., services and intellectual property. We've just come back from a trip to Indonesia and Singapore and that part of the world, those ASEAN countries which could be huge trade partners for us. Are there trademark protections?
I have a bit of experience in China where things like trademark and intellectual property is not always respected. How can we protect the Canadian businesses' trademarks and intellectual property from being sold out the back door?
Ms. Goldfarb: Great question. There are two elements here.
What I'm hearing from you is you're concerned about Canadian intellectual property being stolen, essentially, when we develop something new. In our research, we did both case studies and looked extensively at the experience of Canadian companies in emerging markets. We found sort of the best defence is a good offence, and that offence really is I would say two-pronged, at least as an emergence from our research finding.
The first point is that I talked about our research that examined the rate at which companies introduced new products into emerging markets. If you were faster at introducing new products into emerging markets, your company would be much more likely to succeed, stay for the long term and actually boost its company sales. This is just one indicator of innovation, but that's really what I would say is one of the best sort of defences against intellectual property theft — our companies have to be constantly, constantly innovating and developing new things.
The second sort of offence against this — sorry?
Senator Eaton: I was just going to say we found that so much time was spent going back and forth trying to stop it or deal with it. I mean, in the end, we sold the company, and this was just last year or 18 months ago.
Ms. Goldfarb: Sure.
Senator Eaton: We spent a lot of time, as opposed to if you do trade with a country like Britain or the U.S., which is very comfortable for us. You know they're not going to be selling the product out the back door to somebody else who will manufacture it more quickly. They will respect your trademark and royalty. It's all very well to say to be offensive, but it's hugely time consuming, too.
Ms. Goldfarb: Right, and I appreciate that. I guess what I'm saying is these emerging markets — and you mentioned the ASEAN countries — are unfamiliar and are difficult places to do business. If you look at the World Bank's ease of doing business indicators, they're all ranked as very challenging places in which to do business. They are not traditional trade partners, and you can't rely as much on the legal channels that we do rely on in our traditional trade partners.
All I can speak to is what emerges from our research and that is the importance of constant innovation, and the second factor that really emerges from a lot of the case studies we do is the importance of developing trusted long-term relationships in these markets. These are not about quick kind of one-off visits. These are about constant relationship maintenance, both at the government level and also at the company level. Companies that are going to be successful and are going to be able to overcome hurdles in these markets are those that are going to be persistent and that are able to develop both long-term relationships, to constantly innovate and to persist through these kinds of challenges.
As to whether there are specific programs or policies that the government could put in place, that's one area we haven't looked at specifically so I'm not sure I can directly answer in terms of dealing with the specific problem you're suggesting. However, in general, we found that those are the strategies that have been most effective both through our case studies and our broader research.
Senator Eaton: Are either one of you familiar — because I'm certainly not — with some of the TPP negotiations? Would they be negotiating things like intellectual property rights and trademark protection? If you didn't get that, if it was stolen or taken, do you have any comeback? Would that be part of the negotiations?
Mr. Laurin: Yes, the TPP negotiations do include an intellectual property chapter that includes those types of issues that cover the type of issues that you've raised. I think a stronger rules-based environment, rules that we can effectively enforce, does help companies. That's why businesses in general like trade deals. It provides a consistent set of rules for everybody.
The comment you made is an area I've encountered these questions many times, especially in my previous life, and that's an area where both associations and trade commissioners can be very helpful. Companies think they're on their own and unique in facing this problem, yet there are often other companies that sort of were trailblazers. In other words, there are companies that experienced the same kind of issue and found ways that are effective and sometimes not effective in dealing with them.
I encourage companies to connect with both other companies that are already in that market that face the same issue — if they're not a competitor, usually they're pleased to share that kind of information — and trade commissioners, especially in emerging markets. It's more common for companies to deal with the local embassy or local consulate, so the trade commissioners are usually aware this company's been in this country for seven years and they've had that issue and tried this thing and it didn't work. They lost a lot of money. You might want to connect with so-and-so and see if they can connect with you so they can share their experience with you so you don't make the same mistakes and you learn from their experience. That's an area where I think the government and associations, basically connecting people and sharing best practices, can save people a lot of time and money.
The Chair: Ms. Goldfarb, did you want to add to that comment?
Ms. Goldfarb: I agree with Jean Michel's commentary.
Senator Ataullahjan: Ms. Goldfarb, you have written about immigrants being a strength for Canadian firms to tap into global markets and that Canadian-owned businesses are more likely to connect to global markets. Why are these businesses that are owned by new Canadians more likely to export to non-U.S. markets, and what insights have you learned from their activities?
Ms. Goldfarb: Thank you for your question. I am glad to hear you've read our study on immigrant exporters. We looked at recent immigrants who have come to Canada or become immigrants in the last five years, and we found, all else being equal and we controlled for all other characteristics we were able to control for, that they tended to export more than their Canadian counterparts.
We think this is for the reasons that one would expect. They have connections. In fact, they have better connections back to their countries of origin. They have international exposure and experience. They have better connections back to their countries of origin than they might have within business networks within Canada. We were able to measure their access to business networks within Canada, which we found were actually quite weak, as you might expect, and their business networks outside of Canada were quite strong. At least that's what we can infer from the research.
They are able to overcome many of the challenges that Canadian companies might be encountering in emerging and even in the U.S. market. In the emerging markets, they simply already have connections and long-term relationships. They understand the culture. They understand the language. They have all these natural advantages over Canadian-born folks, Canadian-born company owners, who maybe have not had access to the same kind of international experience.
We found that in general they tended to export more not just to their countries of origin but also to the U.S. as well. We think this is because they have more of an international outlook and they're able to overcome these challenges.
We did find that there was a mix of experiences, and I think this is really important. Not all of these immigrant exporters were equally successful. Some are active in more low-cost sectors where they're trying to differentiate themselves based on cost. Another group of them is more active in knowledge-based, more service-intensive industries, and those are the ones that are competing on the basis of innovation and differentiation and, we think, are likely to represent greater long-term potential.
Senator Johnson: Ms. Goldfarb, regarding CETA, the Canada-Europe trade agreement, for Canada to have full benefit from the provisions of this, professional associations need to negotiate mutual recognition agreements with the EU and the governments, which should help facilitate these negotiations. Could you tell us if these negotiations are particularly difficult between our two jurisdictions?
Ms. Goldfarb: To clarify, are you referring to the overall deal or just the mutual recognition aspect of the deal?
Senator Johnson: The MRAs, yes; the mutual recognition agreements.
Ms. Goldfarb: I will say I'm not an expert specifically on the MRAs, but we have a piece we've written at the Conference Board that tries to outline what is envisioned under them.
My understanding is that the MRAs, CETA puts in place a framework under which companies and associations can then negotiate mutual recognition agreements. The actual putting in place of the framework for those agreements, it is difficult in the sense that you have to deal with so many different jurisdictions within both the EU and Canada to be able to ensure that you do have free labour mobility between the two markets. That is difficult.
In addition to the negotiations themselves having their own difficulties, they have agreed to a text of what CETA will encompass, but what really now is even more difficult, perhaps, is that now professional associations have to actually put that into action and be able to negotiate mutual recognition agreements between Canada and the EU, although I understand there are some professional associations, like the engineers, who are actually advancing their discussions on that and are active now. We need to see Canadian associations engaging with their EU counterparts to take advantage of those provisions, or else they won't necessarily mean anything in reality.
It's going to depend on both what the government negotiates, as well as what companies and associations actually do to take advantage of it. Does that answer your question?
Senator Johnson: Yes, that's excellent. Do you know of companies looking to take advantage at this point? I know you said it wasn't totally your area to comment on, but thank you for the answer; it was very good.
Ms. Goldfarb: I was going to mention that it's my understanding that there are some exploratory talks among the engineers' associations, for example.
Senator Johnson: Mr. Laurin, what is your assessment of the GMAP so far? Does it reflect the strategic policy that you and your members had advocated for in the past?
Mr. Laurin: With respect to my previous life when I was with the Canadian Manufacturers & Exporters, I know you have had Phil Turi testify and he would be in the best position to talk about it.
I left CME in 2013 and, yes, we were not necessarily in the business of telling our members how to conduct business, but we were certainly advising them of the opportunities that existed in international markets.
With respect to the objective that the government included in GMAP, almost doubling the number of SMEs engaged in emerging markets, we always liked it and I think they still like it when the government goes out and sets an objective. We've seen that in other areas, for example, because it drives resources. When you say that this is a priority, this is the objective that we set for the government, normally there are resource allocations that happen around that objective.
In terms of whether we will meet that objective or not, I don't have the latest figures. I assume the government is keeping a close eye on it, but we are essentially relying on StatCan data. With respect to the number of establishments doing business in international markets, Danielle would know better than I do, but the data is usually two years out of date; so I'm not sure that we have much data on whether we have succeeded towards that objective.
My general point is we're essentially saying in five years we're going to get to a completely different result. We're going to get almost twice the number of SMEs doing business in emerging markets. That's great. I think everybody agrees this is a desirable goal for the Canadian economy and Canadian businesses, but, in my view, unless we shift the way we have supported them as well, it's going to be hard to achieve that objective.
I would assume, with the series of events that DFATD, CCC and EDC are doing across the country right now, there will be more demand for their services. I've always encouraged and still encourage companies to connect with the Trade Commissioner Service and EDC because they are very useful to companies operating globally.
If they're seeing an increase in the demand for their services, they will need more resources. The point I'm trying to get across is that some other countries I have looked at are a lot more aggressive in funding trade promotion and being flexible and diverse in terms of the number of services they provide. I mentioned some provide direct funding to companies, which is something that some provincial governments do, but the federal government only does through associations.
We need to think, well, do we have the tools needed for the government to be able to support these companies that we're essentially saying to go to Malaysia, Thailand and Turkey and do business in these markets? Are we equipped to provide them with the level of service that they need to be provided with? I'm essentially asking the question.
Senator Johnson: I see. Thank you. I'm sure there will be some follow-up.
[Translation]
Senator Fortin-Duplessis: First, thank you for your presentations.
My first question goes to Ms. Goldfarb.
To your knowledge, are there Canadian government programs that you can point to as successes?
[English]
Ms. Goldfarb: Maybe Jean Michel is better placed to answer this than myself.
[Translation]
Senator Fortin-Duplessis: Mr. Laurin mentioned that EDC's trade commissioners provided good support, but are there not other programs?
Mr. Laurin: The Department of Foreign Affairs, Trade and Development has two main programs. Actually, it has three. The largest is the best known, the Global Opportunities for Associations, or GOA, or Opportunités mondiales pour les associations, or OMA, in French. It is a funding program of about $3 million per year. Around 30 or 40 sectorial associations, such as plastic producers, automotive products, and so on will get funding. With the funding they receive, those associations will be able to finance some of their costs of participating in trade shows abroad or to develop materials to promote Canadian products. If my memory serves, that program is about $3 million per year.
Another program, called Invest Canada-Community Initiatives, or ICCI, is designed to support local groups such as industrial clusters or local chambers of commerce. The goal of the initiative is to attract investment. For example, if Montreal International leads missions abroad in order to promote Montreal as a place in which to invest, it can use the government program, which supports initiatives of that kind. The program is very popular and much appreciated; it plays a major role in promoting investment. It also has a positive impact on our exports because, often, the companies that have been enticed will establish a new production chain in Canada. Their products will be sold all across Canada and, more especially, they will be exported to other markets.
There is also the Industrial Cooperation Program, which has been in existence for a long time, but with less funding. At one time, CIDA was responsible for that program. If I recall correctly, the program is designed to support Canadian businesses wanting to start up a manufacturing operation in developing countries.
Senator Fortin-Duplessis: Have those programs been successful?
Mr. Laurin: Yes.
Senator Fortin-Duplessis: Mr. Laurin, I have another question for you. Which countries could serve as models for Canada in terms of a trade promotion strategy?
Mr. Laurin: That is an excellent question. A number of countries are doing interesting things. We often compare ourselves to Australia because their economy is said to be similar to ours. The country has a lot of natural resources and a major industrial base. However, the Australians are better than we are at doing business with Asian markets because of their proximity. They are much closer to the Asian markets than we are and they have been there longer. The Australian equivalent of our Department of Foreign Affairs, Trade and Development is an agency called Austrade. It has been running their Export Market Development Grants program for about 40 years. The program provides grants to more than 3,000 companies in Australia. The funding is matching: the company has to spend a certain amount in order to receive an equivalent amount. It helps Australian companies pay for their participation in trade fairs in other countries.
It is often frustrating. I was working for the association at the time and we kept hearing that trade missions from all over the world are coming here and, when we talk to the companies, we find that their government has often done the organizing or helped to support it. It often happened that they were paying for a portion of the fees incurred by the companies. Australia is often held up as a model because its program and its model are interesting. Its government department works very closely with the associations and supports and funds those associations so that they can promote trade more. If you look at it on a per capita basis, they invest much more in trade promotion than we do here in Canada.
Senator Fortin-Duplessis: And how about Europe? Is there a country we could use as a model?
Mr. Laurin: England has an interesting program too. They have established an agency like a crown corporation that is in charge of trade promotion. England could be a model for us too.
Sweden is also often held up as a model for trade promotion. It is interesting in that one of the things they provide to businesses is a consultation service. So some services are provided by the government at no charge, like in Canada. I remember visiting a Swedish company that had an agent, a Swedish trade commissioner, in Canada. I asked if it was funded by the government. The answer was that it was partially funded but they also had to pay out of their own pocket. So their model is a little more of a hybrid. They provide services that are not otherwise offered but a part of those services has to be paid for.
[English]
Senator Demers: Thank you very much for your presentations. Ms. Lorna Wright of York University said before the committee in the other place that any time you get into business there is a risk. A lot of Canadian companies hesitate to go abroad because of the risk. What role should the providers of federal trade promotion services play in helping "ready-to-export" Canadian SMEs to overcome their aversion to risk? What could they do to give assurance to businesses?
[Translation]
Mr. Laurin: You are right. Often, when we are dealing with entrepreneurs, two lights go on when we start talking about international trade: what openings are there and what are the risks? A lot of our companies focus on the Canadian and North-American markets because they often hear that the American market is one of the riskiest in the world. But we know the risks. We know how to manage them and, most of the time, we have the experience to do so. So, what role should the government play in helping entrepreneurs to manage risk abroad? EDC is an extremely valuable resource for Canadian companies. It provides a number of services; it insures your foreign client accounts and provides advice when it comes to insuring this company or that. That in itself is a good indication of the risks to avoid. And there are private insurers who provide the same service.
In my opinion, the trade commissioners play a major role in making information available. They are able to identify the risks that companies can be exposed to. They provide companies with advice so that the risk can be managed. In emerging markets, there are often major macroeconomic factors, issues that the whole world faces. However, the key to success for any company is to find the right partner. They have to ask themselves these questions: Do we have a good relationship with that partner? Is the partner trustworthy? It is not up to the government to tell you who to do business with. But it can point entrepreneurs in the right direction, make information more available, and encourage best practices. It is a pity when we see companies making mistakes when they could have benefited from other companies' experience. In a lot of cases, with government support, associations can provide a mentorship program so that new exporters can learn from more experienced ones.
In my opinion, the role of the government is vital in that regard. I was talking about economic diplomacy, which is of invaluable help for companies in terms of risk management. It gives companies a feeling of security to know that the government is on the scene. It helps in representing the company, and with the key contacts in the other country, particularly in countries where the state plays a major role.
All governments all over the world provide a service of that kind. That is a good indicator that governments have a role to play in risk reduction. Companies frequently turn to those services precisely because they are effective and provide valuable help.
[English]
Senator Demers: Ms. Goldfarb, do you have anything to add?
Ms. Goldfarb: The government has an important role to play in terms of removing barriers to trade in both goods and services, and the information gap that Mr. Laurin spoke about as well. In terms of the financing gap, it's really important to reflect on whether there is a market failure and therefore a role for policy intervention. It may not be clear-cut, but I think we need to ask that question, as opposed to saying there is always a role for government to play in financing just because other countries are doing it. I would just add that kind of philosophical aspect.
Senator Oh: My question is to Mr. Laurin. I travel frequently to Asia. I have noticed intellectual property rights on copyrights. In China and other parts of Asia governments have come down a lot on copyright issues. You don't see knock-offs selling on the market like they did 10 years ago when you could see knock-off Gucci and other brand name products for sale on every street. Can you comment on that?
Mr. Laurin: I can try, but you seem to be more knowledgeable about this than I am. I remember when we first talked about China as an emerging market 10 to 15 years ago. Everybody was worried about intellectual property protection. China is evolving as a country. From what I'm hearing in some instances, they have been addressing the issue, maybe more forcefully than they have in the past. Part of it is for them to have the capacity to address these issues.
I'm not sure if it still remains an issue. I still hear about it from some companies that it's obviously a risk that they are paying attention to. I would invite you to ask companies doing business in China. I hear different things depending on whom I speak to. Some have developed strategies to deal with the issue, whether it's a case of not giving all of your IP to the same partner or taking steps to prevent your product from being reverse engineered. Part of it is also the type of partners you select and the relationship you have with them.
This problem has been around and it's not unique to China as it's certainly a problem in many countries around the world, including Canada. Different companies are responding to it in different ways. In terms of the government's role, we talked about rules before and having strong rules and making sure that governments around the world enforce them is one part of it.
From a company's perspective, I've seen that companies have different strategies to try to address this problem and some have had more success than others. Some, unfortunately, have not been able to have the problem addressed and are facing the negative consequences of IP theft and those kinds of issues. Some have been more successful in dealing with that.
Senator Oh: Overall, I notice in Asia it brings up the bar and significant improvements on intellectual property rights.
Mr. Laurin: That's good to note.
The Chair: I have a couple of questions before we suspend for the next session.
Ms. Goldfarb, you talked about the issue of Canadian services into Asia and the research you're doing. Is this going to be a report that you will be doing? If so, when would it be available? It has implications for the studies we're doing.
Ms. Goldfarb: We have two studies that will be coming out in about two weeks' time. Both of them will be focused on Canada's trade with Asia and understanding how Canada's relationship with Asia has changed. The second one will be looking at where the key opportunities are for Canadian companies in Asia, going beyond natural resources. Both of them will be released on the day that Canada launches its RMB hub, which is on March 23. I would be happy to share copies of those with the committee.
Also, our upcoming series of research is going to be focused on services trade. That will be a key theme of research for us over the next three or four months. We're going to be having an event in May that will be focused on traded services and related research published around that time as well. I would be happy to share with the committee whatever we have as we progress through that research as well.
The Chair: Thank you, that's helpful.
Mr. Laurin, you touched on intellectual property rights. You indicated that it's a problem everywhere, but obviously more intense in some areas than others.
Do your businesses differentiate on the basis of security? In other words, intellectual property rights may be business to business, but from time to time our technologies have had research input and government-funded research go to the areas of security issues, military issues. Is there a differentiation on that basis that companies should be aware of?
Mr. Laurin: I have noticed over the years that companies — and if you talk about defence companies, we have a strong aerospace sector in Canada and I have visited many companies in that sector — I would say that because many of these are global companies and I find they are better equipped to deal with the issue. It's not just an issue of intellectual property protection, but an issue of these companies having access to privileged information about their clients.
Let's say they are defence contractors. They have access to military secrets, in some cases, or military strategies that we don't want to see shared with anybody around the world. I have noticed that companies in those sectors have best practices, partly because they are global companies, but even for SMEs that are supplying the defence and aerospace industries, I have found they definitely are adept at managing risk, not just in terms of other companies out there stealing their intellectual property, but even within their company, making sure that only certain individuals have access to the information needed.
You see that in other sectors as well. I remember visiting companies that were developing parts for different automakers, and those doing R&D for the Ford project would not talk to or have access to the information about this other company that is doing R&D work for another auto supplier.
Companies have their own internal checks to make sure that only certain people have access to certain information.
We often organize plant visits to aerospace companies, and it's a problem because very few people in the company have access to the entire operation. Most people have limited access to certain areas. When you're trying to organize a plant visit with high school kids, for example, to show them what kind of work happens in a plant, it's always problematic because they have so many security processes in place.
These companies are in a better position and certainly more aware of the risks associated with doing business in various markets.
The Chair: We've recently travelled, as was indicated, to Southeast Asia with respect to one of our studies. We've done previous studies, and it seems every time we talk about economic development, trade promotion, the push-back from these countries is that Canada is coming late to the scene and then they back it up by saying, "But there are still opportunities."
How much value should we put on that? It seems a recurring theme which gets us nervous why Canada wasn't there before, or is this a normal statement made by countries?
Both of you have experience in studying those areas. I'll start with Mr. Laurin, if you have anything to comment on.
Mr. Laurin: I have heard the same thing many times. I haven't checked with our counterparts in other countries to see if they hear the same thing, but it's been a recurring theme.
Being a latecomer in the game sometimes has its own sets of advantages because you can learn from the mistakes of others. I think what matters is what is going to happen in the future.
For the last couple of years I spent at CME, and I'm sure my former colleagues still there will attest, there's been a lot more demand for the types of services related to international markets. I know you had Phil Turi here, but he has been leading an incredible program trying to match Canadian companies with opportunities in foreign markets. Jay Myers, the president of the association, has prioritized that. I know other associations are doing similar things.
Back 10 years ago — I'm exaggerating a little bit — companies were mostly interested in cutting costs. They were dealing with a quickly appreciating Canadian dollar and they were looking for ways to be more efficient in their operations. While that is still important, I think the focus has shifted to finding new customers and expanding sales internationally.
I'm quite encouraged because, from anecdotal evidence, I'm seeing more companies putting this issue of diversifying their export markets on the top of the list of priorities.
Ms. Goldfarb: I would add that I also hear the same thing as well. I think that it is true that Canada has been late to the game in terms of establishing a government-to-government presence in lot of these markets.
I will add that it is not as if there is one homogenous emerging market. There are many different emerging markets, including those that you visited, far beyond the BRIC, Brazil and to a lesser extent Russia, but Brazils, Indias and Chinas of the world, to the set of countries in Southeast Asia where Canada is a bit late to the game. Many other countries have come to the table before Canada, but these are still huge markets with massive potential.
Canada has a lot of the things that these markets need. They have growing middle classes. Canada has a lot of resources, products and services that are exactly the kinds of things that, with a little adaptation, these markets need.
I don't think that should dissuade us from thinking forward to the future of the potential.
Senator Ataullahjan: Ms. Goldfarb, I'm looking at your article entitled "Five trade trends for 2015 and how Canada can take advantage of them." In it you say, "Over the past decade Canada's exports to the U.S. have flat-lined" and Canadian "companies have to look elsewhere for growth." Is there awareness amongst the Canadian companies that they have to work harder and actively pursue other markets than the U.S.?
Ms. Goldfarb: Overall the trade has flatlined, although in the last couple of years when the U.S. economy has been stronger, we have seen a slight uptick.
If you actually take out the U.S. from the picture for a moment, you see the trend is actually steadily upwards. In other words, Canada is growing its trade with the rest of the world. Much of that is destined for Asia and much is natural-resource focused, but if you examine each sector, many sectors have already started to diversify their exports and look to new markets. Probably not as many as would be ideal, but we see many examples of this actually happening in practice industry by industry of Canadian companies looking elsewhere. It is starting to happen.
The Chair: Ms. Goldfarb and Mr. Laurin, you have certainly given us a lot of information and it's been exactly what we need for our study. Your suggestions and recommendations especially have been extremely helpful. No doubt you will see your words echoed somewhere in our report, so we thank you for being before us this morning.
We have before us now Mr. Geoff Chutter, President and CEO of WhiteWater West Industries Ltd. by video conference from Vancouver, I understand.
Can you hear me?
Geoff Chutter, President and CEO, WhiteWater West Industries Ltd.: Yes, ma'am, thank you very much.
The Chair: Thank you. Thank you for appearing before our committee. Our usual practice is to have an opening statement, as I'm sure our clerk told you, and then we like to go to questions.
The floor is yours now. Welcome to the committee.
Mr. Chutter: Thank you very much for the opportunity.
By way of brief background, after a career as a chartered accountant with KPMG in Toronto and Vancouver, I started WhiteWater 35 years ago this year. We're the largest designers of waterparks globally and the largest manufacturer of waterpark products.
We manufacture wave-generating equipment, water slides, interactive play areas and surfing machines. Carnival Cruise Lines, Disney, Samsung, Six Flags, Palm Island, Dubai, Atlantis in the Bahamas and your own Calypso Theme Waterpark in Ottawa would be examples of our over 5,000 projects worldwide.
In our architectural fascia business, we have done 100 per cent of the Petro-Can stations across the country, the red fascias with the neon in it. Although 98 per cent of our work is for the export market, 96 per cent of our employee base of 625 people reside in Canada.
We have over 100 patents issued and have received over 100 awards, including two days ago, on Tuesday, being named recipient of Canada's Best Managed Companies award. In short, I believe that we have accomplished exactly what you are trying to foster. I sit on Minister Fast's Small and Medium-Sized Enterprises Advisory Board chaired by Jim Reynolds.
You have, I believe, heard that quite surprisingly less than 5 per cent of SMEs are involved in the export market. I think by focusing on that we are, in fact, perhaps looking at the wrong metrics. Rather than looking at the 5 per cent, I advanced a notion at our last board meeting that we should be adopting the adage: strong at home to be strong abroad.
Most companies will not look at the export market until they have secured their position in the North American market. By "North American," I mean Canada and the United States. Frankly, any businessman that needs help in vending their products into the U.S. market perhaps ought to seek another vocation.
My first question would be: What can we do to make our companies stronger at home? This is where I believe groups like the Canadian Federation of Independent Business, the Canadian Manufacturers & Exporters Association and the Chamber of Commerce can provide a wealth of ideas and assistance.
This is all about creating jobs, so these are my top three areas to accomplish that. First, continue with Minister Fast's excellent work in negotiating free trade agreements and his more recent Go Global program. There's nobody that I've observed that has put as many air miles on and has worked as hard as Minister Fast, but at the same time I think we've got to look at basics and focus on free trade within our country.
We are a country with approximately the same population of California, but we chop ourselves into 10 little pieces with numerous codes and organizations across the country. Imagine California with 10 plumbing codes, 10 medical associations and 10 chartered accountant associations; incredibly inefficient.
My suggestion would be to adopt Jean Charest's policy when he was involved in federal politics, namely to negotiate for a year with the provinces and, if unable to come to agreement, then legislate. I know that Minister Moore has taken on this task, and I would encourage that it is somewhat hypocritical to be going around the world negotiating free trade agreements when we are apparently unable to achieve the same within our own borders.
My second point would be centered on corporate taxation. Quite possibly our corporation tax evolved at a time when individuals could donate significantly to political parties, and perhaps in return things like dividend tax credits and capital gain exemptions came into play. These were done and the counter to that was taxing corporations. But isn't that somewhat backwards? After all, isn't it the corporations who create jobs? Perhaps we could reduce or eliminate corporate tax — a corporation is simply a group of desks and telephones, somewhat inanimate — but instead tax at the full rate dividends and capital gains. Taxation takes money out of the hands of businesses that create jobs. Dividends accomplish the same thing. They take money out of the system, but they don't create jobs. Therefore, my encouragement would be to tax those receiving dividends and capital gains at the full rates. With these savings, corporations would reinvest and would hire.
As an extrapolation of that, I would encourage the government to look at all programs that try to redistribute wealth to industries that are not natural to this country and away from industries that can flourish.
The notion of spending money on activities like Western Diversification Fund or its sister counterpart on the East Coast to me is counterproductive, and those funds are better spent elsewhere. After all, Newfoundland and Labrador and the Western provinces are the have provinces.
At the same time, I would encourage a review of the transfer of ownership of small- and medium-enterprise companies. Today, if I wanted to transfer WhiteWater to my son, the company would have to go through considerable downsizing and risk of dying to come up with the capital gains tax. Capital gains taxes significantly harm the very companies that we think are the future of our export and job creation initiatives.
My encouragement would be to look at a similar policy to what we have in the agricultural community. That is, if a company is transferred to the next generation, the cost base would also be transferred so that at some future date when it transfers outside the family, full tax would be remitted to the government.
My third point, and perhaps one with political challenges, would be that there's one industry in the world in which Canadians are number one without question, and that is we have the best providers of health care in the world. Yet, we are banned from marketing these products. We are located next to the largest economy in the world whose health costs themselves are astronomically high. I would urge that we find ways to allow our professionals to compete in this market. I fully understand the political ramifications. This is all about leadership, in my view, and certainly it's time to start on what some refer to as the slippery slope. In my view, making this one change would eliminate 100 per cent of our unemployment issue.
My message to you is to focus on getting the 95 per cent of SMEs export ready. In terms of the exporters themselves, or future exporters, I would urge you to support EDC, the trade commission system and BDC. Our manufacturing plant in Kelowna is financed by BDC, and we've used trade commissioners extensively in areas of research, introductions and language.
EDC, over the last 20 years, has provided a key partnership for WhiteWater. They have provided backup guarantees to bank guarantees and offered financing. They have been absolutely superb. We, as a company, would be greatly reduced if it weren't for EDC and we are quite happy to pay for their services. In fact, within two hours of leaving this session I will be meeting with EDC to encourage them to expand our bank guarantee line so that we can create more jobs.
I'd like to give you an example of perhaps a common perception that I believe is wrong-headed. Six years ago I embarked on a program to outsource 60 per cent of our work offshore. In this case it was in the Philippines and some in China. At the time, we had 300 employees in Canada. We have completed that journey and today we are over 600 employees in Canada. How can that be? How can you outsource over 60 per cent of your volume and yet more than double your employment base in the country? It is counterintuitive, but it goes something like this.
As we outsource to countries that are better suited to manufacture commodity-based products, our cost point has dropped, our resulting selling prices have dropped and our sales have soared. With those soared sales, we have had to engineer, design, project manage and manufacture specialty products for those projects around the world. To do that, we have had to hire over 300 employees. By and large, these employees are high-paid employees — engineers, architects and project managers. They are what I believe are the exact type of people that we want to encourage to grow within our country.
I think governments should let go of the idea that outsourcing is a bad thing and the idea of subsidizing some of those industries, particularly commodity-based industries, in which other countries around the world are better suited to manufacture those products and we are better suited to do what I would view as the higher end work, namely the design, the creative side and the engineering side.
I'd like to conclude with a few additional bullet points.
Number one, please consider that sanctions covering industries like ours, the water park industry, only hurt Canadians. We have companies wanting to sign contracts in Iran and in Belarus, and we are prohibited from doing so. The best way to change people's attitudes is to work with them, not to isolate them.
Point number two: Brazil is a BRIC economy, as you know. It's virtually a closed economy, simply because there's 30 per cent to 50 per cent import duties into that country. I would encourage continued discussions to try to obtain a free trade agreement; but in the meantime Canadian companies should be encouraged to manufacture in South America, arguably in other countries which have free trade agreements within the continent of South America.
Number three: We need to acknowledge that NAFTA is a free trade agreement negotiated by national governments. The state governments and municipal governments in the United States do not feel bound by that agreement. There is a very significant buy-American program in place. On our next round of negotiations with the Americans, we have to ensure that such negotiations cover all levels of government.
Point number four: SR&ED, the research and development program. Our observation is that over the past three years, perhaps for budgetary reasons, the tap has been turned down on that program. We hire a consultant to spend several months of the year going through that program. Now, at one level I've just argued to get rid of such programs and government largesse, and fundamentally I believe that, if it's done in conjunction with tax reduction. But every corporation, if the government is there wanting to give out money, will gladly receive it. If the government is determined to keep this program and encouraging research and development — which I believe the better way is to reduce tax to allow companies to do it on their own — but if it's bound and determined to do it, then it should be doing it to the full extent of the program.
In closing, I'd like to echo your frustrations in entering and fostering growth within the export market. Perhaps it's our meek historical ways, perhaps it goes back to being tied to the skirt of Mother England in the early years and being a little risk-averse, but we have one great advantage that no other country has, and that is that we are Canadians.
When I travel overseas, more than anything else that I can do, the respect that I get for simply being Canadian, the assumption of integrity, the assumption of fair play, the assumption of following a rule of law — not established by myself, certainly, but established by those that have gone before me — is absolutely huge. Certainly I'm a great advocate of encouraging Canadian companies to go abroad, which has been made easier certainly in the last 30 years by our open-door immigration policy where we've got Canadians that understand the cultures of other lands. When we hire them, we can engage them to assist in those relationships.
Thank you very much.
The Chair: Thank you. You've certainly covered a lot of ground and have put your perspectives on the table.
I won't ask the obvious question, "How did a hard-nosed accountant end up in the fun-and-leisure business?" I'll leave that to a personal conversation.
[Translation]
Senator Fortin-Duplessis: Mr. Chutter, thank you so much for your wise counsel and your recommendations. You are in a good position to identify what works well and what does not.
My next question is a simple one. I am not sure whether your company would be able to carry out a project such as the one I am about to describe. Our committee has just come back from a mission to Jakarta. Even right in Jakarta, you cannot drink the water. You cannot drink the water from the tap and it can make you sick if you do.
In developing countries like that, can your company help to install a system to supply drinking water, to provide the people with clean water?
Mr. Chutter: Thank you for the question, senator.
[English]
Yes, we are WhiteWater West Industries, and your question is a natural extrapolation. I would say, quite candidly, however, we are in the entertainment business. We are in the amusement business. We are akin to Disney in that regard, albeit on a smaller scale.
However, my neighbour two doors up from our factory and office is a company called Canadian Springs. It's that group of companies that actually are in the business of water purification, the bottling of water, et cetera, and I would be happy to meet with my colleague there to investigate that issue.
You know, on a bigger picture, I liken what we have done a little bit to Richard Nixon and Forrest Gump going into China and playing a little bit of ping-pong and starting the process of opening that country.
Our focus is putting smiles on the faces of family — kids, moms and dads, grandparents — and not only does that give me personal satisfaction, but it causes me to realize that all around the world, even in our areas of strife, we all have the same values. We all believe that our kids are the most important things in life. It's that type of attitude that we're trying to foster to assist in a very small way opening up the boundaries of the globe and making us one planet as opposed to a group of individual nations with our own agendas.
We're having fun at doing that in parts of the world that are completely counterintuitive to just good, wholesome family fun.
[Translation]
Senator Fortin-Duplessis: My congratulations. Your goal is to get families laughing and to show the world a good time.
[English]
The Chair: I have just a couple of questions to follow up on some of the comments you have made. Did you start your business and your sales into Canada first? Because you were indicating that you should have a sound base for a small company in Canada before you reach out. Was that the progression in your company also?
Mr. Chutter: Yes, it was. When I left KPMG, I started a small water slide park in Penticton in the Okanagan Valley. From there, because we had made our own moulds to make the slides, other gentlemen approached and said, "How can I do this?" I started selling them water slides and doing engineering. Our first projects were in Salmon Arm; Birch Bay, Washington State; and Niagara Falls.
In the international market, one starts with, perhaps, doing a sale overseas and having a salesman go overseas. Then, as your company grows, you perhaps adopt a philosophy of customer intimacy and recognize that to have feet on the ground is a great advantage. We have 20 offices internationally, but our two focal points are Shanghai, where we've moved some of our engineers and project managers, interestingly enough and perhaps obviously enough, folks who have Mandarin as a first language but who are solidly Canadian, and likewise to Barcelona.
It's been a step-by-step process, but you start in your basement and you evolve to 625 employees and 98 per cent of your work outside of the country, with 96 per cent of the employees inside the country. To me, in terms of your mandate, it's a dream scenario.
Senator Eaton: You are a wonderful example to a lot of SMEs. Tell me, when you started going abroad, your first sales abroad, did you ask other Canadian companies that were already established say in China or Shanghai for help, or did you do this on your own completely?
Mr. Chutter: No, it was pretty well on our own. In our industry, there are some international trade shows. At first, we just went to them, and then we took a 10-by-10 booth, and there were always international folks there. Today, for example, we attend over a dozen trade shows — a big one in Asia, a big one in Europe and the motherlode one in Orlando. It's the third-largest convention in the world, perhaps strangely enough.
We started with the simple task of meeting businessmen who were interested in our products and getting on the plane and travelling there and having the meetings and working with them and, frankly, just being Canadian. That was a start. Then it just grows from there.
Senator Eaton: We were told on our trade trip to Jakarta and Singapore that it was very important for people to actually establish themselves and have a presence in those countries. They weren't happy with people who flew in for a day and left. I guess what you did instinctively was the right thing. Do you find that other companies come to you and ask about your experience or how to go about this?
Mr. Chutter: Yes, that happens. Frankly, it's one of the reasons I'm passionate and interested in the board work that Minister Fast is doing with the SMEs to try to take that experience and say, "Look, this is one path that has worked for us."
You were absolutely right in your opening remarks about the desire to establish locally. Obviously, small companies starting out can't open an office in Shanghai or in Kuala Lampur. They start with the notion of making the sale and making the contact. It's a few trips. They say you don't sell anything into Japan in fewer than five trips, and I think that's very accurate. There is that bond and trust and relationship that has to be fostered and has to grow before they will give you the confidence of saying, "Here's a contract."
Then one wants to get to the point where you can justify, instead of having that salesman to start with, in our case, in Vancouver, have that person in Shanghai covering the Asian market. From there, you move a project manager over, and then an engineer over, and then you have a base of six or ten people.
My point about offshore manufacturing is a really important one, because we tend to look at Canadian companies and almost think that if you're doing that, that's not good for our country. Our example is clear. In fact, we have created more jobs by outsourcing, by a huge margin. It is a bit counterintuitive but, frankly, Canada is not a natural place to manufacture commodity-based products. It doesn't make any sense. We're the most expensive country in the world in a somewhat goofy location, in many ways.
For those types of jobs, we should be recognizing that and saying, "It's more economical to manufacture in the Philippines. If we do that, our prices go down and our sales will go up." The good jobs — the engineering, the architectural, et cetera — those are the jobs that I think we want to foster in Canada, and especially manufacturing jobs. There's no question that those are good for us here.
Senator Cordy: I agree 100 per cent with your comments that we're doing a good job in developing international trade agreements. Yet, here in Canada, we don't have free trade from one end of the country to the other. That would certainly be a positive look at trade.
You're certainly very much on top of what's available and where you can look for information, but we've heard from other witnesses that people involved in the SMEs really sometimes don't know where to look. Is there a suggestion that you would make for those who aren't necessarily aware of it as to what steps they should take? How should they begin to get in tune with government agencies?
It's typical government where we have a number of agencies. It's not a one-stop shopping kind of thing. Would you have advice for those who aren't as fortunate or who don't have the wherewithal and knowledge that you have?
Mr. Chutter: Yes, and it's certainly something that we have tried to focus on within Minister Fast's SME board and encourage the various organizations within the federal government that, as you say, are seen from an outsider's perspective, an SME's perspective, to be somewhat disjointed, to get them all talking together. Certainly in the last 18 months to two years, there's been great success in doing that.
We have used, and we did this early on with great success, the Trade Commissioner Service that the federal government offers. It is not particularly well known but provides phenomenal service to companies that are interested in the export market, but don't really know how to go about doing it. As you know, they're around the world, so one can contact a trade commissioner in Shanghai and meet with them and review their product line, and that person will do research on behalf of the company, open doors and set up meetings for a Canadian company to go over and start the process. I don't think that service is particularly well known. It's one of the things that we as the SME board are looking at trying to get the messaging out there. This Go Global initiative of Minister Fast has that as one of its mandates. The Trade Commissioner Service for WhiteWater, for myself in the early years, was of tremendous benefit. If SMEs were more aware of that, we would see some changes.
Having said that, my first comment was — and I profoundly believe this — you need to be strong at home to be strong abroad. If we can focus on taking those 96 per cent of the companies that don't export — and it's actually 97.5 if you take the U.S. out of it — and try to investigate ways in which we can help make them strong at home before looking at the international market, I think that's where the focus ought to be. That's where I say contacting the organizations that represent those groups, CFIB and the chambers of commerce, et cetera, Canadian Manufacturers and Exporters Association. They have lists of positive suggestions to help invigorate SMEs and business in Canada.
Even on the taxation front, you can see if we're doing well, the government takes tax money and does what it does very effectively. I agree on a people level with taking from the rich and playing Robin Hood and giving to the poor, which I agree on social programs, et cetera.
But on the corporate level, I do not think we should be doing that. I don't think we should be taking from corporations and redistributing to some industries. You remember cucumbers in Newfoundland. That was absolutely ridiculous; but that's the type of thing we continue to do. Justify for me the Western Diversification Fund to the three provinces that are the wealthiest in the country.
Senator Cordy: I remember the cucumbers in Newfoundland. My husband is an accountant and bankruptcy trustee who handled that greenhouse in Newfoundland; so I'm familiar with it, indeed.
You spoke about the Canada brand being very high when you travelled. For all of us who travel on behalf of Canada, when people see that brand and that you're Canadian it's a positive thing as soon as you walk in the door. I read the report from the Canadian Chamber of Commerce. They agreed and said that in terms of the Canada brand being from Canada, we're number two on the list. But the made-in-Canada brand, and there is a distinction, didn't even make the top 20. How do we move from being well respected as Canadians to being well respected in the made-in-Canada brand, because branding is extremely important in sales?
Mr. Chutter: Branding is important. There's no question that in some of our product areas, I think the made-in-Canada works. In our case, it's more that it's made by WhiteWater, not that it's made in Canada. I must admit that I put less focus or emphasis on the made-in-Canada side of things. My twist on that would be the first part of your comments.
Business is all about relationships, trust and integrity. That's the aspect of the Canada part that serves us incredibly well. We should bow down and salute our ancestors, our parents, our grandparents, et cetera, for creating that feeling by international companies towards Canadians. Frankly, that focus and that advantage are good to take advantage of.
In the old days, you will recall, if something was made in Japan in the 1960s it was junk. You'd stay away from it. Now, it's amongst the highest quality products. I'm not sure that it's about whether it's made in Japan or in the United States or in Italy or anywhere else. I think it's about the company and the people we deal with in those countries. As the world gets smaller, that's more and more the case.
If you have a friend who's American or French, at the end of the day who cares? It's the quality of the person that matters. In business it's the same — it's the relationships.
We come from such great stock, we've just got to encourage our SMEs to get out there and just be themselves. We're not boastful or arrogant. All of those things that are sometimes attributed to our cousins to the south, we trump.
Senator Cordy: Your comment about relationships is extremely important and knowing your market. Who would have guessed that Target coming into the Canada would be a failure? You have to do know your market and not make assumptions that what works in one country will work in another.
The Chair: We have come to the end of our session. You've certainly put your points down strongly; and you've repeated them. It's been very helpful to us.
I thank you for being such a good ambassador for Canada.
Honourable senators, we're adjourned.
(The committee adjourned.)