Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 21 - Evidence - Meeting of February 4, 2015
OTTAWA, Wednesday, February 4, 2015
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:17 p.m. to examine such issues as may arise from time to time relating to foreign relations and international trade generally.
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: We are a little late, but I want to advise the senators that we will have a short in camera meeting to deal with our visit, after the witness has presented his testimony and the questions.
I also want to welcome Senator Jane Cordy, our new member, to the committee. We hope that you will enjoy and contribute to this committee as much as you have in other committees. We are at a good point where we are finishing up one study, and we will be hopefully starting in some new areas. Senator Cordy, you are here right at a good time for this study and as we start a new one.
Today, we are going under our general mandate. It was suggested that the report that was published by the Chamber of Commerce, Turning it Around: How to Restore Canada's Trade Success, was of great benefit to us in all of our studies and, in particular, to a proposed study by Senator Downe and Senator Fortin-Duplessis at one point. They were different perspectives but both on the same area.
Today, we have before us, Mr. Cam Vidler, Director, International Policy, Canadian Chamber of Commerce, who will speak to their report and then senators will have questions. Mr. Vidler, welcome to the committee and the floor is yours to make your opening comments.
Cam Vidler, Director, International Policy, Canadian Chamber of Commerce: Thank you very much for having me here today.
My name is Cam Vidler and I am the Director of International Policy at the Canadian Chamber of Commerce. With over 800 corporate members, 450 provincial and municipal Chambers of Commerce and 80 sector associations, we represent over 200,000 businesses of all sectors, sizes and regions across Canada.
It is my understanding that you would like to hear our views today on Canada's recent trade performance and some of the policy priorities of our members. I understand that this appearance may have been motivated primarily by our report released in May last year, entitled Turning it Around: How to Restore Canada's Trade Success. That report focused largely on what we call the trade promotion or economic diplomacy eco-system. Today, I'm going to take a bit of a broader perspective and use this as an opportunity to give you what could be considered the 2015 trade policy priorities for Canadian business. We will touch on some of the themes of the report and I'm very interested in going into more detail afterwards, but I think I will draw a bit of a broader perspective. FTAs, for instance, were not a major topic in there and I will give you some views on those as well.
Tomorrow, we're going to be launching the Top 10 Barriers to Competitiveness. This is an annual product that the Canadian chamber uses to identify the main factors holding back the potential of Canadian business to invest, innovate and create jobs. For several years now, in that report where we identify 10 different issue areas, we have focused one of those on the challenges that Canadian companies face when trying to seize opportunities in foreign markets, and 2015 is no different. You will see, when we release it tomorrow, that there is a section that talks about how Canadian businesses are struggling to exploit opportunities outside of Canada. Despite the recent achievements of the Global Markets Action Plan — and they are real achievements and I will speak to those — we think there's still a lot more that can be done.
Why is trade important for Canada? Our prosperity depends on the success of our businesses, their ability to create jobs, and their ability to innovate, and that very much depends on accessing international markets and being able to participate in global supply chains. We have a small market here in Canada and exporting is often the only way that companies can grow their sales and build economies of scale, bringing their cost curve down and competing with some of the world's leading companies. Moreover, sourcing from and investing abroad allows them to exploit unique technologies, skill sets and cost advantages to integrate those into their production systems.
The problem that Canada is facing right now is that our companies are not globalizing as quickly as our peers. According to the World Trade Organization, Canada's exports of goods and services grew by only 43 per cent over the past decade, compared to 137 per cent in Australia and 74 per cent in the United States. Last year, as I'm sure many of you have heard, the Governor of the Bank of Canada noted that over 9,000 companies had stopped exporting since the start of the recession.
Canadian businesses continue to lag, particularly in emerging and frontier markets where the bulk of long-term growth opportunities lie. The share of exports going to non-OECD countries doubled from 2004 to 2009, but has more or less stagnated since then. According to the United Nations Conference on Trade and Development — and I think this is a very interesting statistic — only 1.5 per cent of Canadian business investments, so the stock of our foreign direct investment, are in developing countries in Asia and Africa, including mainland China. This is by far the lowest share among G7 countries. The return of the U.S. economy, which is great news and has helped pump up our exports by 12 per cent in 2014, is a very welcome development, but it should not distract us on the need for Canada to position ourselves for the future.
What are the barriers holding us back?
It's really important to start by saying that the problem is multidimensional. At home, poor productivity growth and innovation performance have affected our cost competitiveness and our ability to seize cutting-edge market opportunities. There's been a lot of pressure on our transportation infrastructure, as well, in the last year in particular, which affects time to customer and raises our costs.
We could have a whole conversation about those factors, but today I do want to focus on the hurdles that our companies are facing when they are outside of Canada and when they are trying to enter new markets. They come in several forms. Many come in the form of government policies. Protectionist tariffs and quotas, discriminatory or diverging regulations, subsidies, ownership restrictions, local content requirements, and poor protection of physical and intellectual property — all of these make it very difficult for Canadian business to compete in foreign markets and likewise for businesses from any country to compete in foreign markets. These are barriers that are not unique to our companies. Canadian service providers often face entry restrictions and tax disadvantages, or find that their credentials or expertise aren't recognized.
To reduce these barriers, Canada and other countries pursue trade agreements — these are the CETAs of the world, the Canada-Korea FTA. Major progress happened in Canada over 2014 with the conclusion of the negotiations with the European Union and South Korea. Canada also ratified an investment treaty with China and announced talks to explore other arrangements in the future. Ongoing negotiations with Japan, India and the Trans-Pacific Partnership countries hold promise. You may have seen this week in New York that it looks like there's a little bit more energy behind the TPP talks. Also, multilateral talks on services, environmental goods and information technology are moving along without too much trouble.
But these agreements are no panacea. Negotiations are dragging on in some cases, as you know. Completed agreements can take years to implement and do not often cover murkier forms of protectionism. There's no guarantee that governments, when they're bound, will actually respect their obligations. To make them respect their obligations, you have to enter into formal dispute settlements, which are long and arduous, and simply not an option for many small companies operating on short timelines.
It's important to point out that agreements do little to address the operational challenges that businesses face in these markets, the business strategy challenges. They have to build relationships with new customers and suppliers, position themselves against competitors, navigate red tape and manage risks, all in a brand new political, cultural and legal landscape. Broader diplomatic ties between countries matter a lot in these markets, particularly when the state plays an important role in the economy and actually directs a lot of the decision making of their companies.
In this context, we talked about foreign trade agreements and we think foreign service and trade promotion programs are indispensable. They help companies navigate new markets and represent their interests with local governments. Frequent political engagement through high-profile business and government delegations is also important. Yet, we find that in many cases these efforts lack resources and coordination, are poorly communicated to companies, or are not adequately tailored to their needs. Those are the themes that we touched on in our report from last year.
So what's the way forward? We think that it's the federal government building on its recent success — and I think the government has been moving towards solving some of those gaps in the trade promotion side — and we think there are five priorities or areas where we would like to see some progress in the next year.
First, we would like to see more progress in the bilateral trade agenda, including ratification of Canada's agreement with the European Union; conclusion of negotiations with Japan and India; and the launch of exploratory talks with China.
Second is Canadian leadership to advance regional and global trade talks, including the Trans-Pacific Partnership and plurilateral negotiations on trade and services, environmental goods and information technology.
The third is enhanced regulatory cooperation to facilitate the acceptance of Canadian goods and services by major trading partners, including measurable outcomes from the Regulatory Cooperation Council between Canada and the United States.
Fourth is the expansion of Canada's diplomatic presence abroad, including additional resources and enhanced training programs for the Trade Commissioner Service.
The fifth is the establishment of a development finance institution to complement the tool kit currently available to Canadian companies that will help them deploy their technologies, expertise and capital in developing markets.
The serious decline in Canada's trade performance over the past decade deserves immediate attention. The GMAP, Global Markets Action Plan, is certainly pointing in the right direction in trying to tackle some of these issues, but we do need to do more than just sign trade agreements and shuffle resources within our existing trade-promotion model. The time has come for some bold action to make sure our companies have the best tools and muscle behind them to succeed in an increasingly competitive world.
Thank you. I look forward to discussing this in more detail.
The Chair: Thank you, Mr. Vidler. I do have a long list of senators who want to pose questions.
Senator Downe: Thank you for your presentation. It is an excellent report, and the chamber certainly identified a serious problem. As you indicated, we're signing multiple trade agreements and then, when you look at what is happening after we sign them, it appears that other countries and their businesses are much more prepared for the opportunities than we are. The balance of trade, with one or two exceptions, is totally out of whack after the deal compared with what it was before the deal, to Canada's disadvantage. That's why I welcomed your report. I thought it was extremely well done.
I'm just wondering, in preparing the report, or since then, have you compared what support Canada is giving to businesses with what the governments of other countries do? For example, in one document I read a few months ago, I noticed that the United States has a program where, if you are interested in the oil business, for example, the American trade office in Azerbaijan will send out a notice that they're having a conference call or a Skype session for those that are actually interested in a particular market of the oil industry, and they focus very aggressively on it. Azerbaijan is building a pipeline, for example. They're trying to build a pipeline through southern Europe to connect to their oilfields. Here are some opportunities, and here is what they can do for you. They seem very, very aggressive. If you look at the figures for the Americans, their exports have gone up dramatically.
Have you compared us with other countries? You mentioned in your presentation Australia. Is there something that the Canadian government should be doing, that other countries are doing, that we could adopt literally off the shelf?
Mr. Vidler: Yes. The report was really based on a bit of a compare and contrast. It was not completely systematic, but we did take a look at countries that were succeeding in trade, doing better than us, and figuring out where there were some differences in what they were doing on trade promotion.
In terms of the overall service offering of our trade promotion officers of the diplomatic service in Canada, it does mirror what most other countries are making available to their businesses. It is about finding new contacts in markets. It is about solving political or regulatory problems that you might face when they come up. It is about helping you get a better sense of what you need to do to prepare to get out there, and providing affordable financing through export credit agencies and things like that.
There's one exception that I would point out, and this was the fifth recommendation that I just made to the committee here, which is on the development finance side. This is a tool that G7 countries, the United States included, have made a lot of use of over the past few decades. In the United States it is called the Overseas Private Investment Corporation.
What these institutions do is offer similar products in terms of equity or debt, risk guarantees, as Export Development Canada, but because they're oriented towards achieving a development outcome, the financing is often more affordable than what would be provided by those export credit agencies. It is still under the remit of their development policy, but when they are pursuing the development policy, they have this tool to get their businesses engaged in that programming, to leverage their expertise, skills and capital at the table to achieve that development outcome, but the spillover benefit being that you see Canadian companies — or you see their companies in those cases — more active in those markets. That's one gap in terms of the products and services that we offer our companies to help them in new markets.
When it comes to the operations, there are some key differences, as well. The United States, for instance, under the export — I'm going to botch the name here, but basically it is Obama's export initiative. There was something announced, fairly shortly after the financial crisis, saying, "We want to double American exports over a certain period of time." They came close. They did fall short, but it was still a fairly remarkable increase in exports.
They basically sat down every single government agency that had any role in trade — whether this was a trade promotion agency, an export financing agency, or a state-level trade promotion agency — and they had sort of a co- branded approach. It was "export.gov." You could go there and access market intelligence from different groups. It was this sort of whole-of-government coordination that brought everything to the table. With that, in itself, without spending a whole lot more, without having to do a whole lot of extra services, they were able to get more out of what they were already doing.
Now, the Government of Canada has been doing that over the past year in the Global Markets Action Plan, and you have seen significant improvements in terms of the cooperative relationship between Export Development Canada, the Canadian Commercial Corporation and the Canadian Trade Commissioner Service. There really is a sense of a common goal here. The new Go Global program that Minister Fast is promoting cross Canada right now goes to companies and says, "It doesn't matter which agency does what; you call us and we're going to help you export."
That said, it is challenging still to coordinate with Agriculture Canada, which has a Market Access Secretariat, so it also plays a trade promotion role. Agriculture Canada promotes Canada beef, for instance, Canada pork. Those are not really integrated into the Go Global strategy.
Natural Resources Canada has a concierge service to help Canadian companies abroad. If you are a mining company, an extractive company, or wood products exporting, you work with Natural Resources Canada. They're not in that Go Global system right now. So, I would point to that as being something that other countries have perhaps been able to do a little bit better than we have.
A final point would be on the resourcing side of things. We did a very back-of-the-envelope calculation in the paper where we looked at the spending on federal trade promotion services as a share of GDP. We saw that, in relative terms, the U.K. is about twice as high as us; Australia is significantly higher than us. If you look at the statements of the accounts over the past five years, or since 2007, you see in real terms essentially a bit of a drop in spending on our Trade Commissioner Service.
So, while we have been expanding in certain markets, we have been taking away from other markets at that time. We understand that we live in a world of limited resources and those tough decisions have to be made sometimes, but if you are looking for what are the pressure points to really boost our performance, that's one that needs to be looked at, as well.
Senator Downe: You summarized what the government is doing and what it should be doing and could be doing, but what about the business community? You alluded to that in your statement as well, how much easier it is to do business in the United States, particularly with their economy growing at such a rapid rate and the falling Canadian dollar. It is so much easier to do business there than it is to do it in South Korea, for example.
What are the chamber and other business groups doing to educate the business community about the opportunities? We heard, for example, when we were discussing the South Korea trade deal, that the South Koreans, in anticipation of the deal, were sending a South Korean cargo plane to Halifax, loading up with lobsters and flying them to South Korea. As you know, in Asia, food safety is a concern. The Canadian brand of quality and safety is high, and there was a market there, so it was somewhat easy for the business community to drive lobsters to the Halifax airport and somebody else took care of them.
Do you have any programs in the chamber to educate the business community?
Mr. Vidler: There are quite a few private-sector programs in this space. The Canadian Chamber of Commerce works as an umbrella group, largely, for our network. Our focus has traditionally been advocacy, and that remains our focus to this day. Working with the government on the Global Markets Action Plan, they have been embedding trade commissioners into industry associations. We now have one based in Toronto.
What we have decided to do — and this should be coming out in the next few weeks; I would be happy to share more information on this with the committee here — is make that resource available to the chamber network, in particular. As I mentioned earlier, we have about 450 municipal/provincial chambers of commerce. We want them to work with this trade commissioner to help them coordinate their efforts. They tend to offer a wider range of services to their members in business development and things like that. The Ontario Chamber of Commerce has an export development fund. They have a human resource strategy for exporters that they've developed with the Ontario government.
What we want to be able to do at the federal level is help coordinate some of those efforts, see if the chambers can learn from each other, and build that capacity to provide those services for their members.
Other organizations, like the Canadian Manufacturers & Exporters, have looked at doing their own programs. They have put online a website that will help Canadian companies connect with leads in Europe, for instance. They will follow up on the implementation of the Canada-Europe trade agreement. There are other examples that can be pointed to.
I would just make one comment. In the Canadian context, the resources available to the private sector associations are somewhat limited compared to countries like Germany, for instance, where you actually have a mandatory fee that businesses have to pay towards their chambers of commerce. As a joke, I would maybe encourage you to consider that as a policy as well, and we could maybe do more in this area.
Senator Johnson: I think you should start charging, don't you?
The chamber supports the creation of a national branding program that would be focused on building perceptions internationally of Canada as a source of high-quality products, leading to expertise and a partner for innovation. Countries such as the U.K., Germany and Iceland have had very successful branding in the international market. What are the strengths and weaknesses of the made-in-Canada brand campaign announced by our government in 2014, and how would the chamber's national branding program differ from the made-in-Canada campaign? Secondly, what characteristics would contribute to the success of a national branding program?
Mr. Vidler: Thank you. That's a great question. The made-in-Canada program, as I understand it — I'll outline it so I can comment on it, and if I've mischaracterized it in any way, then my apologies — would provide for made-in- Canada products, basically a label that you could apply for. You could certify it as made in Canada, and that brand would be developed by the government in cooperation with the private sector. Beyond that, from what I understand, that's sort of the full extent of the program. It is a way of creating a more common identifier across Canadian exports. It certainly is the right direction. As we said in the report, surveys of businesses around the world and individuals around the world don't see Canada as maybe a producer of premium products — not so much premium products, but innovative products and things like that. If you're trying to create a common identity, I think this is a step. This is an improvement of the current arrangement.
Some of the challenges with it, though, would be, on one hand, you have to get into a discussion about, well, what is a Canadian product. To what extent can I label my product "made in Canada"? What if I'm sourcing from the United States through my NAFTA arrangement, because that's what makes me more competitive? I'm not going to be able to be made in Canada anymore. What about the design and the knowledge that I put into designing that product, for instance? So, it has a fairly limited application to products where the value is mostly generated in Canada, and it's also linked to the product itself.
We referenced Australia. I think "Australia Unlimited" is the name of the program. This is a very sort of holistic, marketing campaign of the country itself. They'll highlight technologies and products that they produce, but they're not going to limit themselves to just putting a label on the product. It's creating an identity and finding many different ways to project that identity.
Canada does have some programs already that do this, or seek to do this, such as the Invest in Canada program, the new education strategy of the government. There is a brand of Canadian education. You were asking about success factors, and there can be some debate as to whether you want to create little niche brands depending on sectors. I think our view is that, if you were to combine that into one image of Canada, you might have more of an effect because people would sort of pick up on that and be able to recognize that brand across its different uses.
There's a lot that Canada can build on. We have a reputation for natural beauty, for a clean environment and for premium products in certain areas. It's not just maple syrup. The seafood sector is very well known. We were in Beijing last November with the Prime Minister, and Jack Ma from Alibaba was at one of the meetings that the delegation had. He said, "The best things I can sell to Chinese consumers are fine foods and premium Canadian food products." I don't think there's anything wrong with that. I don't think that we should say, "No, no, we're all about electronics or technology." But we do have to maybe do a better job of just seeming like a nice place to go and a nice place to live.
Senator Johnson: Sort of like Newfoundland and their ads about Newfoundland. It's not about a product. You would talk more about the country and what's available there in terms of brands. When you look at what Iceland's done, for heaven's sakes, it's incredible.
Mr. Vidler: A key success factor is a national perspective.
[Translation]
Senator Fortin-Duplessis: Mr. Vidler, welcome. Here is my question. The federal government currently provides trade promotion services through various organizations, including the Trade Commissioner Service, Export Development Canada, the Business Development Bank of Canada, the Canadian Commercial Corporation, Natural Resources Canada, Agriculture and Agri-Food Canada, and federal regional development agencies. Provinces and territories, as well as industry associations, can also provide programs. Do you think the mandates of some of those providers of trade promotion services overlap? Are there any gaps in the services provided to Canadian companies?
[English]
Mr. Vidler: You asked if there were overlapping mandates or gaps in the services being offered. In many cases, overlapping mandates is bound to happen, and it actually can be a bit of an advantage in terms of resilience and in terms of creativity, different people trying different things. You see a lot of overlap between the federal Trade Commissioner Service and the provincial trade promotion authorities. It's almost a complete overlap in terms of the services they offer.
Rather than trying to cut overlap, I think we want to sort of make sure that the different agencies are knit together very well. If it's within their mandate and they can perform the task very well, then by all means go ahead, but be able to refer people to the proper service when somebody else is better suited to deliver that service.
I would point to the MOUs that have been signed between Export Development Canada and the Trade Commissioner Service, as well as I think an MOU between the Canadian Commercial Corporation and the Trade Commissioner Service. In any case, there's been an effort now to connect these different agencies together and have them refer clients when appropriate. If you look at the number of referrals, they've increased substantially. I've heard that the conversion rate of these referrals is still a little bit low, so that signals that there's still perhaps a gap in understanding from some agencies about what the other agency is well placed to do, but there is certainly in principle a commitment to try and do that now. I think that's one of the ways that you make the system more coordinated, without having to get into, "You shouldn't be doing this" or "You shouldn't be doing that."
You mentioned gaps in services. As I told one of the other senators, on the service offering itself, if you were to draw a list of if there an agency in Canada that offers financing or that helps you develop new leads in markets, or that will maybe finance some of your market development costs, typically you can find them. It really is a matter of connecting people with the services and using ways of consolidating the access windows for companies.
There are some gaps, and again I would highlight the development finance institution as one of them. This product or service is not available to Canadian companies. Canadian companies use these types of institutions, but they end up using institutions from other countries, where there are constraints on the ability of foreign companies to access their services. You find them going to the United States and trying to make a case to be involved in an infrastructure project in Africa or in Latin America. They have to find American suppliers so that they can prove to the U.S. development finance institution that they are going to bring benefits to America to be able to get involved. We shouldn't have to force our companies to go abroad to seek those types of tools.
[Translation]
Senator Fortin-Duplessis: My last question arises out of those asked by Senator Johnson. In your opinion, what elements are necessary to the success of a national branding program?
[English]
Mr. Vidler: Framing it as a trademark program is possibly the first problem. A trademark tends to focus on something tangible or specific that says "that's Canadian, and that's what a Canadian product is." We need to be flexible and adaptable and to base our brand. I mused earlier that perhaps we need to move away from being seen just as a place of natural beauty to a place of innovation. We don't know if that's true.
We should be doing research. We should be interviewing top executives and government leaders in some of the markets that we're prioritizing to get a sense of what would sell to them, interest them and make them think more about Canada. That's what Australia's done with the Australia Unlimited program. You can be constantly doing those types of surveys, outreach and monitoring the perceptions of Canada. Does Canada come up as a country that you want to do business with when you think about the products you develop?
It's really a matter of going out there, doing the proper research, finding out how we want Canada to be perceived and using whatever tools, whether that's a trademark on a product or whether that's a marketing campaign like the Newfoundland and Labrador campaign, which I quite like. Maybe that's what we need to do in these markets. At least we should be taking a look at that and not maybe jumping into one branding program before we've done all of that analysis.
Senator Cordy: I would also like to ask a question about the made-in-Canada brand, because I was quite surprised when I read your report — which is excellent, by the way, with a lot of really good suggestions in it — that the country brand of Canada is number two and yet the made-in-Canada brand is not even in the top 20. We've signed a lot of free trade agreements over the past few years, so I was quite surprised that that brand is not there.
Senator Fortin-Duplessis asked you what we should do. You suggested in your report that delegations have to be headed by a very high profile person, which makes sense. If you want to draw the top people to do that, you have to have somebody like that.
Your report also talks about a special trade ambassador. I wonder if you could expand on that just a little. It seemed from your report that it would work very well, but you have to keep in mind the embassies and people who work in trade within the embassies. You would have to create the brand for a trade ambassador so that, indeed, countries would feel that it is a top person who is coming to speak with them. Otherwise, you're not going to get the cooperation or the people that you want to meet with in whatever country you're choosing.
Could you just expand on the trade ambassador idea a little bit, because it's so important that we look at the made- in-Canada brand? If we're not in the top 20, it's pretty scary.
Mr. Vidler: We feel that the trade ambassador is an interesting role to look at because in recognizing that high-level delegations, ministers with an economic responsibility, are important, we also recognize that Minister Fast, for instance, has a lot of responsibilities back here in Canada. Not only is he out there promoting Canadian businesses and opening up doors for them, he's also instructing a department about what type of negotiations they should be entering into and making decisions about those negotiations. It pulls a bit of attention away from that focused engagement, as Senator Downe talked about with respect to the U.S. and Azerbaijan. To expect our trade minister to sit down and say, "We're going to work with these Canadian companies to get into this project," is an unfair responsibility to put on a trade minister with such an active file these days. The ambassador could be dedicated to coordinating delegations and working on the list of top 50 projects that Canadian businesses are currently looking at in these markets, freeing them up and allowing them to focus on those things.
In terms of the title and the recognition of that individual, the religious freedom ambassador that Canada now has is a model we could look at. That appointment, by the Prime Minister, I believe, or the foreign minister or the trade minister, will get a lot of respect and credibility with our trading partners, particularly in markets in Asia, the Middle East and South Asia, as well, where government officials are highly respected and actually expected to be involved in a lot of these large transactions.
Senator Cordy: Perhaps that would work also. My understanding from reading your report and from other readings I've done is that CEOs can't get an invitation five days before a planned trip because they have to know well in advance; so perhaps an ambassador could work with business communities 12 months of the year.
I'm also interested in another of your recommendations, which is the same type of thing, like increasing trade. You referred to it as the single window for getting information, or I would call it one-stop shopping rather than phoning five different departments. You spoke earlier about Natural Resources and Agriculture as two departments, but when you go across the board, you would have to get in touch with myriad departments and agencies. A number of agencies deal with international trade.
How would you see the one-stop shopping or the single window being beneficial to increasing our trade and to being beneficial to helping your members of the Canadian Chamber of Commerce?
Mr. Vidler: Our vision is of a campaign or product that's got SMEs in mind, in particular. Larger companies that have developed government relations departments and worked with the government on things before have their contacts and know how to navigate the system. It's still challenging for them, as well, but the one-stop shop is especially important for small businesses that may even be trading abroad without really knowing the Canadian government is there to help them.
Certainly, it isn't welcoming when you look at all the programs and agencies spread across the provinces and the federal government that don't know each other. That in itself could be enough to just throw up a wall. You'll always see it as more hassle than it's worth.
Our dream would be for one spot where one could take advantage of these FTAs that the government is talking about. I call somebody up and that person is a concierge for me and who is able to say, "Oh, well, that's interesting. You haven't really done an export competency test yet, so we've got somebody who could do that. Would you like us to put you in touch with one of the Canadian regulators who works with regulators in those markets to see if your product certification would match up?"
The searching costs should not be on the small businesses' side or they won't actually pursue those resources. That's why we'd like to commend the "go global" brand that the government's been working with right now, which is: Don't worry about the agencies. You can ask those questions later, or don't even ask those questions. We're going to find David, Sebastian or Trisha, who are going to talk to you and figure out what you need and connect you with the right people to see if you are really taking advantage of everything out there to help you win in these markets.
Senator Cordy: That's extremely important particularly for start-up or small companies who wouldn't have the resources to do all that investigating of the agencies on their own. Thank you very much.
By the way, I am from Nova Scotia and there's nothing better than Nova Scotia lobster, so I understand why people around the world love it.
Senator Dawson: Point of order.
The Chair: I will leave that to the Atlantic area and Quebec to work out. If you were touching pulse crops, I would be right there.
Senator Oh: My question is focusing on trade missions or trade delegations. Every year our country has probably countless trade missions or trade delegations overseas. They announced that they bring home signed MOUs. For example, the Ontario Government every year goes to Asia and comes back with $20 billion and $30 billion in signed MOUs. How effective are these signed MOUs? Has anyone followed up? Does your chamber organize any trade delegations to Asia or any other part of the world? How many did you organize it last year and did you receive any in- bound trade delegations?
Do you follow up on any other signed MOUs? What is the success rate of the signed MOUs? Maybe you can comment on what is the best way of organizing a trade mission? Is there an effective way of combining the cities together, or should we go by province or state level.
Mr. Vidler: I will say a few things that I think address some of those questions, all of which I think are very important. A comment on the MOUs: there has been a lot of discussion and debate, over probably a decade or so, on do these big delegations matter that much? They have announced this many billions of dollars, but did that actually get generated by the delegation, or when they announced it in principle did they actually deliver on it in the end? While that is an important discussion, it misses the point to a certain extent. What we try to say in the paper is that these delegations are part of your marketing. It is country marketing.
Whether that deal or that in-principle agreement to explore cooperation in this sector actually yields tangible outcomes is maybe missing the point to a certain extent. We need to be looking at measures like did we bring out the top leadership of Canada's top companies and SMEs to meet with the top leaders of that country's business industry? Did we get the right cabinet ministers together? Are we building those relationships?
When you are looking at accounting, is there $1 billion, $1.2 billion — what you are doing there is sales. That's a sales call. The businesses, if they discover that opportunity, will be able to follow up on it and they will. I would caution against putting too much attention on, well, is that deal real? Did it actually happen?
I would say — and I have heard this from many companies — that when a delegation is coming, if they can get wind of that delegation, particularly in markets like China where the pomp and ceremony is quite important, oftentimes that will move forward a deal that is being negotiated. They will say that they might have had these long discussions about a business opportunity — maybe a major sale of Canadian aerospace products or something like that from Canada — and that transaction won't really happen until a visit happens. Then they can link into that visit and that puts a bit of pressure on the local government to go down to that company and say, look, we want to be able to announce something.
There are cases where you do see real transactions happen because of the delegation. I don't think that should be the only standard by which you measure their effectiveness or benefits.
On delegations in terms of organization and how they should be structured, I think there's real value in having federal leadership in delegations and having that one Canada brand go forward. We have great examples, whether it was the Team Canada during the Liberal government or whether it was this government's delegation to China in November. We were proud to be part of that. I believe there were about 200 or 250 different representatives. The Canadian Chamber of Commerce put together its own delegation of about 10 to 15 CEOs that came for that. The feedback we got from everybody was very positive.
We saw the British Columbia and Alberta representatives to Asia there. That kind of critical mass is what was needed to pull out some of the business leaders in China and some of the political leaders. I do know for a fact that some of those deals that were announced in those MOUs happened because of that trip.
Senator Demers: Thank you for your exposure. I appreciate it. We all do.
What are the main barriers and risks faced by Canada in small and medium-sized enterprise that want to export or increase their exports? To what extent should we integrate into the supply chain of large firms in order to reach new markets, rather than enter those markets independently?
Mr. Vidler: Can I get you to clarify the last part of that?
Senator Demers: To what extent should we integrate into the supply chains of larger firms in order to reach new markets, rather than enter into those markets independently?
Mr. Vidler: That's a very good question. I'm happy to explore that.
Senator Demers: Thank you.
Mr. Vidler: I think on the general question, what are the main areas for SMEs, I think they're quite common sense. You have the cultural and linguistic barriers which can be as important, maybe even more important than the policy barriers we like to talk about, but we shouldn't underestimate the importance of those policy barriers. You know, that sense of that I'm going to have to comply with all these different product regulations. I will need to seek marketing approvals. I don't know what those are. Do I even know a lawyer that I can hire confidently to help me navigate those things? Who is my local partner in that market? The questions are quite endless.
It is also important to recognize that the business challenge in itself is probably top of mind. Do I have a product that fits what the market wants? Is the market growing? Are the competitors there? Can I win against them? Am I going to be entering a market where I'm going to find myself priced out very quickly or I will find somebody displace me in some other way? Policy matters, but it is maybe not as big a share as we often say it is.
This actually is a good segue into the discussion of integration into supply chains because if you can work with a large customer, maybe a customer you have developed in your North American context, in the Canadian context, and they can go out there and they're diversified, they can handle risks of entering into a new market, right? If you are a major auto parts or aerospace producer and you have factories in 15 different countries already, then a venture into a 16th country that doesn't work out for you is not the end of the world. But for that SME, where that's their second market, that could be life or death.
If you could be selling to that company and that company is diversified and exposed in different ways, then they're actually going to be able to absorb a lot of those risks for you. You know you have been working with this company, you know they're reliable and pay on time. You know why they use you. That can often be a really good steppingstone into these markets. There are a lot of SMEs that went global that way. They followed a large Canadian multinational or foreign multinational into a new market and used that as a springboard to develop new relationships. At that point they have proven they can supply into those types of supply chains.
Senator Dawson: In your testimony at the House of Commons, you mentioned the fact that Team Canada was a good approach and in China in particular it had a —
Senator D. Smith: I was there.
Senator Dawson: I'm not going to comment. Which trip? No.
You mentioned that in the House of Commons. Yet, in the recommendations that you made, you don't recommend that the government take a Team Canada approach at this time. If it was a good idea, why do you not recommend it?
Mr. Vidler: Perhaps it is the wording of the recommendation, I think.
Senator Dawson: I'm reading it in French. I might have lost the Team Canada, but I didn't see it as being a reference to the Prime Minister with premiers and top-notch business people going on a very well-structured trip and putting our reputation on the line to promote Canadian products. We haven't seen that in a few years. It's not that there are not other approaches and they can't be successful, but since you did mention at the House of Commons, I was wondering why. Maybe it got lost in the translation.
Mr. Vidler: Yes, we have recommendation 2.1 on page 18. I agree that perhaps it doesn't make the reference that would make it obvious, but it says:
Create a forward planning committee with the private sector and the provinces and territories to coordinate delegations under the Canadian banner.
We talk about the involvement of the federal departments, the provincial agencies and senior private sector leaders. Perhaps that recommendation is more about the mechanism to do the delegation. Semantics, as I think I said to the house committee as well, can get us lost in some arguments that I don't think are very productive.
The point we made actually was that Team Canada has been very effective under the Liberal government. That's what the Liberals called federal trade delegations. The delegation to China last November — if you are looking at what was good about Team Canada, it was that we all went together and made a big impact. We got a lot of attention. The mission to China in November very much aligned with that. If those are the characteristics you are looking for, they were there. You saw that in 2012 when the Prime Minister went to China, as well.
Senator Dawson: As you know, we try to be as non-partisan as possible here, but I'm going through 2.1 and the last line talks about organizing it, stating, "One meeting could be done on the sidelines of the First Ministers meeting." Since we know we haven't had any of those in the last nine years, I guess it won't be happening soon. But that's more of a partisan comment than a question.
The Chair: I am sure you wouldn't want to pursue it.
Mr. Vidler: Perhaps the Council of the Federation meeting could be —
The Chair: Thank you. I just have one question and then one follow-up.
I have heard that we put attention on small- and medium-sized businesses, both with incentives and assistance within our own country, which is the first step, and then outside the country, finding their niche markets, et cetera. The feedback I received is that if you want to go global and you want to stay with your head office in Canada, there doesn't seem to be the kind of financing for you to leap from being a successful small- or medium-sized company into a global company. Most of them throw up their hands and say, "Perhaps I will move to the United States because I can get the financing that moves me into a global company and still maintain a head office wherever I'm based in the U.S." That's the gap they're finding for these companies to be innovative, and they usually are very small, and move to that other step. When they're ready to go really global, and they may be already in 20 and 30 countries but they need to really expand, there isn't that kind of financing or financing assistance, so they move their headquarters offshore.
Mr. Vidler: I think access to finance is a very important part of this challenge of getting Canada's trade performance on an upward trend. There is no quick solution to that. I had mentioned earlier development finance being one type of public financing tool that is not available in the current portfolio in Canada, but it is a bit of a niche product. I don't think it really relates to the challenge that you're talking about, which is the financing to grow your business from, say, a company that employs 600 people in 12 different countries to a real, global multinational.
Access to finance is an issue that we work on a lot at the chamber here, looking at how you can get venture capital markets to deliver more a bit earlier in the stage of the company than the companies you are discussing. Business Development Canada, working with Canadian private sector banks, we are always encouraging them to innovate and find ways in which they may mitigate some of the risks that banks would be taking getting involved in financing those types of companies.
I'd point to examples like the junior mining sector and some of the tax frameworks that have been put in place to sort of help jumpstart the development of those companies, although it is also a sector where you have a tendency to grow until a certain size and then sell it to another company.
Making sure that our banking system is providing the right products and the more cutting edge services to our businesses is important. At the chamber we have welcomed a lot of foreign banks into our membership in recent years. These are banks that have global networks and may be in places Canadian banks aren't. We think that's been helpful. We have a lot of companies that do talk about using some of their global platforms and working with different products that might help them through those later stages of development.
The Chair: You ended your presentation by saying that Canada needs bold action. Your report talks about action. What is that single bold action that you think the Canadian government should do now, or was that just a fine finish to a fine report?
Mr. Vidler: It might have been more for effect.
What we have provided here in the report is really a menu of different options and different pressure points that the government could push on to try to get more out of our trade promotion system. To pick any one of them as being more important than others, some research needs to be done a bit more in-depth to really understand the return on these types of policies.
The Chair: Other than research, it seems to me your report says that we have to do more consistently and constantly if we want to be there. We have to be mindful of new trends, new issues, new companies and new challenges. There is not a magic answer. It is a lot of hard slugging to get companies in. Having said that, I keep hearing, when I travel around the world, that we're risk averse in this country. How do the companies manage that? You are in a unique position to take more risk.
Mr. Vidler: If we as a country — going back to the bold action, maybe I did find what the action is — take a look at what we can do, if we're saying that our economic future is going to be dependent on trade, and I think there tends to be multi-partisan agreement on that issue, then we should look at trying everything we can in this space. Given the fiscal climate and the decline in commodity prices, there are limits to what the government can do in the immediate short term.
We're not talking about boatloads of money here. We're not talking about major restructuring of government departments or agencies. We're talking about filling in gaps. The trade commissioner budget is somewhere in the range of $100 million to $150 million a year. If that's going to be a component of what we use to win in global markets, research has suggested that for every dollar spent on the trade commissioner service, you see $26 in exports. Surely we can find this type of money somewhere and find the political time of our leaders to focus on getting these types of things done.
Senator D. Smith: I wanted to say on the record that I have been on probably more than a dozen various missions to China going back 40 years, but the one that was by far the most successful was that Team Canada one in 1994 that I was on. I'm not really trying to be partisan here at all, but there was a rapport with the premiers and the provinces that Jean Chretien developed that actually worked. They were all there. We spent quite a bit of time with the Prime Minister.
At the first meeting, he called me and he told me I looked like Henry Kissinger, and everybody called me that for the rest of the trip. There was a real good rapport, and the media was incredible.
I know you just can't do a whole bunch of them, but that one did, in fact, work. The sort of chemistry of federal- provincial working together is not like it was at that time and I just want that sort of noted. I know that some of these other ones have been successful in different ways, but that one was quite unique, for which I think he deserves credit.
The Chair: I don't know if you want to respond. I think Senator Smith is saying that that was, as you said, one of the initiatives, and there have been others.
Mr. Vidler: Thank you, yes. Yes, I think the —
The Chair: I'm trying to wind up the meeting.
Mr. Vidler: The positive aspects of that trip sound like the types of positive aspects we like to see on a lot of trips, and that we are seeing, frankly, on some of the recent trips that the government has been doing.
The Chair: Mr. Vidler, you can see that you generated a lot of interest. We are going to continue to follow this issue. Thank you to the chamber for your report, which was extremely helpful to this committee, and for your presence here today.
Senators, we're going in camera for a meeting on future business.
(The committee continued in camera.)