Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 22 - Evidence - Meeting of February 19, 2015
OTTAWA, Thursday, February 19, 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: The Standing Senate Committee on Foreign Affairs and International Trade is authorized to examine such issues as may arise from time to time relating to foreign relations and international trade generally.
Last week, under that mandate, we heard from the Canadian Chamber of Commerce on trade promotion. Today, as yesterday, we will continue in that vein. We are pleased to welcome Professor Lorna Wright, Executive Director, Centre for Global Enterprise, Schulich School of Business, York University; Laura Dawson, President, Dawson Strategic; and we have Chuck Cartmill, CEO, Founder and Majority Shareholder of LED Roadway Lighting Ltd, C- Therm Technologies Ltd and EEDTech Ltd., Solar Global Solutions, who is joining us by video conference from Halifax.
Welcome, all of you, to the committee. We're looking to your information and advice on trade promotion issues generally, what the government has done, what associations have done, how we can improve our competitive advantage, and what are the impediments or advantages in Canada presently.
I'm going to go in the order that is on my agenda, so I will ask Professor Lorna Wright to start. I hope each one of you has a short opening statement and then senators will obviously have questions. I think all of you have, in one form or another, testified before House and Senate committees, so you're used to our process. Welcome to the committee. Professor Wright, I'll start with you.
Lorna Wright, Executive Director, Centre for Global Enterprise, Schulich School of Business, York University, as an individual: Thank you very much, Madam Chair, and members of the committee. Thank you for giving me the opportunity today to comment on Canada's trade promotion initiatives and to give my views on what additional measures might be helpful.
I'll be taking the perspective of SMEs in this presentation and in my allotted time, I may have to speak fast, I would like to make 12 points. First and foremost, much of what I've read on trade promotion takes the implicit view that we're talking about exporting and I would like to stress that trade is a two-way street. It's imports as well as exports and more and more these days it's being part of the global value chain. We need to pay more attention to that aspect. Helping Canadian firms not only become part of that chain, but to develop more expertise and skill in developing and managing those chains will become increasingly important in the future. We want to move up the value chain, not remain as first level suppliers only.
Also, trade agreements, they're a good start for encouraging more international business activity, but they're only a start. SMEs need to be encouraged to take advantage of the opportunities they offer, and the Trade Commissioner Service here can be very helpful. I'm glad to see that more resources are being placed here in the GMAP. Trade missions can be helpful, particularly when they're led by high-ranking officials, but there are several things that need to be attended to, if the trade missions are to fulfill their potential. First, companies need to be selected well, to suit the goal of the mission. They need some initial preparation before leaving. There needs to be a follow-up afterwards from the mission organizers and I can't stress that enough. That follow-up is absolutely critical. A trade mission should not be a one-off, but should be part of a strategy for that country or region.
Business deals take time to develop in most parts of the world because they need to be built on relationships.
Branding Canada is another thing that I'm very glad to see more emphasis on. The challenge is when you have provincial and municipal trade missions, not to mention trade offices, around the world, which can get confusing to the other side. We see this, in particular, in the education sector as we try and promote our education services to prospective students around the world. People keep asking: Ontario, what's that? Saskatchewan, what's that? So trying to brand as Canada is very important, but easier said than done.
The other thing I'd like to say is often when we're measuring success there's a misplaced focus on activity rather than achievement. So, for example, we tend to measure simple attendance at a seminar or workshop rather than delving deeper into whether you reach the actual SMEs you were targeting or just the ecosystem of service providers to SMEs. We need to pay more attention to making the metrics we use more meaningful.
Providing a road plan for SMEs that are new to international business would be extremely useful — a one-stop portal or concierge service. There's a lot of information coming from all sorts of sources. SMEs don't know where to start looking and often don't know what questions they should be asking. Those with experience under their belt still find it arduous to wade through all the different sources. In Ontario, the Canada-Ontario Export Forum is making a start on this for Ontario companies, but we need more. Along the same lines there are too many entities focusing on different parts of the problem, but unaware of what services might be offered by other entities that could help with other parts — the silo effect. SMEs thus don't get the referrals that would give them the complete picture. They are left to struggle through by themselves and often give up.
To help in a small way with this, my centre, the Centre for Global Enterprise at the Schulich School of Business is hosting a gathering of many of the entities of this ecosystem in Ontario next week. We need more knowledge sharing, collaboration and coordination across agencies. Speaking of silos, we need to be involving the ethnic business community organizations more in our efforts. They have links into the markets that we're trying to access. They have knowledge that they can share about the business culture, language and customs, which would be very helpful. The Asia Pacific Foundation of Canada published a report about 20 years ago called "Canada's Hidden Advantage'' that explored this. I don't think we've made much progress in the two decades since.
We should also be linking up the business immigration program more with Canadian companies wanting to export. We should be making more use of the multiculturalism that we are proud to say defines us as Canadians to the benefit of us all.
Government partnering with other organizations in the business community with the same aims, for example, CME, I.E. Canada, Canadian Chamber of Commerce, boards of trade, ethnic business councils, my Centre for Global Enterprise, can provide synergies and make scarce resources go further. This networking can improve the reach and reliability of solutions.
Almost anyone that talks about Canadian business mentions its conservatism and risk-averse nature. Cross-border business entails risk, but it's a manageable risk. SMEs need to overcome the fear factor, if they are to succeed internationally. I think we have a representative of an SME that will be speaking later that can tell us how he does it.
They need to know how to manage this risk, and this can be helped with education, forums, seminars, mentoring. This is happening now and should continue. The Trade Commissioner Service is a great resource here, but there should be different levels of seminars benefiting not only the neophyte but also the more experienced.
As a business professor, I would be remiss if I didn't point out that we should be focusing not just on our current business people, but also ensuring that the next generation is equipped to compete globally. Let's think ahead and have them better prepared. Partnering with universities and colleges would be a good plan, to link the present and the future. There are two programs I could mention here that are working on this, FITT, the Forum on International Trade Training which is offered at many colleges and the EDC sponsored Certificate in Managing International Trade and Investment at Schulich. Linking SMEs with business students who have particular international business knowledge and skills, who could be hired on a project basis as interns or full-time employees, would also be beneficial to both SMEs and the students.
Then there are the interprovincial trade barriers. It's better than it used to be, but we may soon be in a situation where it will be easier to trade with Korea than between Ontario and B.C. In addition to the trade agreements that we're signing with other countries and regions, we need to pay more attention to bringing down the trade barriers in our own country.
I could go on, but I'm going to stop there. Thank you for the opportunity and it is really heartening to see trade come back to the forefront with our policy-makers. Thank you.
The Chair: Thank you. You certainly have done it efficiently, in the time allocated, and I appreciate that. We will now turn to Dr. Dawson for her comments.
Laura Dawson, President, Dawson Strategic, as an individual: Good morning, Senator Andreychuk, and thank you to all of you for the invitation. It's great to be back before you. I'm feeling like an old friend because my office is three blocks away, but hopefully I can offer you some insights.
When I was asked to come and speak about trade promotion, there's an infinite number of things that we can be talking about, but the first thing that came to mind was SMEs, small and medium-sized enterprises. Fortunately for all of us, Dr. Wright has given us a wonderfully comprehensive overview of the real nuts and bolts, so I'm here to tell you stories.
I used to be a professor of international trade and then I went to work for the government. I went to work for the wrong government. I was a Canadian, but I was working on the U.S. side. So I had the grave misfortune, for example, of telling your next speaker, Mr. Cartmill, that his company was out of luck as far as Buy America goes. Sorry, Chuck. It's probably still out of luck.
After leaving the U.S. government, I started a company that helps businesses with cross-border market access and regulatory issues, so I deal with businesses every day. Unfortunately, I can't deal with small businesses every day because small businesses are too busy making things, earning a living and keeping the doors open. They do not have time to deal with lawyers and lobbyists and consultants, so I do meet them through the various associations that I work with. I've become sort of a "go-to gal'' or a "Dear Abby'' on a lot of trade things. I want to talk to you about some of the things these people are experiencing.
First, I don't think it's too strong to say that I'm fed up with government initiatives, particularly federal initiatives that say, "We're putting SMEs as a top priority on our trade agenda.'' I don't think so. I hear lots of lip service. I don't see action.
I don't see the sort of assistance that they need to actually move their products in and out the door. For example, one of the companies that I work with is an Ontario manufacturer of truck components. So they bring in the chassis, the business part of the truck, from the United States, and they put interesting things on it like hydraulic lifts and stuff. But all of the problems that they have with this, for a relatively small company, for example, are that they're importing a vehicle with a U.S. speedometer on it, shown in miles. You can't drive that in Canada, so they have to explain to the customs guy that we're not reselling it in Canada, but we're putting stuff on it and sending it back. If that is the case you're going to have to pay a whole lot of GST, as if you were importing it and then we'll give you that back later on, if you're lucky, in the fullness of time. So the cash flow problem that this creates for small businesses, with limited cash flow to begin with, is huge and it's imponderable. We're not helping these folks.
Here is another story. A relatively successful manufacturer of fur hats in Vancouver has to export her hats to customers who really want her stuff in the United States. This is all ethically raised farm ranched fur. We are not getting into that trouble. But she can no longer send that product across a land crossing in the United States because they can't do fish and wildlife inspection at the land crossing near Vancouver. So she has to send it by ship from Vancouver to Seattle. Can you imagine the additional costs and hassles that this creates? So what does she do? She's just not going to send it to U.S. customers any more.
For some of these businesses, when a foreign customer calls, especially a U.S. customer, they would be better off just to hang up the phone and say no because the hassle is just so high for relatively limited returns. While we're pushing our small businesses to export, we are not giving them the support they need.
There are all sorts of websites that say we're going to do this for you and we're going to lead you through it. I've been through a number of them. Yesterday I went through the Canada Border Services Agency guide to exporting. It's like a one-page guide to becoming an astronaut. It could have been written by Chris Hadfield. First, get a graduate degree in aeronautics, then become a test pilot, then master conversational Russian and then ta-dah, it's done. These are the same sorts of magnitude of requirements that we're looking for from our small business importers and our exporters. And oh, by the way, if you're exporting to the United States, often your U.S. customer will say, "You know, I can't do all that border stuff. It's too much of a hassle. You guys send it, landed to my door.'' What does that mean? That means that Canadian small business has to learn the U.S. system as well. He has to be the importer of record and do all that's required on that side.
What government agencies does he have to deal with? I made a list and this is by no means complete, but if you're a small business exporter you have to deal with Canada Border Services Agency, Customs and Revenue Agency, and possibly DFATD, CFIA, Finance, Agriculture, Natural Resources, Fisheries and Oceans, Transport, Industry Canada — nobody is helping these folks in a comprehensive way, at least not in the Government of Canada.
I would like to see four things. First, I would like to see a single window online access point for small business that is actually functional for them and that is more than just a one-page guide to space travel.
Second, I would like to see an ombudsman, so that when there's somebody who has a complex problem that involves agriculture, food, labelling and borders, they can call the ombudsman and say, "Who do I talk to and how do I figure this out?''
Third, I would really like you guys to work on rules of origin. Most small business traders don't use the benefits that they have in these great trade agreements that we've been negotiating because the rules of origin for a complex product are too difficult to figure out. Where does this come from: Canada, United States, Bulgaria or Austria? How much is the Austrian component? How much is the Bulgarian component? I don't know. They do not know. And so the small business trader doesn't use the benefits that we negotiate for them.
Fourth, please take a look at that GST issue. Please figure out if there's an easier, more comprehensive way that we could help our small business traders that are bringing components in from the United States or any place in the world, doing something in Canada, and then re-exporting them. Don't make them leave tens of thousands of dollars tied up in government coffers. Thank you.
The Chair: I will turn to Mr. Cartmill from Halifax. I hope you've dug out and are ready to come and talk to us. Welcome.
Chuck Cartmill, CEO, Founder and Majority Shareholder of LED Roadway Lighting Ltd, C-Therm Technologies Ltd and EEDTech Ltd., Solar Global Solutions: Madam Chairman and senators, thank you for the opportunity to provide my input on trade promotion. I would like to take a minute to give you a little bit of my background as well, and a little bit about the Atlantic area. Most people know we have an aging and shrinking population, a lack of immigrants, out- migration of graduates and tradespeople and a floundering economy. The only solution is the creation of growth- oriented and export-oriented sustainable businesses that provide good long-term sustainable jobs.
I consider myself a late blooming environmental entrepreneur and inventor having started my first manufacturing and exporting venture at age 54. Prior to that I owned and operated two technical sales and marketing companies, one in Atlantic Canada and one out of Toronto, which is where I made my money and subsequently shifted into my manufacturing ventures, which my wife calls "the black hole or the money pit.''
I bought an empty 55,000 square-foot building in Amherst, Nova Scotia, in 2002, with no customers, no bank money, no employees and no government money. I called that C-Vision and started a contract manufacturing business. In 2007, I started LED Roadway Lighting with the development of my first LED streetlight. In 2011, I put those two businesses together under the name of LED Roadway Lighting Ltd., which now employs between 250 and 300 people, most of them in Amherst, rural Nova Scotia, and the balance at our research and head office in Halifax.
I'm proud to say that we have retained and repatriated dozens of university and college graduates, two of whom are my own sons, an accomplishment that is not lost on my wife when weighing the benefits of self-employment, global travels and long work hours. I now get even more points as the grandchildren live only a few blocks away.
LED Roadway Lighting employs people from Mexico, the U.K., the U.S., Brazil, Africa, New Zealand, Venezuela and the Philippines, most of whom now work in Halifax. I'm also the founder of C-Therm, Solar Global Solutions and EED Tech Ltd. C-Therm is a Fredericton business which I started in 2007. It employs about 20 people and exports to over 60 countries very specialized thermal conductivity analysis equipment that was designed and developed in Fredericton. Solar Global Solutions has sold about 500 solar systems globally, 80 per cent of it exported primarily to the Middle East, Caribbean and the U.S.A.
EED Tech is something new I started which is a smart grid think tank water heater which I'm building with a design and R&D team in Fredericton.
I must say that through all my travels, people absolutely love Canadians and they love Canada. I've had the good fortune of travelling the world since I started my manufacturing SME businesses. I would like to compliment the Government of Canada for turning its attention to trade promotion with a strong focus on SMEs, where approximately three out of four new jobs are created.
Over the course of my career, and as an exporting SME, I've tried to engage with EDC; TCS, Trade Commissioner Services; CCC, Canadian Commercial Corporation; and BDC, Business Development Bank of Canada.
EDC, Export Development Corporation, and TCS, Trade Commissioner Services, have been enormous in their assistance and in helping us to grow our business. EDC insurance and financing options have been the backstop to our export business. Until recently, I didn't even have a credit manager. All I told my people was that if EDC won't approve the sale or the account, we won't do business with them, and we've had virtually no losses. Trade Commissioner Services has been outstanding in the field of support with market intelligence and client introductions, having helped me make key appointments with government officials, such as the Mayor of São Paulo, the Mayor of Panama City, and in one case even got me into a kind of a family lunch with one of the original sons of Sheikh Zayed in the United Arab Emirates.
On the other hand, CCC has been virtually impossible to build a relationship with and have little to no consideration for SMEs unless they are referred to them by the U.S.A. defence department for the IRB regional industrial benefits program. In my opinion, CCC is one of the biggest opportunities within the federal government to help grow export sales quickly and safely, with little or no risk to the SME. I understand CCC is given an annual fee to cover its U.S. sales and now will receive a commission on the 12 to $15 billion light vehicle contract with Saudi Arabia, which should help them finance most SME initiatives.
One of the challenges that SMEs face when you're exporting, especially with technology companies, is that we're up against companies like General Electric and Philips. These are giants who have great financial background. People know they're going to be around for a long time. There are always questions about an SME, which may be a relatively new company. Having the involvement of Canadian Commercial Corporation that acts as a contractor in between the governments, allows the government-to-government contracts that don't have to go to tender and it reduces the risk to the SME of getting paid. It also helps add a lot of credibility to an SME in that you're dealing with the Government of Canada, which gets equal consideration to a company like GE or Philips.
I do not believe the top management at CCC understands the importance of SMEs to the Canadian economy, and there needs to be a commitment to change, with measurable goals and consequences for goals not met. The ability of CCC to carry out government contracts adds credibility and financing solutions.
In my opinion, BDC, known as a lender of last resort in the industry, has large numbers of regional staff with overlapping responsibilities, and they charge exorbitant rates. I've not been able to build a relationship with either of those two departments, but I've talked to many SMEs that do deal with them or who have tried to deal with them. One of the challenges is that BDC falls under Minister Moore, whereas the other three departments, TCS, EDC and CCC, fall under Minister Fast, and I think if there was a way to tie those together, there would be a more cohesive approach to the programs and the support of SMEs.
When talking about trade missions, trade mission preparation is crucial. There's usually a matchmaker appointed, and I think a course on how to use matchmakers and how to pick them would be useful. When I go on a trade mission, I always insist on having a discussion with the matchmaker before we go, and the first thing I tell them is that I'm going to be their worst nightmare. I tell them who I want to see and I push them, and when they aren't able to make the appointment, I must say the consulates or embassies, even in some cases the ambassadors, get involved and help us to make our connections.
The other comment I would like to make is that Canada needs to make foreign aid donations more accessible to Canadian companies, in particular SMEs. As an example, we gave a $250 million donation to IDB for the Canadian climate fund for Latin America and the Caribbean. That fund is referred to as C2F, and I've been to Washington to meet with those people. There are two American people who are running the program, one of whom I recognized from Los Angeles where we were shut out because of Buy America. He was running the Buy America program at the City of L.A. That gives you a pretty good idea of the kind of consideration we're getting. At that time, not a single Canadian company had received business from the $250 million fund. On the other hand, both U.S.A. and Japan, that donated substantial amounts of money as well, insisted that recipients visit potential suppliers in their countries and they retained final approval of the projects. These kinds of projects could really launch an SME. They're the difference between making it and not making it, and moving into the next level. I think it's really important.
I did read the comments from Canadian chambers, and I believe DFI, the Development Finance Institution they referred to, if my understanding is correct, would be of great value, and it would perform something like our own IDB. I would suggest that that should report to the Minister of Foreign Affairs and International Trade as well.
I think there was a comment earlier about free trade with the U.S.A. From our perspective, there isn't any free trade with the United States. Our exports at LED have historically been at 3 per cent or less to the United States. The U.S.A. municipalities, states and federal departments specify American, made in America, and severe consequences for deviating. As a result, rather than take any risk, companies and municipalities stick to American suppliers.
Another important aspect of building strong export-oriented SMEs is support received from the federal government in proof of concept. There's a relatively new program called BCIP, which invests in technology programs. It's part of the Department of Public Works. This is a phenomenal program, one of the best things that the federal government has ever done for SMEs.
They'll offer up to $500,000 for a federal department to buy a new technology. They make the technology and company up with one of the federal departments, and then they get to demonstrate that technology. The next phase of that should be the development of standing offers for these types of innovative technologies that are developed in Canada and tested by the federal government.
In an effort to build stronger, sustainable SMEs, focus on trade and export. EDC and BDC should consider direct investment in common shares of SMEs without the requirement of a VC as is now a condition.
Venture capital is extremely important, but the types of agreements that most SMEs are forced into, first of all, as in my case and one of the businesses, you have no experience. These are huge, detailed agreements with all kinds of preferential treatments, preferred shares, clawbacks, waterfall tables, and the list goes on of things that are really detrimental to SMEs. I think forcing EDC and BDC to invest in conjunction with venture capital funding aligns the agreements that are not in favour of building good, strong SMEs.
When a VC gets involved, their goal is to flip that business as fast as they can and make a profit. Is that how you create sustainable businesses in Canadian? Not really. Those businesses normally end up in the U.S., and that's where the growth goes.
I did also mention I sent through a summary of some comments from Mr. Vinod Khosla, a billionaire who is co- founder of Sun Microsystems, but venture capitalists, and that's available from Adam.
That's it. I'm sorry for taking a little too long.
The Chair: Thank you, Mr. Cartmill. We certainly have a lot of information and points of view. As you can imagine, I have a long list of senators who have questions.
Senator Dawson: Ms. Wright, since you did not have a chance to breathe when reading your statement, I was looking at the translators having the challenge of keeping up with you, and you finished much before them.
There are two things I would like elaboration on that are important. We have heard many times the notion of measuring. We had 12 meetings in such-and-such a country, we met so many bureaucrats, but the measure of success is not something I have heard mentioned here on behalf of the support that the federal government does. We do measure meetings, but do we measure results?
The other one you talked about, and I think it is a key strategic advantage of Canada, is multicultural communities and the fact that we have access to 150 communities around the world, because we have 150 cultural communities in Canada that have that, but multilingual in many cases. I would like you to elaborate on that.
Since I'm sure I will only have one chance, I will pose my "Dear Abby'' question to Ms. Dawson. I never have the occasion to meet her except when she comes here.
You talked about "ombudsman.'' We had an explanation about "concierge,'' the notion of trying to have people like you have in hotels, somebody you could call and help them meander through the federal system, go through the CBSA exporting guide. Would that be the same as the ombudsman, or is it something different?
Ms. Wright: The measuring thing is something that I think we have to start taking a bit more seriously in terms of what it is exactly that we measure, because things which get measured get paid attention to and actually get done.
I see a lot of measuring of activity, exactly what you were saying. We had X number of meetings, we had X number of people come out to our seminar or whatever, but we don't then follow through and find out if the meetings that we had were with the right people. Were they people who would actually help us to advance the business? Did we actually have a deal that came through?
I've been involved in some situations, for example, on trade missions where the Canadian company and the company on the other side looked like they had a deal that was good for both sides. The Canadian company got back to Mississauga, which is where they came from, and got busy with their regular stuff, and the deal never happened.
This happened to be in Thailand. I went back to Thailand and talked to the Thai company and asked what happened. They said, "Well, we never heard from the Canadian company again.''
That's why I mentioned follow-up on trade missions is so important as well, because too many things fall through the cracks. If we don't measure, more things fall through the cracks as well.
The other things I have been hearing are Minister Fast's seminars, this Go Global. I think it is a great idea. One of my colleagues was at the one in Waterloo. It was a good session, but looking around the room, this was directed at SMEs. Very few SMEs were actually there. There were a lot of lawyers, accountants and government people, but not the actual people that you want to have there.
On the multicultural side of things, we really ought to be taking much more advantage of that than we have been. I've talked about silos. There are so many silos out there and not enough connections across.
Both Ms. Dawson and I talked about a one-stop shop, a portal, a concierge. That is critical, I think, for helping us move forward. If we can have it so that it's a one-stop shop not just for mainstream Canadian companies but also for some of our ethnic community companies and bring them together so there are some synergies happening there, that would be enormously helpful.
We have Canadian companies trying to do business in China. We've got a lot of people here who come from Shanghai, Chongqing and Guangzhou who could be extremely helpful in making connections for those people who could be working together.
In terms of students, York University has probably got the most multicultural student body anywhere. If we could get those students hired by SMEs or any company, it would be beneficial both to the students and to the companies, because our students speak many languages. They understand how to do business in many places, but they would also like a job in Canada. So if we can work together, I think it will be helpful.
Ms. Dawson: The question regarding the concierge service, it's just a matter of name. If "concierge'' is a better word than "ombudsman,'' let's go with that.
I think what the essential characteristic is, is that person or office couldn't be just a single person, in reality. It would have to be cross-agency. This can't be CBSA or DFATD. This is an office that is capable of coordinating across Agriculture, the Food Inspection Agency, Transport, and all of the trade-related areas so that you don't call up and someone says, "Terrible problem, but I'm sorry, that's something that's handled by the Food Inspection Agency,'' and off you go.
That cross-agency domestically is important, but if we are going to go into the gold-medal round, it should be able to coordinate across borders with the United States.
A lot of my work is involved not with big trade disputes but how does the Department of Transportation understand this in the U.S, and how does that align with Transport Canada? It's just getting our nomenclature and rules lined up. There is an entity that does that. The regulatory cooperation council between Canada and U.S. is doing good work in that area. Line that up with our ombudsperson concierge service.
Quickly, on metrics, the measuring process is fine, but people who are doing business are really busy doing business, and I think we need to measure output. We need to actually get better at measuring not just bulk exports, because bulk exports do not capture the nuance of the value chain. If we put a Canadian component in this thing and send it to the United States and then they make it a bigger thing and export it to Austria, that doesn't show as a Canadian export to Austria. That shows as a Canadian export to the U.S.
The government is doing some good work in tracking value added trade. We should encourage that. Also, we are very poor on tracking services trade. We are weak on understanding what value of services we are exporting and importing, even though services constitute something like 25 to 40 per cent of the value of a finished good.
Those are the metrics we need to be focusing on and, in that way, we will understand our trade better.
Senator Demers: Senator Dawson just asked the question, but Dr. Wright, I'm so impressed with your definition of success. For me, success is being around the right people and achieving your goals. A lot of people don't understand what success is all about. I'm impressed by both of you, and certainly the gentleman on the video. We understood exactly where you are coming from. Thank you very much.
Senator Oh: Dr. Wright, I think what you mentioned about trade mission is an important key component of success. I travelled on a few trade missions overseas, and I find that trade missions are becoming too big. If it's too big or too loose, it will not accomplish anything. Businessmen are busy and do not have the time to go on a two-week trade mission. Most of the successful trade missions will be seven days maximum.
The whole thing is that we don't have a proper component to make use of the multicultural community here to link up with whatever country the trade mission is going to. These are very important resources. Through you, maybe the departments can put together a booklet of how to operate efficient trade missions overseas. Can you comment on that?
Ms. Wright: It would certainly be useful. That is one of the things we're trying to do, actually.
I think everybody who has spoken so far has talked about the sort of disjointed ecosystem that is out there. Not everybody knows what anybody else is doing, and there is no sort of one-stop shop. We're trying to bring people together across government agencies, across everybody in the ecosystem, and do our bit to try and get toward the single window.
How to run a trade mission? There are probably trade consultants that can do that. The thing that has always astounded me from the Team Canada days on, and some of those missions were actually excellent, was that when they came back, there was no follow-up. I was involved in the one to Thailand and one to Japan. When I tried to follow up on the one to Japan, I couldn't get any metrics or measure out of the Canadian government as to what actually happened three months or six months later. I went to Japan, and they had everything. I could get the information from the Japanese government, but not from the Canadian. We didn't know really what the value of that trade mission actually was.
Senator Oh: To follow up on some of the trade missions, the premiers and all who went to China, Asia and other parts signed so many MOUs. They came back and flashed the paper, but there is no follow-up, as you say, and no result. If so many MOUs are signed, our economy should be booming, right?
Ms. Wright: Yes. You need to follow up and actually get those MOUs nailed down into actual deals.
Senator Johnson: Good morning. It is nice to see you here today. Mr. Cartmill, you have achieved remarkable success. I have read about you and the work you are doing. Ms. Wright and other witnesses before us have often talked about how Canadian business is risk averse in nature, and SMEs need to overcome the fear factor if they are to succeed internationally. They need to know how to manage risk, and this can be helped with education. Based on your success and what you have gone through and how you have achieved and overcome many things, tell us how you feel about that particular thinking and those comments. Is the GMAP program that we started in Canada in 2013 reaching you, or does it have any promise in the future, do you think? I know it's early in the game, but somebody is really doing the work. We're trying to get other Canadian companies to go abroad. Can you tell us more about your story in this respect and these parameters?
Mr. Cartmill: Canadian companies do need to be a lot more aggressive. Even with the Trade Commissioner Services and the consulates, I would always drag my light to the receptions. That was often frowned upon, but they were inviting all kinds of key people. I would set my light up, and I would be the only one with a light or a sample of a product. Everybody else was drinking wine. I think the point is you have to really work it.
I met Minister Fast in Brazil on his first trade mission, and he invited me for a trip back with the Prime Minister on the Prime Minister's jet. We met with the President of Brazil and a lot of other key people, and now we are partnered with the City of São Paulo, which is a massive opportunity. Mr. Fast said the Prime Minister says Canadians are too nice and not aggressive enough, and he said, "You're aggressive enough for all of us.''
We need to encourage SMEs to get out there and push. I have been on trade missions. I can think of one in Panama where there was a lovely couple from P.E.I. who sat around the hotel most of the time and didn't get much out of the trade mission. We need to teach them to be more aggressive.
I think GMAP is fantastic. We've got all kinds of trade agreements in place now or on the way with CETA. We find that you need to target your markets. There is no sense inviting a bunch of people on a trade mission to go to a market that they can't service or can't be competitive in or they can't afford to buy their product. We have a couple of basic rules. First, we have to have a free trade agreement in place. We don't even consider somewhere where we don't have a free trade agreement. Second, we like to see high energy rates. All of my businesses and the direction I'm headed in is in energy efficiency or generation or power shift for peak off-loading. Pick your markets, and pick countries that have the ability to pay. Even if they don't have money, some of them can still pay. They can get financing from IDB or World Bank or European Development Bank or places like that.
What is going on with GMAP is right on the money. We need to really focus on trade promotion, which most businesses and perhaps a lot of people don't realize, and the technical people in particular. We have lots of engineers and Ph.D.s. Nobody goes anywhere unless something gets sold, and we have to focus on closing deals and selling. We need technical sales and marketing people who really understand technology and who can communicate. Unfortunately, most technical people, when they think of sales in marketing, which this is all about, they think of insurance and salesmen and they shy away from it, when in fact it's a great career. It's an area that really needs focus and attention on how to promote your product and sell it effectively.
Senator Johnson: Thank you so much. What about GMAP? What is your assessment?
Ms. Dawson: I can't comment on GMAP.
Senator Johnson: Okay.
Senator D. Smith: My question is primarily for Ms. Dawson, but anybody else who wants to answer it can chip in. I'm quoting you: "We're not helping these folks.'' You said those exact words. I believe you were talking about small businesses that want to export. Ironically, a little over 30 years ago, for a year, I was the Minister of Small Business. I was hearing the same thing then. I was quite interested in listening to them and dialoguing, but then there was an election and I was back doing the Bay Street legal stuff. I've always been very interested in that.
So my question is this: Is there a country that is a role model for how to help these kinds of people? I know when you have a federal system it is always more awkward and complicated, but is there a country that you would regard as a role model that is really helping these people to figure out what to do to help them more?
Ms. Dawson: The United States does a better job than we do, but it's not because of nuance. It's because of scale and money. So their department of commerce is very much invested in small business development, small business export development, finding export markets and linkages. I think in Canada we can do it smarter. I think that the U.S. does it well by volume. I can't really think of any other country — perhaps New Zealand — that we can say is that successful.
Canada has to really focus on what we can do domestically that will help our export competitiveness. Thirty years ago when you were the minister, I think you were facing, as you say, many of the same challenges we face now, but the big companies with the lobbyists and this and that, they capture all the air space. The small and medium-sized enterprises aren't there because they are busy doing business and they don't have the ability and the time to follow up. They are the redheaded stepchildren that we need to act on their behalf, even if they are not in the room.
Senator D. Smith: I do buy New Zealand wine and lamb.
[Translation]
Senator Fortin-Duplessis: Welcome to all three of you and thank you for your very interesting opening remarks. You all stated that it is extremely important to provide a single window.
Ms. Dawson, you emphasized the problem small businesses face in having to pay the GST before they are paid for the products they have manufactured. Could other steps be taken in order to make things easier for small- and medium-sized businesses in terms of penetrating new markets and increasing their exports?
[English]
Ms. Dawson: Something may have been lost in the translation. I will underscore; the GST is such an important issue. It assumes that you are importing a finished good. It does not pay attention to the fact that we live in an integrated supply-chain world where things move back and forth across the border very quickly. In that aspect it is a very outmoded system. I would like to see us engage in some creative thinking. I don't want to defraud anyone out of tax money, but I would like to see some creative thinking so that it is easier for Canadian SMEs to participate in cross- border supply chains without having to tie up so much of their cash in these sorts of fees.
I should also mention that when a trader ends up offside with a customs or taxation issue, it is not enough that they just make up the difference because they've made an error in their paper work. There are often what we call "administrative fees'' and "penalties.'' So you have to pay a fine over and above for a calculation error. We are punishing our SME traders and we're creating a lot of resistance where we should be opening the world up to them. Again, rules of origin, taxation issues, the single window, the ombudsman, those would be the four things that I would very much focus on.
[Translation]
Senator Fortin-Duplessis: My second question is completely unrelated. Have you noticed whether or not small- and medium-sized businesses face problems in countries where human rights are not respected? Do they take this into account? Do you hear anything about this?
[English]
Ms. Dawson: SME traders tend to trade with the United States first because it is a relatively easy market. We can dispute whether or not there are human rights issues in the United States, but generally speaking that is not such a concern for Canadian SMEs. If we can expand it to the trade in general, human rights issues are a concern for Canadian trade.
I think that the Government of Canada has done a good job in starting to approach that issue, in our Canada- Colombia Free Trade Agreement we have a human rights charter. I think Canadians are paying much closer attention to the human rights and environmental issues in the extractive sector. Canadian companies are generally, not always, seen as good corporate citizens in the world. I think we need to emphasize and expand that. If there is one thing about brand Canada it's that Canadians are trustworthy, reliable and good to do business with. I think that extends into the human rights aspect as well and that is one of one of our important national values.
Senator Eaton: Professor Lorna Wright, are we doing anything in business schools? We might as well start with the next generation teaching them to be as entrepreneurial as Mr. Cartmill.
Ms. Wright: We actually are. It's interesting to see the change in business schools over the last 15 years. I've been back in Canada now for 20 years. I became an academic late in life, so I did other things before I became an academic. When I came in to teach in business schools in Canada, 20 years ago, there were almost no courses on entrepreneurship. In Schulich School of Business right now you can specialize in entrepreneurship. Now there are debates going on: can you teach entrepreneurship or not? What you can do is give students a basis in how you put together a business plan, what you need to do, and link them with mentors. So for example The Next 36 and Futurpreneur are organizations which help young entrepreneurs. So we see a lot more of linking with business students that you did not see 15 years ago. So that gives me hope.
The other thing I would like to see a lot more of is for international content to be put into our business courses. For that you have to also train our business professors.
Senator Eaton: Especially for countries that we're signing these huge free trade deals with like CETA or TPP.
Ms. Wright: This is one of the things that we are working with EDC on at the moment. We are trying to put together open source material that any business professor in Canada can use to allow them to inject international material into basic courses: marketing, finance, strategy and organizational behaviour. These are courses that every student has to take. If we can inject the international content, it means that we will have a generation that has an understanding of international and, hopefully, will be able to interest a subset in going further.
At Schulich, we have an International Bachelor of Business Administration, IBBA, program for those students who already know they want a global career. We have an international MBA program. Both of those programs are much smaller than our regular programs. I think it's always going to be the case that a minority of students want a global career. But if we can get every student to have an understanding of what it takes to do business across borders, then we're better off. These days, even if you never leave Ottawa or Toronto, you're going to be impacted by international business.
Senator Eaton: Is there one person in Minister Moore's department that understands everything you can get out of the government?
Ms. Wright: No.
Senator Eaton: Yesterday we had the Canadian manufacturers association here. I asked them about Navigator, which is a new health thing where every patient has a navigator to help them navigate through the system. He said that they call it a "concierge,'' which I guess is your ombudsman. They have a small concierge program. How could we encourage the government? Yes, we can write a report but what steps coming from outside could encourage the government to have a navigator, ombudsman or concierge to make their services more accessible to everybody?
Ms. Wright: We have to start by getting the different government agencies, first, more knowledgeable about what each other is doing, and second, willing to work together. Laura mentioned several of the different agencies that have different bits of the pie. One of the other things that I've seen in my work is just the difference between DFATD and CIC. I often think they're working at cross purposes. With DFATD, we're trying to get more investments in, more exports out; and CIC keeps putting up roadblocks in terms of visa restrictions, et cetera.
We don't have all our government departments pulling in the same direction, to start with. As well, one department doesn't have a lot of knowledge about what another department is doing. Somebody from DFATD doesn't necessarily know what someone from Natural Resources is doing. It may take an outsider to try to pull things together and make a single portal or concierge, perhaps outside government entirely, to pull all of the government agencies through it.
Senator Eaton: Someone who could take a client through.
Ms. Wright: Exactly. You need that. You need a navigator, concierge or ombudsman, whatever you want to call it. That would be extremely helpful. SMEs, at the moment, in particular those that are just starting out in the international arena, don't know where to go. Tons of information is out there, but where do you start? You may find a bit here, but where do you find the next bit?
Senator Eaton: Who do they phone?
Ms. Wright: Exactly.
Senator Eaton: Laura, I had the luck to hear you at another meeting. You were very interesting, and we were talking about the U.S. I know your point about the HST and we should do something about that, but there seem to be more roadblocks dealing with the U.S. than with Mexico or Japan. They seem to be very difficult these days.
Ms. Dawson: I'm glad you asked that question. I spent a lot of time paying attention to the Canada-U.S. relationship. Usually I'm a cheerleader that things are on the up-and-up and the problems are the exceptions. But I'm really distressed by the state of the relationship right now. Did you read the paper this morning? The Government of Canada is now going to pay for the entire bridge and the customs plaza at Detroit-Windsor. Canada is paying for that bridge. Maybe it's because of the dog. I think that the Canadian dog winning the American dog show might be the reason for that bad decision.
There are a lot of barriers. Let's put it in perspective. First, it is Canada's largest export market, so we have a lot of exposure to it. We're more aware of the barriers there than we are of them in Austria. The U.S. had to come through and find a path out of September 11 and those security concerns. There seems to be a cottage industry in creating barriers, not necessarily to affect their best and closest friend but as a way to satisfy domestic political constituents, which is why Chuck Cartmill can never sell things under Buy America. Maybe it's just a fee recovery — for example, instead of just one customs agent who put a fish and wildlife inspector on fur hats.
We're getting the death by a thousand cuts in our economic relationship with the United States. You can explain and defend every one of them — the State of Michigan doesn't have any money or country-of-origin labelling for beef and pork — as being about consumer protection or the Buy America program. When you put that all together, it spells a very troubled economic relationship. I am dismayed that the U.S. will not expend any political currency to help fix that relationship.
Senator Eaton: The Mexican ambassador agrees with you. He said there's a big block in the middle.
Ms. Dawson: The big block between Canada and Mexico is the United States. It's a big border.
The Chair: To all of our panellists, you can see you've generated a lot of interest. We could have used a lot more time. Perhaps we will recall you. We're just starting our look at trade promotion. Mr. Cartmill, some members of this committee did have the pleasure of seeing your light when you brought it previously. We've drunk the water and understand that you're not risk-averse at all. You're a good role model for Canadian business.
We received a lot of good information from an engaging dialogue today. Ms. Wright, your points are excellent and hopefully will resonate somewhere through our report. Ms. Dawson, as usual, you've given us some good perspectives. Mr. Cartmill, you're certainly a role model for Canadian business. I think you'll see your name somewhere in our report down the line.
We hope to continue this dialogue and appreciate your attendance today.
The Standing Senate Committee on Foreign Affairs and International Trade is authorized to examine such issues as may arise, from time to time, relating to foreign relations and international trade generally.
For our next panel, we have Mr. Ernie Lynch, President, Lynch Fluid Controls Inc; and, by video conference from Burnaby, British Columbia, the hotspot of Canada at the moment, Mr. John Kalbfleisch, Chief Operating Officer of Alpha Technologies Ltd. We're running a little late, but I am going to turn to both of our panelists for an opening statement. Then senators will no doubt have questions. If we're efficient with our time, we will be able to get everyone in and meet our deadline.
I'm going to turn to them as they appear on my list.
Mr. Lynch, please proceed with any opening statement you wish to make. Welcome to the committee.
Ernie Lynch, President, Lynch Fluid Controls Inc.: Good morning. Thank you, Madam Chair and senators. Thanks for inviting me here today. I'm from the Lynch group of companies. We were started 27 years ago. We are located in Mississauga, Ontario, and we employ approximately 100 employees. We export to 57 countries, and we have a goal of 75 countries by 2018. We follow where our bank goes. Our bank is HSBC, they're in 75 countries, and we like to feel at home where they are at home.
We're in the hydraulic and motion-control systems business. Our markets that we serve are military, aerospace, mining, entertainment, material handling — there's quite a broad variety of verticals that we get into.
Last year, NASA was one of our largest customers, building control systems for the umbilicals that come away from the spacecraft as it's taking off from the launch pad. It was quite an intense project for us, but we did learn a lot from it.
We exhibit our products around the world. On the entertainment side of things, for instance, we have been in shows like Miss Saigon, Phantom of the Opera, Terminator 2, and we work with Cirque du Soleil and Universal Studios. We built projects for Spar Aerospace, which were triceratops. Some went into Florida, and some went into the Universal Studios in Japan. As to trade shows, we participate in the U.S.A., France, the U.K., Germany and Latin America.
In 2013, I was appointed to the SME Advisory Board to the Minister of International Trade, and that has proven to be a good experience for me. I have learned a lot from the experience, and I've seen what is happening with the Trade Commissioner Service, EDC, BDC and CME all working together.
There's also a new approach that I've seen taking place with the CCC. In the previous session, there was some discussion about CCC. I'm pleased to report that there is maybe a different attitude, and they're being more aggressive as a result.
Last year, we attempted to purchase an American company. Through that process, we were assisted quite well by EDC and BDC. Both were very helpful in the process. EDC will also finance potential customers, in some cases, in foreign countries. We use them for receivables insurance and have done so for a long time.
Our marketing department has taken the approach that we actively use the Trade Commissioner Service as part of our marketing department and sales department. We're not big enough, at 100 employees, to have feet on the street in every country of the world, so we say that they are our employees. So we do that, and we do our best to educate them as to what we do and take advantage of the services offered.
We've found them to be quite active at trade shows that we have attended. They will come and will set us up with contacts, make new associations for us with the people that are there. If we're able to contact them in advance of a trade show, they can set up meetings for us, and that has been a good experience.
The EDC, in the past year, has backed an initiative for CME to administer and launch the ECN, which is the Enterprise Canada Network. That's a matching website. It's not speed dating or anything, but we can match our capabilities with the needs of companies in other countries.
That system is not just for manufacturers, even though it's administered by the CME. It is actually used by any industry. It could be software; it could be services, anything.
In the previous deposition, there was some discussion about the Go Global events. I have participated in two and was on a panel at one of them. I would have to agree with Lorna's comments. She attended the one in Waterloo, and I believe that Jim Reynolds spoke here yesterday. My observation is the same, that these meetings are not too well attended by SMEs. One of the people from EDC said to me that there should be more notice given, and, if they have the opportunity, they can mine clients better to get the actual people who need to hear what the services are out to the meetings, rather than just have bankers and finance people and government people attending. So you've got a higher ratio of people who actually need to hear the services.
I feel that more Canadian companies need to actually get on planes and go abroad, find their way to trade shows in other countries. The financing is there, the assistance is there, provided by the governments, provincial and federal, to get them there, but they need to take the initiative to do that.
Recently, many of you may have seen an EDC commercial encouraging Canadian companies to go global. You might recall seeing a fellow walking through his house and seeing the different products — "This one's made in China. This one's made in India. This one's made in Switzerland. The Scottie dog at the end is made in Scotland.'' What's the matter with Canadian manufacturers? I thought it was a great commercial. It should be shown more.
I mentioned previously that we do use the receivables insurance, and I believe Chuck Cartmill may have mentioned also that they are using it, too. If EDC won't back a deal, we have no business being there.
The first we have had anything to do with CCC has been in the last few months, but they have been diligent in finding financial information about us, and now with our experience in launch systems, there are other opportunities that we may be able to get matched up with in different countries.
It has come to my attention that the transportation infrastructure in Canada — this is a bit out of my realm, but there has been a study done that I understand has not been released yet, but the transportation infrastructure may not be adequate to handle future growth of exports. If anybody is interested in that, I can perhaps speak to them off-line.
I have a personal crusade that I have been on for the last two years to have a section of the 401 flattened and a bridge built where there is a valley right now, over the Credit River. You could say it's an uphill battle fighting with the ministry. They've got a valley. We've got 400,000 vehicles per day going through this valley, and it's a truck stop, and we need to do something about it. We need to think flat, and I think if we did that, we would be able to preserve a lot of fuel and a lot of the time that's wasted.
Getting down to the last couple of points, I did read a recent article by David Suzuki which draws attention to the Government of Canada being sued by U.S. corporations for failing to comply with NAFTA rules and regulations. Apparently, Mexico is also sued on a regular basis. The U.S.A. has not lost a case in as much time as NAFTA has been in place. They are the aggressors, and finding their way and getting things done through legal means, but the free trade agreement is not working out too well in that area.
Lastly, I believe one of the speakers at the previous session did mention that the U.S. has critical mass. They may not be doing a better job than we do up here. My experiences with the services that have been provided by the government have been stellar in our company's case, but that may not be the experience with all companies.
In closing, on sitting on the SME Advisory Board, with discussion towards an ombudsman and also a common portal, I think these are both initiatives that are under way right now. It is coming.
The Chair: Thank you. I will turn immediately to Mr. Kalbfleisch from Burnaby. The floor is yours.
John Kalbfleisch, Chief Operating Officer, Alpha Technologies Ltd.: Thank you, Madam Speaker and senators. My name is John Kalbfleisch. I'm chief operating officer of Alpha Technologies Ltd.
Alpha has been in business since 1975. We're a private company founded and based in Burnaby, B.C. We have about 500 employees across Canada, the U.S. and Latin America. We've been exporting probably for the last 35 years.
We specialize in power conversion and uninterruptible power supply products predominantly in the telecommunications industry, powering and backing up wireline and wireless infrastructure across Canada, the U.S., and Latin America, but we've also sold products into the industrial marketplace, into the traffic marketplace. We're the number one provider providing backup power for intersections across North America. We sell into the security marketplace and the Smart Grid marketplace. We also have a service business and a service group across Canada.
In the past year, we set up a sales office in Mexico. We've got sales reps across the U.S., in Latin America and Brazil. We sell through distribution predominantly in Asia and through partners in Europe and into the Middle East, and also into Australia.
In terms of exporting, we do about $185 million in revenue. That was our revenue last year. Probably about 30 per cent of that was in Canada. The rest was predominantly export, with 70 per cent of our revenue in the U.S., and about 6 per cent in the rest of the world.
For our strategy, key areas of expansion are going to be Mexico, Central America and South America over the next coming years, and also into Southeast Asia and the Middle East.
In terms of the government's efforts in promoting free trade initiatives, I think we're excited about the upcoming free trade agreement with the EU and with South Korea. We think any time we can break down trade barriers in international markets is great for Canadian exporters.
There was talk at the last session about branding. I think we can solidify the Canadian brand and really focus on innovation, high quality and integrity. Canadians are well respected throughout the world, and I think we really need to leverage on that brand. I think the provinces and the federal government need to continue to work on being very well coordinated and leveraging the finite resources that they do have.
Another opportunity is really educating businesses on the services that the federal and provincial governments do provide companies in order to export.
We've worked with the EDC and also trade commissioners in a number of countries. We have found them very good to work with. They have been very open to telling us what types of services they can provide.
We tried to do a foreign acquisition last year, and the EDC was very open to financing that acquisition. They've also brought forward the opportunity to provide insurance on our receivables as well.
In terms of the trade commissioners, they open up a lot of doors. Companies need to reach out to them. It would be great if there was more of a push mentality, if the trade commissioners could understand more about the businesses and their markets and how they could be successful. Often they show up and don't know a lot about what we do and where the opportunities may be for us. That's an opportunity.
In terms of some general things, I think we've got to work collectively on the Canadian psyche. Canadians are risk- averse. They're a bit afraid to want to grow their businesses outside of Canada. I think a great book that talks about this psyche is Why Mexicans Don't Drink Molson, and I recommend you read it. It's a fascinating read.
From my perspective, I think if we do export, we often get caught up with the U.S. market because it's right next door, a very large market, speaks English. It's very easy to expand into the U.S., but when you start getting outside of the U.S., it gets a little more complex for Canadian companies. There are a lot of different cultures, different languages to understand, and I think that drives some of the challenge.
For Canadian businesses and Canada overall, we need to work on our productivity. We need to focus on being as efficient as possible; how to be smarter faster in everything that we do; eliminate waste out of all our processes, out of our companies, so we can be as cost efficient as possible.
For us to succeed in a global marketplace, we need that global supply chain. We need a global go-to-market strategy. We need to understand where we want to sell our products, what's the right way to go to market and how we can have the right cost structure to be competitive in that market. Sometimes that's not manufacturing in Canada. That may be manufacturing in the local market. That may be manufacturing in China.
I think if companies want to expand internationally, they've got to be committed for the long term. You've got to be able to get on an airplane and travel. I spent a month in Turkey last year. It's a long flight to Turkey. If you want to expand your business, you've got to be willing to put in the hard work, get on a plane, go meet with customers, go meet with potential supply partners, distribution partners.
In terms of financing, I think access to financing is critical for Canadian corporations to expand trade internationally. In a lot of markets the payment terms are quite a bit different than in North America. You can go to southern Europe and you could be waiting 180 days to get paid. You could work with a company in China and not get paid for a year. Often you may get a customer that, at the point they are going to pay you, they may get into a renegotiation process about what the pricing was.
So you need to understand the local customs. You need to have the financing so that if your payment terms are stretched out, you can actually afford to carry the inventory being in the customer's hands for that long.
Also, it's critical to understand local customs and to know where you're selling your product. Is IP a risk? How critical are relationships in certain countries? Personal relationships are way more important than in others.
The other thing I can suggest is that maybe Canada should think about developing a mentor system, where we give the opportunity for small and medium-sized enterprises to partner with other businesses within Canada that can help them learn and take them through what they've learned through the process of growing their businesses internationally. I think that would be a great opportunity.
The other thing I can say is that we need more innovation in Canada. We need access to the best and brightest people. Sometimes those people are educated in Canada, and a lot of times they are not educated in Canada. We need to be able to bring that talent into Canada, and it needs to be a lot easier, with a lot less red tape. That's a key thing for us moving forward. We need to think about teaching innovation, productivity and efficiency in school programs, because that's critical to our long-term success.
Mr. Lynch talked about infrastructure. For us on the West Coast, it's really having free-moving containers through our ports. We've had a number of slowdowns in the Vancouver port. In fact, the West Coast ports right now are in terrible shape and we are often seeing one- to two-week delays in getting containers through the Vancouver port. Help in improving the speed at which product can come into Canada is critical for us.
For us, our strategy is that we do manufacturing in our facility in Burnaby, and we manufacture products that go to our customers in Canada, the U.S., and some abroad. We know that in certain markets, like the Middle East, for example, Canadian products are highly regarded; they're seen as extremely high quality. There is a big opportunity for us to leverage our brand in those markets. That's it.
The Chair: Thank you. You have both been very efficient with the time, and I appreciate that.
I'll turn to Senator Fortin-Duplessis for the first question.
[Translation]
Senator Fortin-Duplessis: I would like to begin by thanking you both for your remarks. My question is for Mr. Lynch. I am not sure if I understood you correctly, but I believe you said in your opening remarks that EDC also subsidizes businesses in other countries. I noticed this practice when our committee travelled to Turkey, a country that is flourishing. President Erdogan, along with a limited number of ministers, has identified areas or markets where he wants businesses to expand and be highly successful.
My question is the following. First, I would like to make sure that I correctly understood what you said. Second, do you think that a government should identify areas or markets for businesses and then provide them with all the support they can in order for them to grow and succeed, or should they let the market do the work?
[English]
Mr. Lynch: Thank you for your question.
There are two points that I'd like to make. The first is that I didn't say "subsidy.'' I did say "financing.'' There is a difference between subsidizing and financing.
The second part of the question dealt with whether it's up to government to identify and develop opportunities, or should it be up to the market to develop the opportunities. I think it should be a combination of both.
Certainly the two parties involved should be able to identify their individual needs to ultimately arrive at a profit, but the trade commissioners — whom we're speaking about in this case — should be fully aware of the capabilities and the needs of both parties so that they can bring them together.
Certainly having feet on the ground in those countries, the trade commissioners should know as much about that marketplace as they possibly can so they can guide the Canadian SMEs into the right pockets and make the best match possible and not waste time, and also to be able to bring to the attention of the selling company, the Canadian company, the nuances that are involved and where they could get stung, where they could maximize their profit.
Does this help you?
[Translation]
Senator Fortin-Duplessis: I forgot to mention that in Turkey the government subsidizes industries that are not even Turkish. Perhaps I misunderstood earlier on the issue of financing.
[English]
Senator Cordy: Thank you to both of you.
Mr. Kalbfleisch, you spoke about the need for educating businesses about what is out there, and we've certainly heard that before. We've heard that there are some good government agencies and non-government agencies that are willing and able to help, but that people don't know about them, or small and medium-sized enterprises don't really know about them. We also heard from other witnesses about the silos. We've got agencies that come under trade, we've got agencies that come under industry, and we've got agencies that come under agriculture. So sometimes there are challenges for the SMEs because they don't have the personnel or the finances to be able to have a staff person strictly looking into that.
What would be a good way to go about doing that that would be beneficial to the SMEs but that could also be done without a huge amount of time or financial resources involved to be able to get that information? If the information and the agencies are out there, it seems a shame that so many SMEs really don't know about what is available.
Mr. Kalbfleisch: That's a good question. From my perspective, we almost have the same challenges in business, where we've got silos; we've got different groups within an organization that don't talk to each other. So it's really establishing lines of communication between agencies to understand what they offer so that there is more knowledge across the different groups. We've been engaged with the Canadian Manufacturers & Exporters, and I think they do a pretty good job of trying to educate the members on what services the government provides and what is out there.
I think often, for businesses, we get caught up in our day-to-day activities and we're not really doing a good enough job thinking about what the government can offer us and what there is out there. I'd probably have to think about it a bit more to give you a better answer.
Senator Cordy: Okay. Thank you. Because it sounds — all the other witnesses, and you included, certainly it makes sense, but how to go about doing it efficiently would be, I guess, quite another thing. If you get a brainstorm in the middle of the night, you can send it along. That would be great.
Mr. Lynch, you said that the Go Global meetings are not well attended by SMEs, that you tend to get accountants, bankers and a lot of government people at them, which is not that helpful. We heard from our previous witnesses that perhaps the focus should be not so much on how many meetings there are or how many people are at the meetings and speaking about outcomes from these meetings. What is happening as a result of the meetings and follow-up, and particularly there the witnesses were talking about follow-up to trade missions — it's great to go and meet people and present your product, but when you come back what was the result of the trade mission? What was the follow-up? Did you follow up on contacts? How do we change it from how many people were there and how many meetings to the outcomes/follow-up aspect, which I think is more important?
Mr. Lynch: We can draw a comparison to the results of a trade show. If we go to a trade show, we may come up with 100 solid leads from the trade show. Of those 100 we come back and filter through them and how many of them are actually high quality, and at the end of a year or two years — because it does take a long time to see results. Sometimes it can take three or four years before a company clicks with another one in another country to make a sale. It should come under the realm of KPIs. This is something I've been pushing for.
Senator Cordy: I don't know what a KPI is.
Mr. Lynch: It's a key performance indicator, and the international trade group needs to operate as a business with KPIs, with mandates, so everybody knows what job they're supposed to be doing and that their results are judged, and they've got to come up with numbers. They should see results, but they should be reporting what the outcomes are from their efforts.
I wanted to add a comment to the question you previously stated. What I have seen in the last year and a half is definitely a strong effort between all of the acronyms that attend to us. The BDC, CCC, CME, and there are a lot of acronyms but I am seeing a definite shift, I would not say consolidation of these groups but a collaboration.
When we have our SME Advisory Board meetings, they are attended by all factions so they can hear what is going on. I think this is the human side or the human version of the portal that's being created. Rather than having disparate silos of information, I think if an SME is on the go and they have it on the ball, if they contact BDC on a case, I believe the BDC partner is actually contacting their EDC counterpart and bringing into play the people who need to be involved in that particular case. I think the other gentleman who has gone through an effort to purchase a U.S. company probably found the same thing as us; that they do work together.
It's really up to the SMEs to have the gumption to put themselves out there and draw the information out. You can't just attract attention because you're an SME; the SME has to be aggressive.
Senator Cordy: I'm new to the committee, so the acronyms are a steep learning curve, I want you to know.
Mr. Lynch: I'm still learning, too.
Senator Johnson: Thank you for coming today. Mr. Kalbfleisch, did you start off with technologies, is this your company?
Mr. Kalbfleisch: Certainly not, I would have started it when I was four then.
Senator Johnson: Then you're very clever. When did you become the COO?
Mr. Kalbfleisch: I have been with Alpha for six years. When I started, Alpha had about $100 million in revenues, so we've had significant growth over the last six years. I actually did think about the senator's question a bit more previously, but thinking about the branding of all the organizations, if we can get to one brand, one website, I think that might help unify things a bit in terms of having all of the SMEs in one location.
Actually, when I travelled to Turkey they have a very powerful document that they have in Turkish Airlines, which is a little red brochure that has a power button and it's called invest.gov. It's about investing in Turkey. It's very powerful in terms of subsidies, what the benefits are of investing there. They are interesting things that we need to think about in terms of our marketing, our branding and what we can offer.
Senator Johnson: We have been told so many times in this committee about Canadian businesses being risk averse in nature. From your experience, do you find this still to be a factor? One of our previous witnesses has even said that SMEs need to overcome the fear factor. If they are to succeed internationally, they need to know how to manage this risk, and this could be helped with education.
Education is something one of my colleagues referred to earlier, especially in terms of entrepreneurship. Do you have comments on that? Then I want to ask you about your experience aside from the United States.
Mr. Kalbfleisch: Yes, we are still risk averse as a country. We're great at competing internationally in ice hockey, but we need to get that mentality into the business community.
I think education-wise, yes, educating people on what it's like to do business in different countries would be beneficial. You fear what you don't know. Like you said, it's easy to expand into the U.S. because it's an English- speaking country, you're exposed to the media, you can often travel to the U.S. quite easily. Once you start thinking about jumping on an airplane and going across an ocean, or spending six hours to go to a country where English is not the first language, it's a little more daunting.
More education where people understand that we can be successful, and that's why I think mentoring would be great. This would be where you have companies that are successful with exporting and doing business outside of the U.S. available. Like you said, one brand, one website, where companies can talk to the SMEs and ask what they did and how they were successful. That would help.
Senator Johnson: Why are we so shy in Canada?
Mr. Kalbfleisch: That's a good question. I think we're a humble country, and I don't think we want to conquer the world.
Senator Johnson: Just hockey.
Mr. Kalbfleisch: Just hockey.
Senator Johnson: We don't want to conquer the world, so how far can we get? Especially in your technologies we could do a lot.
Mr. Kalbfleisch: Absolutely. For us, we're competing against global companies, some based in China and some in the U.S. They're multi-billion-dollar companies and we're a lot smaller. We're able to compete because we provide a high-quality product, excellent feature set, we listen well to our customers and deliver what they want in a timely manner.
We focus on delivering what they need in a cost-efficient way, and delivering a high-quality product. I think most Canadian companies can do that. It's really educating people that we can compete globally. We have the brain power and we have the ability to produce good quality, high technology products and we can possibly be successful.
I think the financing thing is really people understanding financing the business, because it is risky. People are asking how they can go and finance the first transaction they may do in an international market, and I mean outside of the U.S. That's really educating people on what BDC offers, for example. I think they offer some great things in terms of eliminating a lot of the risks for Canadian businesses. That can help them become confident in taking that first step.
Senator Johnson: I want to know one more thing from both of you. Why do we not support more entrepreneurship? Or do you think we do in this country? It's also part of education, but I don't find a lot of young entrepreneurs I talk to — it's an incredible struggle in Canada to get your start-ups.
Mr. Kalbfleisch: Again, it's access to financing and venture capital. You can get easier access to venture capital in the U.S. than in Canada. Again, I think it's changing. As generations are changing we are seeing people being more entrepreneurial in spirit.
Not that there were not entrepreneurs before but I think with technology and making the world more global people are seeing that there are opportunities to come up with something innovative and want to start out and work for themselves and see the benefit of those efforts.
Senator Johnson: Thank you so much. Do you have anything to comment, Mr. Lynch?
Mr. Lynch: I will comment. Before I started this deposition, I wrote down "an entrepreneur is a malcontent.'' I know there are entrepreneurial courses to assist people who are truly entrepreneurial, but I don't know if it's something — you can't change the DNA of a person.
Senator Johnson: No, they are born.
Mr. Lynch: They need to be aggressive. They need to be able to step outside the box and be that individual. A good leader is one who lays down track for the rest of their business community or the rest of their culture to follow along and do a job.
As far as risk aversion goes, I think that Canadian entrepreneurs have all the tools they need, especially with EDC providing very good coverage for receivables insurance. The worst thing that can happen is you don't get paid, and if you can write that out of the equation and say "you will get your money,'' and not have that encourage an entrepreneur to go do business in another country, I don't know what will.
Senator Johnson: Thank you for your enlightening remarks, both of you.
The Chair: I have one comment about doing business other than in non-English-speaking areas, et cetera. As you work internationally, do either of you work with local partners? Is that one of the keys to doing international business?
Mr. Lynch: Yes. I think my partner here on screen will probably agree. There are many different channels to market. You can work through a distributor. You can work through an agent that you appoint, a manufacturer's agent or manufacturer's rep. However, one of the things we found that works well — and there is funding available for it too for the SME or the business to take advantage of — is to hire an export manager.
In our particular case, we were doing very little business in Latin America, but a few years ago we hired a young lady from Colombia who speaks the language and is very aggressive and was able to grow the business substantially, and I learned my lesson early.
When we do webinars in South America, we could have 20, 30 people online in Peru, Chile, Ecuador and Colombia, for instance, all from the same company but in different factions. I get on and I'd be ready to do my thing. I don't speak Spanish, but I learned quickly that they just want to hear "hello'' from me, and then I let the people who speak Spanish on my staff do the rest of the talking because that's all that's going to happen.
When we're dealing with companies in other countries, generally the principal may speak English, and it may be broken English, and maybe the 2IC, the second in command, may speak English. After that, forget it. All of the engineers and purchasing people want to speak in their mother tongue, and we need to have people in Canada who can answer the phone and be able to deal with the RFQs that arise.
Mr. Kalbfleisch: I would agree with what Mr. Lynch said as well, that you need local representation. The customers want someone local they can trust and talk to if there is a problem. Often in our business we need local support as well. If something breaks down, they need to be able to call someone to get support on the phone right away. We're selling to large telecommunication providers, and they want reliability in their network and can't afford for their equipment to be down. We have hired local sales reps in-country. We work with distributors. We have sales agents. If it is a market where we want a long-term presence, we may set up an office. We just set up a sales office in Mexico. I spoke to someone from América Móvil last week when I was in Mexico. It's critical to them that there's local support in the countries that they operate, and they don't want to do business with somebody that, as they said, is acting like a comet and flying into that country. Having that local support and someone who speaks the local language is critical to success.
The Chair: We have run out of time. One of the issues I wanted to pursue is the fact that we are investing and receiving through our universities and colleges and technical schools many students coming to Canada. What we lack is Canadian students going abroad to get that, perhaps, international understanding and experience, so perhaps that's for another time.
If there is anything you want to add to your testimony, please contact the clerk and add to it. We very much appreciate both of your comments as you're on the ground and reinforcing some of the issues we're dealing with.
(The committee adjourned.)