Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue 24 - Evidence - Meeting of April 1, 2015
OTTAWA, Wednesday, April 1, 2015
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:45 p.m. to examine such issues as may arise from time to time relating to foreign relations and international trade generally (topic: trade promotion).
Senator A. Raynell Andreychuk (Chair) in the chair.
[English]
The Chair: Honourable senators, it is 4:45. We have been delayed due to the house business and are now ready to proceed with the Standing Senate Committee on Foreign Affairs and International Trade.
Before we turn to our witnesses today, I should point out that the steering committee has been notified and have tentatively agreed that Mr. Adam Thompson will be seconded to another committee where the clerk had to leave for I think medical reasons for some time. Adam, being one of the seasoned clerks that we have here, was asked to fill in as there will be some major legislation going through there.
Adam, we thank you for the work that you have done. We understand you will be taking over another committee but will be returning.
What is your full title, Mr. Armitage?
Blair Armitage, Principal Clerk of Committees, Senate of Canada: I'm the Principal Clerk of Committees now.
The Chair: Mr. Armitage will be stepping in as a clerk to our committee. Mr. Armitage knows committee work and will get a firsthand view again. He will have a little refresher course on the job as our committee clerk, so thank you, Adam, and welcome to the committee, Blair. We will now turn to our witnesses.
We are examining today such issues as may arise from time to time relating to foreign relations and international trade generally. Our topic is trade promotion.
We have before us by video conference from TradeUp Capital Fund, Ms. Kati Suominen, Founder and CEO. And I understand you are in Los Angeles. We also have before us Ms. Rhonda Barnet, Vice President Finance from Steelworks Design Inc. in Peterborough.
We can all hear and see you and hope it will stay that way for the hour that we have with you. I would ask you to make any initial comments that you want in the order that you are listed on my agenda, and then we will turn to questions from the senators, so I will turn to Ms. Suominen from TradeUp Capital Fund to begin. Welcome to the committee.
Kati Suominen, Founder and CEO, TradeUp Capital Fund: Well, thank you very much. It is a great honour to appear and I very much appreciate the invitation.
I thought I could spend five minutes or so giving some ideas initially and going from there. I have done a lot of academic work on exporters as well as run my company that focuses on helping companies, emerging companies in particular, to access capital for exporting purposes. I am coming to this from a number of angles.
Let me say first of all that I think Canada, globally speaking and comparatively speaking, has done an excellent job with your trade initiatives. Not only have you completed a number of trade agreements for your companies and investors to access foreign markets, but you have done an excellent job with your Trade Commissioner Service and Export Development Canada, these two organizations that are very critical for helping Canadians, small and medium-sized companies in particular, to find global markets, finance their global expansion and so forth. I think there is a lot to celebrate and there's a very good basis to build upon.
There is, at the same time, a great deal of room to grow in Canada, both to expand the number of companies that export as well as to expand the export volume of the existing exporters. According to my numbers, only 4 per cent of Canadian companies export, and particularly the smaller companies, while they account for the majority of the number of exporters, still make up only the minority of the export volume, 45 per cent of Canadian exports. So there are both opportunities to grow the number of exporters that there are and to grow the export volumes.
Now, why does this matter? There is extensive academic research from around the world, including from Canada, that shows that companies that export outperform non-exporters by significant margins in productivity, in wages, in job creation, in stability and in resilience. So exporting is not only good for companies because companies that export diversify, scale and become more innovative as they encounter international opportunities, but it is also typically the better companies that become exporters to begin with. It is the go-getter companies, those that really want to grow that become exporters, so they are worthy to focus on and promote and support.
I would offer perhaps three areas where there may be some newer thinking that Canada might do or scale and expand on existing initiatives as the world changes, as the international marketplace changes, as the exporter changes, as technology changes.
Number one is that what companies often encounter is the tremendous complexity involved with exporting. For companies that have never exported, exporting is like starting a new business. It is a whole new set of capabilities that need to be marshalled, and for companies that want to expand, expanding to new products and markets is very complex. Surveys in Canada show that — finding partners, agents oversees, market opportunities, meeting product standards, complying with trade rules, you name it — there's an enormous list of issues companies have to consider. They often have trouble.
A couple of conceptual challenges are that companies often get information on these areas from different entities and different areas, so they have to piece it together. In addition, they often have very different needs. One company has very different needs from the next company. They're in different sectors, and they are in different stages. What governments have typically done is put together these one-stop shops where companies try to get everything that a government offers. Canada has done it through its global export workshops, where the different entities in Canada that support trade help companies to get the same information from all of these entities in one place. Singapore and the Czech Republic have done this as well in a very good way.
However, I would say that, if you were to think of new areas, one is for companies to learn from each other, this kind of peer-to-peer learning from companies that have done it, have exported successfully, are looking for international markets, have perhaps foreign partners and so forth. This is a very powerful way to learn and also to customize the export promotion activity to companies.
One initiative very much worth looking at is called connectamericas.com. It is run by the Inter-American Development Bank. I wouldn't be surprised if Canada has supported it in some ways. It is like a social network for exporters across the Latin America and Caribbean region to find contacts with each other, to network and to learn about new things in a very flexible fashion. They don't have to go to workshops. They can browse the Web. They can find the right information that they need for their purposes. The site is customized for every company.
So these are the new cutting edge areas where I think we can go beyond kind of catering boilerplate learning tools and packages for companies and kind of handing down information from the government to companies and rather have companies have a forum where they can interact and find the information themselves. You would be exceptionally well-positioned to do something like this.
There are a couple of other areas I would flag that are critical for Canadian companies to succeed at exporting. One is financing. So access to capital is absolutely critical for growth and export activities for companies of any size. Of course, for smaller companies, access to financing is always a larger challenge than it is for large companies. Now, companies need financing to fulfill large export orders — so there is a transactional element to it — and they need financing to expand their production capacity, maybe their manufacturing in Canada. They need bigger resources to perhaps buy new equipment, buy new factories, hire new staff to export more successfully. Finding this capital is time-consuming and hard. In surveys I have seen in the U.S., in the European Union and in the OECD, including Canada, companies say that access to capital is the number one constraint to their exports.
So this is something where efforts are critical. While a lot of export finance agencies, including Export Development Canada typically help companies to get a guarantee or guarantee their loans from a bank so that the bank is more predisposed to giving a company a loan, there are a couple of hurdles on the way, just to use this model only.
One hurdle is that a lot of companies today are so-called "born global" companies. They globalize when they start their business. They may be Internet businesses, software businesses, ecommerce businesses. When they start, they are already global.
Now, these companies don't have much collateral. They seldom meet banks' underwriting criteria. Yet, they may need capital. In these cases, companies need equity financing or some other type of longer-term bid financing, riskier financing, and here is where export finance agencies have typically lagged behind.
You have actually made very useful efforts, through Export Development Canada, to help companies to access equity financing, not only the small born-global companies necessarily but also companies that are more seasoned exporters that all of a sudden have this need for larger capital injections. These efforts could now be scaled and made perhaps more systematic. I think Canada has been a front-runner in this regard, and this is a very worthy effort to link Canadian companies to equity funds, venture capital funds, and perhaps for the government also to think about ways in which it can facilitate this longer-term financing to exporters, in addition to the bank financing that is being provided.
The final couple of areas I would flag are that a lot of export promotion and trade promotion, including in Canada, has focused on kind of the external aspects. How do I find foreign markets, and how do I find capital? What do I do out there? But exporting takes a lot of organizational capacity. It is very complex foreign business, and it affects strategy, product development, operations, distribution, marketing, sales, you name it. It requires a lot of organizational flexibility. According to a survey by Canadian Manufacturers and Exporters, 39 per cent of SMEs cited corporate organization and 31 per cent of SMEs cited lack of internal expertise as factors constraining their export expansion. These kind of internal capabilities, staff capabilities, over and over, not only in service in Canada but globally, come across as the key constraints for companies to do global business. Of course, export effort has to be driven by the CEO of a company, but there is a great need for kind of global trade management expertise across companies, across the different disciplines. So there's a need to train staff.
I would imagine that this would have to start even earlier, perhaps through certification programs, certificate programs at universities on global trade management or global trade compliance and things like that that expose executives across disciplines, even if they are in operations or marketing, to these intricacies of doing things globally.
Again, Canada could be a front-runner on this. Very little has been accomplished internationally, and, furthermore, there's a great opportunity to do this in a deeper way, also taking into account the idea that a lot of products are now sold online and that ecommerce is the way to go. Ecommerce companies that sell online tend to export. There's an incredible correlation between selling online and exporting, selling online through platforms like eBay and also export diversification. In the U.S, for instance, 1 per cent of companies export. Of companies that sell on eBay, 97 per cent of them export. Companies that export typically export to one or two countries. In Canada that market is typically the United States. However, companies on eBay regularly serve, even the smallest companies, 28 markets in the United States.
So this is a new area again where you need both the internal capabilities as well as the external capabilities for companies to take advantage of opportunities. It is not as simple as just putting your product online. It requires capacities like locating foreign customers and markets over the Internet; developing a marketing strategy using the Internet, social media and e-commerce platforms; search engine optimization; and branding, labelling and pricing products in cyberspace.
You go down the list and there are a number of idiosyncratic capabilities, and again, Canada would be extremely well positioned in its efforts to help companies understand exporting in its efforts to help companies build internal capabilities to exporting to take advantage of this particular angle of e-commerce and to be a front-runner globally in helping companies use online tools, not only to learn about exporting but actually doing it.
Thank you very much.
The Chair: Thank you. Now, we will turn to Ms. Rhonda Barnet, Vice President Finance of Steelworks Design Inc.
Rhonda Barnet, Vice President Finance, Steelworks Design Inc.: Thank you, Madam Chair and senators for inviting me. This is my first time presenting before a standing committee of the Senate, and I'm very grateful for the opportunity.
Today I'm hoping to enlighten you as to some of the issues that my colleague has talked about. I am the target SME and I have lived through many of these scenarios and wish today to relate some firsthand experience of what it is like to grow your company in Canada.
My company is Steelworks Design. We're an engineering firm specializing in the design and fabrication of custom machinery and equipment for manufacturers around the globe. We're a very small facility in the city of Peterborough and employ 27 skilled trades and engineers, so high-value jobs in Canada. Our customers are primarily large multinationals like GE, Siemens, Rolls-Royce and Honda.
We talked about CME earlier. I also have the privilege of sitting on the National Board of the Canadian Manufacturers & Exporters. I sit there to represent the needs of small manufacturers.
So as an advocate of SMEs in the sector, I've had the opportunity to meet with many federal cabinet ministers to discuss the needs and challenges of Canadian SMEs in the sector. I've also had the privilege to attend two recent trade missions with the Prime Minister. Last March I was in the Netherlands and in November I was in China with the Prime Minister.
I really believe that trade missions open doors to opportunities that small companies like mine would otherwise never see. Attending federal trade missions has opened my eyes to all of the world-class support that the Canadian government has put in place.
Let me start today by saying that I'm joining you via video conference from GE large motors in Peterborough. GE Canada has played a strong role in the export success of my company. Having been very successful providing custom equipment to this Peterborough plant here, our firm has been offered opportunities to meet buyers from other GE facilities around the world.
Now I know that GE is one of only a handful of multi-nationals that EDC has something called a reciprocal protocol where EDC provides support to GE around the world and helps open doors for them and then GE in Canada works to include Canadian SMEs in their global supply chains. And I'm one of those companies. Because of EDC's work in this area combined with my local success in this GE plant, my firm now works for five divisions of GE around the globe.
Historically steel works exports have run around 20 per cent of annual sales. Our company has been teetering below the $2 million market sales for seven years, and we're 13 years old. Now that story is changing.
I'm here to talk to you and represent today what's going on in the EDC mentorship program that Steelworks has been afforded the opportunity to take part. Recently we engaged in the mentorship program at EDC to support growth in our export sales. In this fiscal year, which we're just about to close, May 31, our sales have risen to $2.5 million, and of that, 50 per cent is now export sales. We're now tracking to be a $5 million firm in the next 24 months through our export growth.
These immediate results in our growth are a direct result of the dedicated mentorship we've received from EDC. This year our firm engaged BDC — so I want to talk about the various federal programs that we're involved in — consulting services to help our firm strategically design our sales process. Up until now, really, our export sales have happened by default because we work with multi-nationals, we get maybe invited to talk to someone, so we've never actually gone out and used a cold call to approach these guys. Now we're trying to design a system with the support of BDC and EDC where we have a plan and we design our sales in export and we execute on that. We really believe now with this combined effort that the sky is the limit for this company.
This year Steelworks Design was supported within the mentorship program by GE Canada, employees from the facility here, EDC and CME, and the trade commissioner's office to make a sales trip to Mexico. Our firm has identified Mexico as an area of interest within the program.
In Mexico there are 27 GE plants. We visited three in the power conversion division last August. During this trip, the trade commissioner, EDC and CME set up many one-on-one meetings to educate our firm in the business culture and to open doors to give us the support we would need to be successful in the region.
With the support of EDC, our firm is now putting together a very formal export plan for entry into Mexico, so really we're taking the time to set up a strategic plan on how we will go and service those clients.
The next challenge for an SME like Steelworks entering Mexico and other markets is pretty simple. A small company lacks the expertise, the resources and the finances to fully leverage the opportunities that exist, and certainly my colleague talked about those points. We're a living witness of that.
Our firm leverages the services and funding of EDC, BDC, DFATD, CME and programs like SR&ED. We fully leverage those, and as an owner of a small firm, your time is always split between developing these opportunities and running your existing business, and rarely does an entrepreneur have background in international trade. I believe you touched on that as well.
I feel for next steps the greatest asset the government could provide a firm like mine would be access to that talent. I would suggest an export manager or a senior specialist within my firm and we have access to affordable talent — ideally, also for a significant period of time. The Ontario government recently launched a similar program, I think about a year ago, but it's not received any additional funding. When I went to apply to this, the program was closed. I don't know if it will be re-funded.
As a federal initiative this could be the most bang for your buck, a grant to fund 50 per cent of a senior export manager or business liaison for, say, up to two years. That's what the Ontario program was. So they would grant up to $80,000 over two years towards this person's salary at a 50 per cent rate. The idea would be that the senior person would come into a small company and help set up and actually implement the increased export activity. This would provide significant impact to SMEs like Steelworks and provide the expertise and resources to actually act on the opportunities that are out there in the global marketplace.
In my work with CME at the national level, as my colleague mentioned, there are only about 40,000 companies out of 1.1 million exporting on a regular basis. So why is this? Part of this is not recognizing the opportunity; another is not having the resources or time — that's certainly my challenge — or seeing it as an immediate priority for their business. Another is not having a product that is export ready or a capacity that can handle increased volumes and the supply chain requirements. Part of the problem is not knowing how to do it.
Government and other services can help here and certainly they are. Mentorships, networking and market intel are all very important. Funding for new product development and scale-up is important. Increased working capital is key.
AR insurance is essential for success through EDC, and access to affordable specialized talent is the next key ingredient as you really try to engage in this process and become a true exporter.
BDC, I believe they're doing a great job. They're providing secured and unsecured financing. My company has been a beneficiary of that kind of financing for foreign investment and market expansion. EDC can help SMEs manage the transaction and currency risk through some of their insurance programs and to leverage more operating funds with the chartered banks.
I think the one challenge here, and my colleague talked about it, is that quite often the chartered banks really are not fully leveraging the programs that are there. There is work to be done. I've actually talked to the Prime Minister about it. I'm not sure where to go with it, but we need to get chartered banks on side with fully leveraging the programs that are out there that the government has put in place.
We have trade commissioners and EDC that can speak to the opportunities. There are endless opportunities for Canadians, which I have in front of me. EDC now provides this strategic mentorship to SMEs.
When I talk about SMART, it's a great program in Ontario. I would like to see if that program could go across Canada to help SMEs make the necessary investments in their business to be export ready. We need small programs for small companies to be doing those much-needed investments.
The government has also announced new funding to help SMEs with Go Global, helping them participate in trade missions and develop an international export business plan, et cetera. There is a lot being done, and certainly there are areas where we could do more.
I think Canada has never been in a better position to support and empower businesses of all sizes, but never before has there been so much focus on opportunity for SMEs wanting to grow through access to export markets. I see it; I feel it. SMEs have become a growth engine for Canadian exports, and any help the government can offer to support investment and mentor the companies wanting to enter new markets will certainly pay long-term dividends to the country.
BDC, EDC, DFATD and even organizations like CME are doing a tremendous job supporting small business growth in export markets, and given the government's new funding that the Prime Minister announced, I believe two weeks ago, to help SMEs, obviously more can be done. I hope that by relating some of my personal experience you gained relevant insight into the life of an SME and how you might be able to help in future programming. I look forward to answering questions. Thanks.
The Chair: Thank you. Both of you have certainly put a lot on the table. I don't know if you have talked to each other, but you certainly have complemented each other on some of the issues we're grappling with. I thank you for your submissions.
[Translation]
Senator Fortin-Duplessis: Let me congratulate both of you on your interesting presentations.
Ms. Suominen, you have in-depth expertise in international trade, trade finance and corporate globalization. You are also in charge of a project sponsored by eBay as a catalyst for the presence of small exporters online, which you actually said is the way of the future. Based on your experience, could you tell us what challenges you foresee with this new type of commercial activity, when companies turn to e-commerce. I will ask you other related questions afterwards.
[English]
Ms. Suominen: Thank you very much. First of all, just to underscore that if a company seeks to sell products and services online, that is a very powerful way for the company to grow through export. The majority of companies that have online stores, that sell on online platforms, that use the Internet to sell internationally, as well as domestically, typically also sell internationally. There is a very high correlation between selling online and exporting.
Why is this? Part of the reason is that when you are visible online to global customers they find you more easily. This is a very typical pattern, where a Canadian company may sell on, say, the eBay platform and a buyer in Korea or in Chile or France finds them and they become an exporter by accident. This happens over and over, and the numbers are staggering.
For instance, in the United States, the smallest 10 per cent of online sellers on eBay export to 28 different global markets. They may not have pursued those markets strategically. They may have accidently been discovered.
Online commerce basically limits the distance that has hampered trade for centuries between countries. When buyers and sellers are far apart, they lack information on each other. They lack visibility into each other's products. It's hard for them to trust each other, so when you have online tools, it's so much easier. You have payment systems, you have trust signals there — have you received five stars from your other buyers? It is a wonderful tool. But I have yet to see systematic efforts by most export promotion agencies globally to help companies sell online and to realize also that this is a wonderful way to sell products and services and this is the future way.
When we look at the millennials, the people now in their 20s and 30s, they use everything. They live online. They find products online. They interact online, so the future generation is all about online. If you're not an online seller in Canada, you will lose out big time. It's a great trade opportunity that's wasted.
If you think about the challenges for growing online trade, whether you're selling products and services, you still have to go through the same hoops, if you will, as would a traditional brick and mortar seller.
You need to find foreign customers. You need to develop a web-based marketing strategy. You need to understand how social media can be leveraged. You have to understand what e-commerce platforms are out there and what they do. You have to optimize your branding, your labelling, your pricing of products for foreign customers. You have to translate your websites for foreign languages. You have to understand how to create a multi-channel export strategy or shopper strategy where you're not selling just through one channel but you're selling through a number of ways online to reach different kinds of customers, reach customers on their mobiles, their iPads, on their iPhones, on their laptops, establish relationships with local e-commerce platforms. For instance, if you want to sell online to China, you have to understand something about Tmall and Alibaba and things like that.
There's a whole new area of capabilities that companies have to master if they are to sell online. It can be as simple as putting a product online on eBay and accidently getting an order from Mexico or the United States when somebody finds you. If you want to keep up with global competition and you want to do this strategically going forward, when every company around the world is now selling more and more online, that requires a lot of expertise that I believe most export promotion agencies have yet to cater to companies and help companies with. I know some examples in Korea, in El Salvador, in some advanced economies where this has been done — India also — very successfully, so I would encourage Canada to look at some of those models.
If there is one single bullet in my research that I found to exporting, it is selling online. It is absolutely magnificent what it can do to companies to scale and diversify internationally.
[Translation]
Senator Fortin-Duplessis: Could you briefly just tell me whether you have identified any dangers or disadvantages in e-commerce? You said that it is the way of the future and that SMEs can be very successful when they do business online. However, have you noticed any dangers or disadvantages?
[English]
Ms. Suominen: That's an interesting question. I don't necessarily sell online myself. I help companies raise capital online for export-related purposes. I haven't come across this myself. There are always issues related to what one finds in surveys in both advanced and emerging markets, for instance, the security of online payments. Some customers are globally more hesitant to provide their information to the seller and use these online tools. Perhaps there is something to that effect. When companies have used online tools to raise capital from investors whether or not they export, of course there have been incidents of fraud. Fraudulent companies have posted angels there.
Overall, I think there are certain risks that need to be managed and there are traditional risks, as well. That is, do you comply with the foreign export or the trade rules, and so forth? There are a number of standard export issues that need to be managed. One also has to manage the information that you put out there. That is, how you manage your security, the company's cybersecurity and information. Those are risk management techniques and you always have to use them, but you have to use them domestically as well.
The Chair: I'll now turn to Senator Johnson.
Senator Johnson: Good afternoon, and thank you for appearing before our committee today.
Ms. Suominen, you were saying in your opening remarks that Canada is good with the EDC and trade relations. I know we're aggressively supporting trade promotion similar to the U.S., the U.K. and Germany. Where do these efforts on behalf of government fall short in your view?
Ms. Suominen: That's a very good question. Maybe my colleague can also answer this since she has been intimately involved. I'm by no means an expert on Canadian export promotion per se so I need to put a couple of footnotes there before I answer.
I think Canada has had thoughtful export promotion campaigns and has provided a number of support mechanisms through different agencies, so I think there is a lot to celebrate. A lot may be about scaling some critical efforts further, for instance the idea of companies needing longer term capital that banks may not be able to provide or wish to provide — that is, equity financing, which you have already done. This could be systematically scaled further. There are other ways to do that. In light of the evolution in the international trade markets, there is the idea of using online tools to train companies at scale so that companies don't have to come to workshops or sit in seminars. They can access the right information when they need it and do it online, from their offices. This can be helpful as well.
My colleague talked about providing staff capabilities. This is more of a cross-cutting issue. When Canada engages in large companies and in small companies through any way with international markets, how do we make sure that the companies have adequate human capacities to do global business, are comfortable with international markets and understand their function as an international function, not only as with domestic sales but also in a global sales role? There seems to be a lack of bandwidth in a number of markets in this area, including the United States, where the staff capabilities are critical.
As an overarching theme here, what I have found in both research and surveys from around the world, including in the United States and probably in Canada — though I'm not intimately aware of a specific publication — is that it tends to be the case across OECD nations that companies lack awareness about all the good that governments are doing. My colleagues here have navigated their way through the Canadian government and figured out who provides what, where the financing can be obtained, where the grants can be pulled and who is supporting trade missions, and so on. However, most companies do not know. They do not understand that the government is there to provide all those capabilities. Our banks don't know that the government provides credit enhancements and loan guarantees. There is a great deal of education to be done and, again, this should be done by seasoned marketing people who actually know how to get to the client. It's a tough client to get to because small businesses are a fragmented market and you have 1 million of them. How do you get to all of them? It's a big challenge but it is one faced by export promotion agencies and governments in the United States, the U.K., and I would imagine also in Canada.
There is a great deal of lack of awareness in the U.S. Less than 10 per cent of banks understand what government tools are available. They are the ones that interface with SMEs. This education and marketing is very important, particularly for a country like Canada that has world-class capabilities to help exporters.
Senator Johnson: Ms. Barnet, do you want to comment as well?
Ms. Barnet: I agree wholeheartedly with everything my colleague has said there. Certainly, my experience is somewhat unique. We have been very successful. In my region it has been fairly easy to navigate and understand what is available. I think I heard through the CME and through other SMEs that they don't find the programs accessible. I think EDC and BDC are working hard to be more accessible, but this is a big country and they have regional presence. Organizations like Canadian manufacturers are partnering with EDC to promote what's going on and how they can help, but I think a lot more has to be done.
In previous transcripts, I saw this sort of concierge desk notion or one point of contact so that we know what all the programs are that a small business could be involved with. We go to our chartered banks, our lawyers and our accountants locally, and even they don't know all of this. We have to start educating the professionals in the region so that they can educate their clients, the SMEs.
Senator Johnson: There is obviously a lot of work to be done in this respect. I have one more question for Ms. Suominen.
I extend my congratulations to you because in 2012 you were chosen as a cohort of a highly selective global promoter of women entrepreneurs, with only 11 other business leaders. Would you please tell me about your experience with the organization and what women are bringing to the entrepreneurship in the group you're now working with or part of there? I'm absolutely riveted to find out about this.
Ms. Suominen: Thank you. That's an interesting question. I don't tend to think so much in gender terms.
Senator Johnson: You have to sometimes.
Ms. Suominen: There are certain things that I think connect nicely with the topic of the day. I'm also on the board of a non-governmental organization out of Chicago called Women Entrepreneurs Grow Global. It's aimed at women entrepreneurs to expand their horizons internationally.
More academically speaking, I have found that women often times bring different capabilities to business than men. They may see other things. They are a different customer segment all together so they have an innate feel for certain issues in business that men may have just because they consume different products and think about different things, and so forth.
I have found very interesting research that, when you have women as board members in companies and women as part of the management team, those companies tend to do much better, and there is empirical evidence that scholars are putting out that shows exactly this.
Now, there is also some empirical evidence emerging that women entrepreneurs tend to do quite well in the international context, for whatever reason. Maybe it is because of being culturally more attuned or whatnot. I do not know. I'm not an expert on this, but it is interesting for me, as an academic, to observe that some of these findings are now coming out there and that there are a lot of opportunities where, maybe, being a woman is somehow advantageous to doing global business and so forth.
At the same time, as we all have seen, at least in the United States, a lot of the venture capital and a lot of their support systems are still quite heavily oriented to male-run companies. Of course, those are the majority of companies as well, so one can't say that there is discrimination or anything like that. Nonetheless, these kinds of programs like ASTIA, which give women exposure to global business leaders, give the right tools, are very practical and pragmatic, are very worthy, particularly as they are not too high cost. So, again, I would not make a big difference between men and women in business. I think we need both, but there is some interesting evidence that tells me that it could be worthy also to support women as business leaders, as companies globalize.
Senator Johnson: That's excellent. Thank you. I'm very interested in the international aspect and could go on, but I know the chair will cut me off soon. So thank you both very much.
The Chair: That was a good anticipation, thank you. If you want a second round, I can put you on that.
Senator D. Smith: I have a question for Ms. Barnet. I have to say, I'm very intrigued by the fact that you are coming to us from the big GE plant in Peterborough because, in recent years, not all of the big industrial plants in Ontario have survived. I know there are all sorts of question marks at the moment about GM's operations in Oshawa. I hope they get solved, but there are a lot of questions about it.
I am quite intrigued because that GE plant, by my recollection, back in its prime in the late 1950s and 1960s, had close to around 4,000 employees there. Now, you have got these 27 trade and engineer specialists, with clients like Honda, Siemens and clients like that. What intrigues me is the extent to which high-tech boutique operations can work hand in hand with sort of a big manufacturing thing, like the GE plant. I'm curious how many are still working there. I'm sure it is nothing like 4,000. But it may be sort of a combination where both survive. In other words, you have a big manufacturing plant that can do a lot of stuff that you don't necessarily, but then you have got these little specialists. I think maybe you get what I'm curious about because, in Ontario, in particular, where manufacturing has been challenged in recent years, my impression is that, where you have a combination of operators that can benefit and work with the manufacturer, both can maybe do well. Maybe you can just comment on whether I'm dreaming or whether there's a point here.
Ms. Barnet: I absolutely agree, and it's certainly our experience in how we've grown our company. I've lived in Peterborough my whole life. I saw GE at its height, and I think they were even close to 5,000 employees back in the late 1970s. Right now — I just saw the board today — there are 982 employees at GE Peterborough; they're all very highly skilled jobs, though. I think any of the jobs that have been lost or moved were more the low-tech jobs. There are very highly skilled jobs here. There are two divisions of GE. There's GE Power that makes large motors and GE Hitachi that makes tooling and fuel for nuclear reactors. So there's a very high-tech hub of manufacturing now in Peterborough. We have Rolls-Royce, Siemens, General Electric here. It was often coined as being the electric city. Peterborough is still alive and well. Certainly, in Canadian Manufacturers and Exporters, I work alongside the multinationals and at the board level, and I have grown to understand that there's probably not any new investment that multinationals will be making into Canada. But I don't see them taking away what they have. In Peterborough, this is an original Edison plant, and Elyse Allan, the President of GE, is very fond of this plant and making new product lines available to this plant year after year. So I think it is really great and exciting.
Yes, they have changed their focus. They do all the high-tech stuff, and they do a lot of outsourcing. So does Rolls-Royce. We work in marine and nuclear divisions of Rolls-Royce. They do the front-end engineering and get some support with that, and they do assemblies. All of that middle stuff now gets outsourced to companies like mine, locally, to do. I think it's a great synergy. That's why we're seeing this uptake in the number.
Senator D. Smith: Are you unique, or are there a number of boutique companies that do well, in part because they're able to work closely with the big manufacturers like GE?
Ms. Barnet: I think we are unique in that we have the engineering capabilities. Most companies like mine would have a design office and maybe have some technologists working for them doing design, but we actually have a solid engineering firm. That's why we get the attention of a company like General Electric or Siemens or Rolls-Royce. They really buy into that. It is a big investment for us. We have to find the work and find the customers to have this heavy team. We've had great success.
Senator D. Smith: My final question is: Did you go to PCVS or Adam Scott?
Ms. Barnet: Thomas A. Stewart.
Senator D. Smith: Okay. My daughter graduated from Trent.
Senator Cordy: Thank you to both of you. You've certainly presented the committee with a lot of very helpful information about small and medium-size enterprises, and, certainly, it is always nice to see the successes in our country. You both spoke about the challenges for small and medium enterprises in terms of foreign trade, and, Ms. Suominen, you spoke about the complexities of exporting, that, in some ways, it is almost like starting up your company all over again because of what you have. Ms. Barnet, you spoke about the challenges that a small or medium-size company have because you may lack the expertise for foreign trade or, in fact, just have the time challenges. You are sort of running on fewer personnel than the very large company. So you have a foot in both places trying to expand and trade internationally, while at the same time making sure that your business is holding the line.
As to some of the things that you came forward with, you spoke about an export manager, Ms. Barnet. I wonder if you could expand on that. I thought you said it would be somebody who would come into your business. You did say that somebody in your business would have a person that they could phone for information. I thought you then said that they would come into your business. I'm wondering if I misheard you. I wonder if you could just expand on that export manager scenario.
Ms. Barnet: Sure. No, exactly. What is really missing in my organization — and speaking to my colleagues around the country — is just access to in-house expertise to grow your business. We're working and finding the opportunities with EDC, and we're able to mostly fund them and do all of these activities. But, when you're running a small company, with your bottom line, there's not much left over. You are always reinvesting the money that you have back into the business, and you are trying to show some profit so that you can borrow more money. It is a Catch-22 all the time to show enough profit to borrow more money but to invest enough back in that you've spent the right amount.
So trying to make strategic investments is really hard for an SME. I think one of the things that we have to invest in is the expertise in international trade if we could come up with a program that could offset some of those initial costs, at least. I think this can't be a junior person. I think it has to be a more senior person who will come in and really take advantage of the opportunities that you have and help you to leverage them actually, so feet on the ground.
Senator Cordy: The expertise in international trade would be at the federal government level, who could provide you with the expertise?
Ms. Barnet: No, I see this like the youth internship programs. I'm going to hire a person, and the government will offset some of those costs for the first year or two.
Senator Cordy: That makes sense because when I was taking notes, I thought it would not be possible to have a government person go into all businesses. I understand now that there would be funding available so you could bring somebody in short term. That sounds like a great idea.
One thing we heard over and over, and again today, is about one-stop shopping or the one point of contact — almost like the Service Canada model. A lot of government agencies or departments have an interest in areas of expertise at providing services to small and medium businesses, and others have suggested the same kind of thing. What model would you see working so that you are not making 50 phone calls or trying to meet with 15 different people?
Ms. Barnet: It has to be a third party that the government chooses. Maybe something like the Canadian Chamber of Commerce or Canadian Manufacturers & Exporters or Importers and Exporters Canada will sort of make that concierge desk, that one point, where SMEs can come in, see the programs and where they fit — SMEs running a program specific to manufacturers. Maybe just a bunch of those organizations need to work together to create this unified front for SMEs to show how they can manoeuvre through and the people they should contact. Some regions, like mine in Peterborough, have really good economic development groups that have formalized that. Even in bigger cities, small companies don't know where to go to access that.
The Chair: I have a couple of questions. We are going to try to pull a report together. We hear the recurring themes of the need for education and awareness out and the need to be able to reach out to these programs and support systems. I don't know if it's a pilot project or whether it is embedded but recently the government put some trade officers into associations on the basis that small, medium and large companies will reach out to the manufacturers association or what have you, and the trade person would be right there working hand-in-hand with them to give this information and support. Is that one way of doing a concierge service on the ground that would be more accessible to businesses to be able to move forward as opposed to just getting information?
Ms. Barnet: Absolutely. That's a good model. Most SMEs belong to at least one vertical or horizontal group. If you could pick a handful of them that represent the bulk of SMEs, it is a great approach, actually.
One point on your topic that I thought I would bring to your attention, something as simple as the BDC. There's still a perception among Canadians SMEs that the Business Development Bank of Canada is the bank of last choice or however they used to describe it 20 years ago. It is nowhere near that. It is the most amazing tool that I have in my business. The government has to get out in front of that and let businesses know what BDC does and who they are and have testimonials from companies like mine to show BDC in the 21st century. There's a lot of old messaging out there.
Ms. Suominen: Just to second my colleague's observations, I think this is a wonderful initiative, having associations with this point person that several companies in the sector or vertical or industry can approach for their specific needs. It is a wonderful idea. Furthermore, if one can have some capabilities within a company, of course that is even better to assist companies in the long run with their specific export needs. I would imagine that a point person would be spread quite thin at the end of the day. It is a great initiative, but you could also help company-by-company with a kind of case management deeply embedded in companies across Canada that would be even better, of course.
The Chair: We have heard a lot about the fact that Canadian companies seem to be more risk averse than perhaps some other countries, and then you add the layer of small and medium companies that don't have the capability of a larger company. Is it a fair assessment, Ms. Barnet, to say that Canadian companies are more risk averse, taking aside eBay, which is the new entrepreneur a different way? In the traditional sectors that we work with, whether they're agriculture or manufacturing, did you find that you were more hesitant to go overseas or did your company propel you to go overseas? In other words, do you start at home and move out or is it the concept you have that will drive you overseas? It is not a growth factor but a commodity factor or a service factor that drives you overseas.
Ms. Barnet: Canadian companies are, for the most part, risk averse and our financial institutions echo that. It is culturally biased and we have to work against that. The Prime Minister is really trying to encourage companies to take more risks in setting up programs. For one example, all of my export until now has happened by default. Because I work domestically and I'm successful, another GE or Siemens company would like to buy the same product, so I get introduced and make that sale. I haven't done very much to foster that.
I talked to the President of EDC a few weeks ago about our success in GE. He said, "Well, why don't you just go and talk to the President of Siemens Canada and get in their global supply chain?" I never thought to ask that as I work in the Canadian chain. We now have EDC doing this mentorship program and lots of high-level government officials pushing Canadian companies to think differently. It is going to have to come from the government making this push and encouraging companies to think differently.
We will do it and we can see the successes. For American companies, their banking system is more in tune with the risks they take. We have to align the systems and BDC will allow Canadian companies to make more risks. We need to take more risks to get into markets. It is a scary thing to go into a foreign country. When I look at Mexico, I see crime and drugs. It is a new thing for me to think about in terms of how I execute in my business. Yes, we're risk averse and we need to do more.
Ms. Suominen: I can't comment on the mentality, but let me just say there's a reason that so few companies typically export. If they have a large domestic market or in your case you kind of have also the U.S. market, you don't necessarily have the need to expand internationally immediately. The case is very different if you are like I am from a small country originally. I'm Finnish and we have a very small domestic market. It's very limited, and you are bound to export or you will wither, basically.
Statistics internationally show that in America, 1 per cent of companies export; in Canada, 4 per cent; and in Mexico, 6 per cent. In the smaller countries, Chile is at 18 per cent; and Jamaica and the Caribbean islands are at 25 per cent to 30 per cent. Still a minority, but it is correlated to the size of the economy.
I would ask: Why are companies risk-averse? They are risk-averse because they do not see what the return on investment. What is the return for me to start this export journey? I don't understand what the markets look like. I don't understand how my product will work overseas. This is the very typical hurdle I see in America. They have world-class technologies like you do, world-class companies, extremely well run, but the company doesn't know how its product will fly and succeed internationally.
We need to tell companies about specific products and specific markets and show them in a very accessible way, rather than through 30- or 40-page reports on a given market or a given product, a very accessible quick fashion that these are great market opportunities for this particular product in these markets. Furthermore, if we can show a peer company that has succeeded in this way, that the company next door did it and expanded as a result by X per cent, this is a powerful way to drive it home and show that there is a return on the investment.
Companies that see that, as my colleague's company has now seen it, get it, and then they go and expand further and further. They see that it wasn't so scary. They see that there is opportunity. I see this all the time in the U.S., and I think it is just a matter of showing there is return on investment.
The Chair: That is the note we will end on, the return on investment, and perhaps that will be echoed in our report.
I want to thank both of you for being present today and for waiting because we had a vote in the chamber. Your input has been extremely valuable and I hope that this experience will be profitable to you. We have hopefully had you think about how you can contribute your expertise to some other would-be entrepreneurs in the international scene as I believe we are being televised and your words will go out across Canada.
Senators, we are adjourned.
(The committee adjourned.)