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Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade

Issue 3 - Evidence - Meeting of February 6, 2008


OTTAWA, Wednesday, February 6, 2008

The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:05 p.m. to examine such issues as may arise from time to time relating to roreign relations generally.

Senator Consiglio Di Nino (Chair) in the chair.

[English]

The Chair: Colleagues, I see a quorum. I call this meeting of the Standing Senate Committee on Foreign Affairs and International Trade to order.

I welcome you all to the meeting. This committee is currently examining the emerging economic influence of China, India and Russia, and Canada's policy response.

We are happy to have with us today George Haynal, Vice President, Government Affairs, Bombardier Inc. He is a former Canadian diplomat and public servant.

[Translation]

Welcome to the Senate. I invite Mr. Haynal to make some remarks, then we will proceed to questions and answers.

George Haynal, Vice-President, Government Affairs, Bombardier Inc.: Thank you, Mr. Chair. I am well aware of the honour you have accorded me in asking me to come here to discuss a very important matter.

[English]

I will make my presentation in English and be open to any questions that you may have.

I have provided some information on Bombardier ahead of time. Perhaps it was not sufficiently in advance, but it is a quick read. I am sure many of you are very familiar with the company, perhaps even better than I am.

By way of introduction, Bombardier makes trains and planes. We have two units — Bombardier Aerospace is headquartered in Canada with operations in the Montreal area and Toronto and has suppliers across the country; Bombardier Transportation is headquartered in Berlin. Our aerospace group is the third-largest manufacturer of civil aircraft in the world; and Bombardier Transportation, less known in Canada, is the largest manufacturer of rolling stock in the world. As I said, Bombardier Transportation's activities are less prominent in Canada than elsewhere.

Everything we sell from Canada is in U.S. dollars because the aerospace market works in U.S. dollars. That represents its own challenges these days. In rail, we sell in what are often protected markets in national currencies around the world.

We are proudly Canadian and to remain that, paradoxically, we have to be global. Indeed, to remain in business we have to be global, agile and not shy of risk. This company has faced its own challenges in global markets over the years.

Our revenues are about $16 billion a year. That number looks large, but in comparison with our competitors, we are not that big. Most of our competitors in both aerospace and rail are tantamount to national champions in other jurisdictions. The question of how to succeed in this environment is an interesting one, and one that we ask ourselves every day. In a generic fashion, it is a question that Ms. Mandel-Campbell posed in her book Why Mexicans Don't Drink Molson. I found it fascinating that that book contained nothing about Bombardier, because if ever there were an exemplar of what she was looking for in terms of entrepreneurship and otherwise, we are it.

Since she would not tell you, allow me to outline five indicators of how we stay in business. We invest massively in innovation, because in both of our businesses, the first technology is a determining technology for markets. We are meticulous in production, productivity and organization because the bottom line is dictated by efficiency as much as by the price that you are able to charge for your products.

We are uniquely multicultural in our makeup and truly global in our structures. I indicated to you how the company is situated in terms of even its head offices. We partner extensively with others to leverage the power and capacity that we do not have in these enormous global markets.

A strategic vision that has driven this business since its inception has been a key to its success.

The key to all of these dimensions of being successful is engaging with what I will call the ``newly centric economies,'' if I may use that neologism, countries that abandoned archaic models of economic development in the course of the 1980s and are now assuming an ever-increasing role in the world economy. Among these newly centric economies of the world are the three giant hybrid economies that we group as the BRIC — Brazil, Russia, India and China — the ones on which your particular attention is focused today.

Bombardier operates in all four of the BRIC countries. We regard them as key to our future, but they are not the only ones. There are many other newly centric economies that are prospering and becoming parts of global supply and value chains. We have extensive partnerships in many of these in Europe, Asia and the Americas.

The BRIC matters enormously to us in a particular fashion. They are all extremely large, and they have a huge suppressed demand for what we make. Because of the lag between their infrastructure and their pace of economic development, their infrastructure and transportation infrastructure situation is often disastrously short of what it needs to be.

To put it positively, however, they have a chance to leapfrog technological development in this area in a way that will enable them to do economic development in a fashion that is less stressful to the environment than perhaps we and others who rely so much on road transportation have been.

They are, in short, to cut to the chase, investing massively in air and rail transportation. They are important markets for us, but they are not only markets; they are also partners. To be clear on this, they are also potential and actual competitors to us in a number of our businesses.

These are also difficult and challenging environments, as promising and exciting as they are, because in a number of cases they are protectionist on the short term insofar as is consistent with their international obligations. They are that way because — perhaps I will say it right now — what to us appears to be ``business'' is in all cases to them ``economic development.'' The transactions are always coloured by a national agenda, if I can put it that way, to the degree that the state gets involved, which is often.

Each of these countries is, therefore, complex in its own way, not just in this context but in many others, and the balance in our relationships with each one of them is unique.

One thing is common to all of them, and that was the point I just made, that is, to them what appears to us to be ``business'' is a matter of ``national development.'' Everything has a context beyond the immediate.

Perhaps that is enough about the company. Your question was more addressed to how Canada as a whole and all of us together can adapt and succeed in this new environment — a world order in which new participants are taking an increasingly central place.

Unlike a corporation, which may seem complex seen from the inside, a country's challenges are infinitely more complex. I hesitate, in all humility, to provide prescriptions. Among other things, a country is not mobile, unlike a corporation. Its stakeholders are its citizens and taxpayers.

What is required? If I may make some observations, again realizing that my perspective is limited, let me make a few comments on what may constitute parts of an agenda in terms of ensuring Canada's success in this new environment of these global hybrid economies and their dominance in the world economy.

One that we have had experience with is the need for some higher level or intense sensitivity to the challenges that each of these economies and societies face as we engage them. Engaging them is essential, I believe, to our interests because the rules that they adapt and the forms of governance that they pursue in the world will have a direct effect on how we manage our affairs at home. That would be one area for discussion.

Engagement does not mean acceptance, but it allows one to shape agendas and behaviour constructively. There is evidence that it works, if not immediately but over time.

It is also important to put ourselves in perspective. Ours is a relatively small country. We are enormously rich, but we are a jurisdiction of 32 million people or so. We have an economy that is large but one that, looked at in global terms, is not that large. For us to be able to sustain the level of prosperity and the standard of living that Canadians expect is not something that will be handed to us.

When we engage with these large new economies, we must do it with a sense of purpose, a sense of proportion and a sense of what it is that we can obtain from those relationships.

It is extremely important in that context that our jurisdictional issues not interfere with our capacity to act as one unit in the world. A small jurisdiction like our own faced with a population of 1.2 or 1.3 billion has a great challenge in pulling together in its sense of purpose and engagement.

In practical terms, so many important things could be done and are being done. In previous testimony, people have talked to you about the need for a more consistent foreign representation. From our point of view, this is intensely important in distant economies rather than the United States where Canadian companies are comfortable, perhaps too comfortable. The capacity to create disintermediated networks — in other words, where principals talk to principals rather than requiring the intermediation of government agencies and others — is also an important thing to develop.

Policy capacity to help us harness the energy of these new giant economies rather than simply coping with them is also extremely important. In terms of capital investments, the large sovereign funds that are run not just by these but also by other countries could be an important source of investment in our own national priorities such as infrastructure. Of course, ensuring their participation with us in global value chains is also a critical and complex one.

The formation of a workforce in Canada that is globally mobile and globally excellent is also absolutely critical. Looked at from the point of view of our company, we face many challenges in human resource terms especially now when we are doing well. In doing well, we need more employees of a highly trained globally competitive capacity. They are not as easy as they should be to find in Canada.

Our capacity to work in a multicultural setting in our own country is a huge accomplishment, and it is one from which, on the global scale, we should be able to benefit rather more than we do.

The use of our energy resources are obviously controversial and have many dimensions. To be able to leverage those resources in order to attract the kinds of investment and partnerships that we need across the world, including with the BRIC economies, seems to me to be a matter of national priority.

We obviously cannot — and, again, I am reflecting on my company's experience — forget our enormous reliance on access to the U.S. market. Building gateways to North America, as we are doing, which are enormously important and productive investments, could be vitiated by the border effect if ever the borders become contingent against the use of Halifax and the Pacific Gateway into North America.

R&D is an area where government policy has been extremely active over the years and where Canada makes huge investments. However, it seems to be a source of some disappointment that the investments made in this area are not harvesting the kinds of results in innovation that many are looking for.

Government and industry partnership in these areas have often been controversial, and I would be glad to talk to those, if you like. They are, however, initially important and certainly are regarded as important in most other jurisdictions.

Free trade is an ideal that, from a corporate point of view, is a highly important one. It often involves difficult political decisions and compromises, but if we are to have trading relationships that last and are comprehensive, the difficult issues must be addressed. If we are not prepared to make compromises in areas of legitimate interest to our partners, it is difficult to get them to do the same with respect to our interests.

I would say that as a matter of practice in a global business, it is always a source of important support when public policy is made not only on aspirational grounds alone — that is to say, it should be made with full appreciation of how the world is rather than how it should be. It is extremely important for Canada to act and to continue to act to seek a better world order. We have been an enormous contributor to creating a better world order than the one we found, but we have to recognize that the world is an imperfect place and that, if we are to survive in it, we will have to, if not accept its imperfections, act to change them with the knowledge of what they are and what our own influence is in doing so.

I have presumed too much with these notions and I have likely overrun my time, but I am grateful to you for providing me this opportunity. I would be pleased and honoured to engage in discussion and questions.

The Chair: Thank you for appearing. We will go to questions.

Senator Johnson: Mr. Haynal, you have such an amazing history in China. I am sure that all of Canada and other companies can learn from the Bombardier experience, whether it is providing rail equipment or the aircraft market. How are you coping with the inflationary pressures, high energy and raw material costs, the falling dollar and new business rules, including more stringent labour laws? Will this continue to increase your cost of doing business or are you finding these to be problematic?

Mr. Haynal: No. In terms of our sales of regional aircraft to China, I mentioned at the beginning that in this industry products are priced in U.S. dollars, giving us a constant base for revenues. Labour costs and other associated costs in China with our Chinese partners in this field are well within what is manageable to sustain a profitable partnership for us. Even though there are strong upward pressures on the cost of qualified labour, we are glad to pay it because there is an excellent workforce and the potential in this market is so enormous that we are engaged for the longer term.

These issues are real but manageable within the larger strategic commitment to being part of this market and part of the value chain that brings their contribution to the global output.

Senator Johnson: Following through on that, how has global business affected cultural differences in management practices, such as cooperative strategy, conflict management and decision making? Would you say that over time cultural differences are diminished or do they remain as prominent as ever, in particular when we think of new Canadian businesses and the importance of increasing our business?

Mr. Haynal: Working in China is an enormous challenge for any non-Chinese entity. It requires an unusually high level of investment in cultural sensitivity. If we are to be successful in building partnerships with the Chinese economy, not just to make sales but to be in partnership as global producers, then Canada will have to invest and Canadians personally will have to invest significant resources in becoming much more aware of the cultural differences and demands in China or India or Russia, or any other market, for that matter.

That is a challenge. We have been impacted by that. The President of Bombardier in China is a Chinese national who has spent a considerable amount of time in Canada and has two university degrees from Canada but who is and always has been very much integrated into Chinese society. Our staff in China is multinational. We have employees, in particular on the transportation side working on several of our joint ventures, who are from Sweden, Germany, Canada and other countries, as well as a large Chinese workforce, which has been essentially integrated into our global production culture, if I can put it that way.

Our Chinese factories operate on the same rules as our other factories operate but they do it 10 times faster. I exaggerate, but the reality in China is that the demands for speed are not in keeping with anywhere else because their need for investments are so huge in this field that, to meet them, you have to make special accommodations.

I am not sure if that is a complete answer to your question. The way we have coped in China is the way we have coped everywhere else. We have operations in almost 30 countries, and in each of those cases we have a unified workforce.

Senator Dawson: I notice that five of the senators here were members of Parliament in the early 1980s when the Government of Canada decided to support Bombardier's efforts to move away from its traditional role of manufacturing skidoos to massive transport. In those days, there was tolerance for governments to participate in partnership with Bombardier. Under the existing international environment, how can we help you? For example, Bombardier had the winning bid for the train in Montreal; however, today, the Government of Quebec announced that it is reopening the tendering process at the international level because they are not allowed to favour Bombardier. In the past, when they built the train in 1967, they were allowed to do that. How can government offer you some support in your endeavours?

On a different subject, you are looking at three countries. How do you prioritize those countries? You cannot be in all places all the time. How should we prioritize our actions in the three countries?

Mr. Haynal: Today, as the honourable senator was mentioning, there was a decision by the Government of Quebec to go to an open, multinational tender for the contract in Montreal, which is fine with us.

The best way to help a corporation like Bombardier, which operates in global markets, is to do it no favours, but, at the same time, not to disadvantage it either. We do what the authorities want us to do. We are happy to go to an open tender if the clients want that. We are not the largest manufacturer of rolling stock in the world, because we are nice. We are nice, but that is not the reason. We are competitive and we compete within the established rules. If those rules require us to supply from one jurisdiction to another, then we will do so. Most often, we are not allowed to do that except in the case of Canada. We have 14 factories in 14 European jurisdictions because we are constrained to work there.

I do believe that is the most comprehensive and honest answer I can give you. Do us no favours, but do not hobble us, either. If the international rules favour our competitors, then, as governments have done and as this one does, let us have a level playing field. We will do just as well as we deserve to do with a level playing field.

That does not mean passivity. For instance, support for risk sharing in huge undertakings such as development of a new aircraft platform is essential. No aerospace manufacturer does so without sharing the risk. We cannot be an exception to that. As I said, a level playing field is all we ask for — and, as paradoxical as it seems, getting to that is sometimes a challenge.

How do we prioritize among the three, China, India and Russia? We do not. I am trying to give you as thoughtful an answer as I am capable of.

The fact is that the conditions themselves provide the priority. Each of these markets is unique. We are engaged in these markets, as well as others. Important to note, these are not our most important markets in terms of volume at this point. They will be in the future but are not now the most important.

Our priority is, in fact, a global one. We want to be capable of participating in these markets when they are mature; we want to be capable when they are ready. In some cases, we have been readier than in other cases. I will give an example in China. Bombardier and its predecessor companies have been in the rail transportation business in China for 50 years. That is a result of a series of acquisitions that Bombardier has made over time. In India, we have not been present in a significant fashion, although we have been in a modest fashion for a number of years. However, that limited presence was largely because India itself was not ready for foreign partnerships. The same goes for Russia. In sum, I think our priorities are largely dictated by the readiness of the economies themselves.

In a public policy sense, it may be a false choice to say that you have to strike priorities among them. A world of global value chains does not often allow you to choose countries; it obliges you to find maximum value in particular niches and circumstances. That would be my narrow view of that question.

The Chair: Before I call on Senator Grafstein, I will bootleg a brief question.

You talked about operating in a number of countries. One question that has been raised through our report is the support of consular offices, particularly trade commissioners, et cetera. In your response, I would like you to emphasize the three countries in particular we are looking at.

What has your experience been? Do we have good people? Do we have enough people? Do we have them in the right places? Just help us in understanding that.

Mr. Haynal: Often where you stand depends on where you have sat. I have sat, walked and run in the Department of Foreign Affairs and International Trade for a long time — truth in advertising there.

Perhaps this completes the answer I meant to give to Senator Dawson. Looked at from the company's point of view, government support is extraordinarily important, particularly in these three markets. I do not mean subsidies. I refer to a recognition that in these economies, in particular, the line between the economy and the state is often a rather fuzzy one. In these and other economies, the notion that Canada itself is engaged as opposed to just a company becomes an issue of competitive advantage or disadvantage. In this case, this committee is not looking at Brazil, a very relevant player, but I will give you an example. President Lula has visited each of these countries, if I am not mistaken, and has had reciprocal visits since he was first elected. There is very intense political participation in support of sales by Brazilian entities. Presidents of France do the same, and so on.

From that point of view, as a generic point, I would say that representation is extremely important to us. Ambassadors can be critical players in these markets and they do us proud in all of cases that I have been aware of. Trade commissioners are an important source of support.

However, the question arises as to where they should be, how they should be formed and what they should be doing. If I may offer a very personal point of view, I do not think we need traditional trade commission intermediation services in the United States. We need a strong presence there, but not to put individuals together with other individuals. That sort of service is critical, however, in markets where most Canadian economic actors lack linguistic or cultural affinity, as Senator Johnson pointed out. There, the presence of representatives who can provide that kind of intellectual and cultural infrastructure and networking is extremely important.

Again, it cannot be a commodity form of intermediation; these are people who must have something special to bring to the table. My own experience is that, in many cases, you get very strong and culturally sensitive representation.

Ultimately, the question is whether there is enough of it. That may be a question better answered by others than by someone from Bombardier. I say that because we may have a capacity that others might not be able to bring — because of our physical, established presence in many of these markets.

Senator Grafstein: I have an opening question regarding the Brazil experience. Have the issues been sorted out with the Brazilian government? At one time, there was a question of subsidies that became a matter of some dispute. Has that been resolved with the Brazilian government?

Mr. Haynal: We have no dispute between us.

Senator Grafstein: There was at one time, was there not?

Mr. Haynal: Yes, there were several rounds of going back and forth in the WTO.

Senator Grafstein: Has that all been resolved and is it out of the way now?

Mr. Haynal: Yes.

Senator Grafstein: I know that hindered Canada's discussions with Mercosur and Brazil in terms of fostering a kind of trade agreement with Canada. I have lost track of what happened. I was on the ground in Brazil and it affected some things we were doing there. I wondered where that stands.

Mr. Haynal: Without taxing your time and that of your colleagues, I would be glad to walk you through the details. The WTO process ended with Canada being given the rights to retaliate for $1.3 billion against Brazil.

Senator Grafstein: What happened?

Mr. Haynal: We do not have $1.3 billion worth of export from Brazil to retaliate against. That was not really the point. The point of statecraft on all sides was to reach an accommodation where people's behaviour did not provoke counter-market reactions.

There is no dispute at the moment. There is now a consensus rule agreed in the OECD on the financing of aircraft to which Brazil is a party, even though it is not a member of the OECD.

However, these issues will never go away between us and Brazil. As you likely know, there is now a major dispute between the United States and the European Union on support for development of new aircraft. As I said earlier, this is a field in which governments share risk and the rules under which they share the risk are evolving.

Senator Grafstein: I only raised that because I think this is a sidebar issue we should be looking at because it affects our overall relations with the BRIC.

I will be more specific now. I think I read yesterday that President Sarkozy attended La Rochelle, I believe, for the announcement of his new high-speed train.

Are you in direct competition with that company? That is a French consortium.

Mr. Haynal: Indeed, we are.

Senator Grafstein: Are you in direct competition with them in terms of speeds and technology?

Mr. Haynal: The last train they built is pretty fast; our technology is not quite at that speed. However, yes, we are in high-speed rail.

Senator Grafstein: I raise it in the context that Mr. Sarkozy, for whom I have great admiration, has become very aggressive in re-establishing marketplaces for French goods around the world. He is very active in the Middle East now. He is active in Russia; he has been there several times.

Our government has not done that. We have done Team Canada; we have had a softer approach to this. We have had an interesting history. It goes back to George Hees' approach, which was useful, and then Mr. Chrétien did Team Canada and Mr. Mulroney did a series of other things.

Is that approach, which is government-delivered activity to support enterprise, a positive approach? Is there a more clinical or surgical approach, like Mr. Sarkozy is adopting, which is not Team France, it is France and the president? He is there, and he is almost closing deals.

You have had experience, Mr. Haynal. What would be your advice to this committee as to how we should advise the government? What is the best governmental approach to breaking into some of these marketplaces? You are already there in India, Russia and China.

The Chair: It would be useful if you could focus that question to the three countries we are discussing.

Mr. Haynal: I revert to several points I made earlier. First, almost all of our competitors in rail manufacture and civil aircraft, commercial aircraft, are, in effect, national champions.

Senator Grafstein: They are state-owned.

Mr. Haynal: Not necessarily.

Senator Grafstein: In part?

Mr. Haynal: Some are state-owned. Alstom is not any longer; it has been privatized. It is owned by a private group. I will go through some of the major ones.

There is Alstom, which is French and very strongly espoused by President Sarkozy, as you mentioned; Siemens, which is a huge German conglomerate and very successful; in aerospace, there is Embraer, which we discussed, Airbus and Boeing. This is the league, in effect, in which we have to operate.

Therefore, the power they are able to bring by dint of being French, German, America or pan-European is enormous. In the rail sector, there is a Korean entity that is owned by a chaibol with shared ownership with a major American financial house, for instance. That is the league in which we operate.

Should governments get involved in being direct sales representatives? I think they have to do what is consistent with their political culture. I would not presume to dictate or even to suggest how a national leader should conduct that dimension of the business. All I can say is to repeat what I have already said; that is, that in these three countries in particular, state-to-state relations are an important component of how individual transactions may be regarded by regulators who have considerable power.

Senator Grafstein: You are being very diplomatic, and I appreciate that.

Mr. Haynal: I cannot help it.

Senator Grafstein: I understand that. However, my question is really more direct, and if you can help us, that is fine; if you do not want to, that is fine.

President Sarkozy is involved. He has decided this is the way he will reassert French manufacturing and French diplomacy. He is actively engaged. It is a model.

We have not done that. We have done it more surreptitiously. It is almost like we are ashamed to show up, and when we do, it through the back door. I have been on some of these missions, and I know the difference.

If you were choosing a model for Canada — because we are here to advise governments on what to do — which model do you think would be more helpful for expanding Canadian manufacturing abroad in these three target markets? Would it be more active leadership from the top down?

Mr. Haynal: Certainly, active support is an important contributor. It is not absent in Canada. President Sarkozy himself is, if I may say, somewhat exceptional as a political leader in France, so I would not want to generalize from his approach. Who knows where that approach will lead.

Being advocates for the national economy is very much a role that would be congenial to any Canadian government. We may have a different approach to the Canadian economy, not just to the sales of Canadian products, than other societies do. The notion of national champions is not necessarily one that is current in Canada. Industrial policy is also not current in Canada. Whether it should be or not is another question.

I would suggest that you cannot do, if I may suggest, what you are suggesting in isolation; rather, it must be part of a broader commitment to an engagement with the economy.

Senator Grafstein: You are not being helpful, but you are being informative.

Finally, I am interested in the detail of partnerships. In other words, you are now well engrained in Russia, India and China. You are a leader in at least two or three of those countries in terms of small aircraft, which is great. With respect to your partnerships, do you have a model you could recommend to us in terms of the ideal partnership? You have entered into local partnerships in all of these countries, I assume.

What is a successful model that we can look at? You probably have different models in each place. I have been engaged in some of this as well, so I am curious to see what have been the most successful models, or is it market by market, partner by partner?

Mr. Haynal: It is very much market by market. Some of these economies have a very long history. In some cases, such as in Russian, they have a very short history. That in itself defines how you have to behave. There is no long- established tradition of corporate governance in that environment.

You would take a different view there than you would necessarily in India where great corporations have been operating for a long time when it was actually very difficult to do so.

I am not sure to whom to attribute this notion, but I remember being told that during the days of the ``Licence Raj,'' the economy ``operated by night,'' often these large corporate entities became successful because they operated outside of their home markets and became global by force. Association with these great houses is hugely important because they are not only pillars of the economy but have been able to shape the economy when liberalization happened.

It is a different model in China because there is a gradual weaning away of the economy from the state. A partnership there is of a different kind, often with state entities or quasi-state entities that operate again in the markets where we are active.

Rail and air are very particular in that there is a high level of state involvement in every economy. It may not be a model that applies elsewhere.

As a rule of thumb, you associate with those who are best able to assist you in succeeding in the local market. I know that is not very helpful, either, but you have to do it with partners who also are prepared to accept operating by rules that we find acceptable, and that is a matter of choice sometimes.

Senator Grafstein: Finally, I assume, then, your preferred approach in partnerships is to retain, in effect, voting control. You are not minority players in any of these marketplaces; you are controlling players, although maybe not in equity.

Mr. Haynal: That issue has not yet come up in Russia, although we are engaged in partnerships there. In China, actually, we were in a minority holding in several of our joint ventures, but now that is changing because we bought out one of our partners. I think, ideally, you want to be in operating control. That is fair to say.

Senator Downe: There is no doubt the Team Canada model that was used in the 1990s was extremely successful. Many business people indicated that they could not have arranged the high-level meetings unless the Prime Minister, and in some cases the premiers, were there. New contracts were signed. Contracts that had been negotiated and delayed for various reasons were rushed up and signed because of the host government wanting to have an impressive package. However, nothing lasts forever. There appears to be a void as to what the government should be doing to try to duplicate that level of influence. That is something the committee will obviously consider. If you have additional thoughts on that today or later, we would appreciate hearing them.

My question today is really about your competition. Are you concerned that some of your competitors in these countries may be benefiting from indirect military subsidies — research, production, planning and so on — that are not clear to Canadian companies when trying to compete with them?

Mr. Haynal: This is a perennial concern in the aerospace industry. I cannot point to specific cases at the moment because there are no live reasons to be concerned about this.

As I have said, this is a field in which risk is shared, and it is shared in different ways by different governments with different corporations. I will cite the dispute now between the United States and the European Union, where the EU is accusing American jurisdictions of unfairly subsidizing Boeing in the development of its new aircraft, including through massive military-research spending. We will see what the judgment of the WTO is in that case, but it is a live issue.

Senator Downe: Which aircraft is that?

Mr. Haynal: The dispute is with respect to development of the 787. The U.S. is countersuing the Europeans.

As a general observation, of all the countries that have an aerospace industry Canada is unique in not having a defence industry. The possibility that may be open to others to be able to develop R&D through military applications is not available to us here. Fairly or unfairly, others obviously have recourse to what support they can get. In our case, this does not exist.

The issue does not arise in the rail sector because there is no defence expenditure of a meaningful kind in that field.

I will respond with one observation on your notion of Team Canada. One powerful effect of that approach was that it involved the provinces in this enterprise. Given the constitutional makeup of our country, the provinces have perhaps under-assumed their responsibilities for the management of the economy in some cases. The fact is that the federal government, for instance, cannot oblige the provinces to accept international trade obligations. The provinces have always been involved in the negotiation of international agreements, which is great. However, in terms of the promotion of the Canadian economy and in terms of establishing a structure of regulations and policy across the country that allows us — as a jurisdiction of 32 million — to act with force in the world, very strong participation of the provinces will be required.

Again, the Team Canada approach had that benefit, where the premiers themselves were personally very engaged. I am aware that a number of provinces have mounted very successful missions headed by premiers. Obviously, doing it together would raise this sort of effort to an entirely new level.

Senator Downe: I share that view. That is a very good comment, particularly in a federation where not all provinces are equal in size and prosperity and where some provinces can establish trading and/or diplomatic presence in some of these countries and others cannot afford it. The second benefit, in my opinion, was that the premiers who are really paid, in many cases, to be parochial received an education in a national and international view that they would not have otherwise obtained. That was helpful for the nation.

I want to get back to aircraft production. I am not familiar with the aerospace industry in these countries, but I do have some knowledge in the United States where Boeing has a parallel production line for military and domestic or international commercial airlines. Over the last 20 years of modification, they are building aircraft to be more and more interchangeable and dramatically reducing cost.

I was at the Boeing plant 25 years ago; at that time, it took them 22 days to build a 737. As of this year, it takes them 11 days. They are reducing cost and time, but much of that research is because of the military. As you have indicated, we do not have the military side to assist you in research. Has your company entered into any partnerships in any of these countries to build anything for their military?

Mr. Haynal: No, we produce only civil aircraft. Some of these aircraft are adaptable to special uses — for instance, coastal surveillance. Although the Canadian military has chosen not to employ this aircraft for that purpose, it is now in use for this purpose in Australia, Sweden and elsewhere. Our aircraft are used for this. Some have been adapted for battlefield surveillance because they are a good platform; however, they are not developed for military use.

We have not engaged in developing any products for the military for a long time. The only partnership we had with the federal government was under the old Technology Partnerships Canada program, TPC. That program expended $3.2 billion over its 10 years. The government partnered with us for a total of $143 million, less than 4 per cent. Although many people seem to think we were more important as partners there than we were, I should note that we have paid the government fully now.

That is the nature of government-industry partnership in Canada. We not only live with it, we are able to thrive. However, our competitors have different models.

The Chair: Two or three times during your comments you referred to the multicultural nature of your company. Canada is blessed with a huge diaspora from all over the world, particularly from India and China. Has your company been able to take advantage of that in some way? If so, has it been successful? Has that been helpful?

Mr. Haynal: No, we have not. Linkages are a very difficult thing to do for a private corporation. As I have suggested, it is certainly one area where even the government has raised — I should not say ``even.'' It has been raised in a number of quarters. How do we leverage our energy resources better to provide an additional incentive for success for Canadian corporations? I do not know how we would do that directly. It is interesting to note that the large sovereign wealth funds that are becoming an increasingly important part of the landscape have obviously shown interest in the development of our natural resources. Is that something that could be coupled to encouraging investment in other areas, such as public transit infrastructure or rail infrastructure? If you are asking me how that would help our sector, if not ourselves, that might be one way of doing it.

The Chair: My question was more related to the multicultural nature of your company and the fact of the various diaspora we have in this country.

Mr. Haynal: I misunderstood.

The Chair: I probably did not articulate it well.

Have you been able to take advantage of that? This issue has been brought to our attention by more than one witness. We have 1 million Chinese, and probably just as many Indians. There is a body of opinion that suggests we should be taking advantage of and benefiting from that. Has your company done so and has it benefited?

Mr. Haynal: Yes, we have done so, I would say. I have given you the example of the president of Bombardier China. It is an excellent example of precisely that. We have done so in other markets as well.

Often, the issue is not so much finding a Canadian with origins elsewhere as ensuring that our relationships in these markets are maintained by people who are in those markets. Hence, the diaspora is not necessarily the answer to that. Someone who may have left their country 20 years before and goes back may or may not be as effective as someone who has consistently been there through a stage of very rapid development and is able to keep up with the changes in his or her own society.

Hence, multiculturalism does not necessarily mean the deployment of multicultural Canadians; it means a company that has genuinely many cultures from many places active all at once but trying to work on one single cultural plane in terms of corporate management.

Senator Mahovlich: Perhaps as long as 20 years ago, someone came up with the idea of a high-speed track from Quebec City to Windsor. Where is Canada on that right now?

Mr. Haynal: The situation, as I understand it, is that the governments of Quebec and Ontario have once again revived this notion. A few weeks ago, Premier Charest and Premier McGuinty called on the federal government to participate with them in a study to further this project.

Senator Mahovlich: They are still studying it.

Mr. Haynal: Yes.

Senator Mahovlich: When I was in Paris, I could take the train halfway across France, have dinner in Lyons and return to Paris the same evening around ten o'clock. That is how fast that train is.

Mr. Haynal: It is amazing. You could have two very good meals in one day, which is not an inconsequential benefit.

Senator Mahovlich: Yes, and you are halfway across France.

Mr. Haynal: You would not have a hard time persuading us that this is a good idea.

Senator Mahovlich: We are behind on this, I believe.

Mr. Haynal: Investment in rail infrastructure in this country is behind.

Senator Mahovlich: We will be behind China soon. For such a large country built on rail, we are ignoring it. The cost of oil and gasoline is skyrocketing.

Mr. Haynal: What can I say except that I could not agree more. There are other possibilities of such a train, between Edmonton and Calgary, for instance, where rail would be a material contributor.

I mentioned earlier that these three countries we are talking about, and Brazil as well, have an opportunity to leapfrog the car age in a significant fashion. They do not have the infrastructure that they need to sustain a car civilization that would mimic our own. As interesting as the invention of the $2,000 car in India is, it will not solve the transportation problems of an economy growing at 8 per cent to 9 per cent per year with a population in excess of 1 billion.

Public transit and intercity rail is a huge part of allowing these economies to grow without destroying the physical environment, not just theirs but ours too.

They can leapfrog the problem that we still face. This is a national challenge that we will face at some time in Canada if there is a national consensus to invest in public transportation rather than just accommodate the growth of road travel.

We would be delighted to be there to help and to compete with others who want to help, but we do not make these policies.

Senator Mahovlich: Does the United States have high-speed rail from Florida to New York?

Mr. Haynal: No, but there is a fast train between Washington and Boston. Unfortunately, that train, which we helped to build by the way, was designed in such a way that it is not as fast as it should be, for many reasons that have nothing to do with us or with our design but rather with the prescriptions that were imposed in its construction. Its potential is not fully realized.

Senator Mahovlich: The Japanese have a fast train that rides on air. Is it safe?

Mr. Haynal: It is not on air but on magnets. They have a very high-speed normal train that runs on rails, and the French have just bettered it, I believe President Sarkozy would tell you. The Germans also have the magnetic levitation, maglev, technology. If you want to see it in action, you might want to go to Shanghai. You can take it from the airport to somewhere in Shanghai and then drive another two hours in a car to reach the centre of town. It travels at 450 kilometres per hour and seems to be safe. There was a tragic accident with such a train in Germany recently, but it is still in the test stage.

Senator Smith: As an aside, I was in India last month for personal reasons. You can hardly move on the Bombay roads. Although people are talking about this $2,500 car, the thinking is that with millions more cars the roads will be very rough.

I have a lot of sympathy for the theory of fast rail, but I know that Air Canada and other airlines negatively react at the thought of it, when you consider the billions that would be required in terms of government subsidies to get these high-speed tracks built. I see it as a great national asset, but they see it as unfair competition, that their taxes would help to pay for a competing form of transportation much more effectively. How do you react to the public policy questions that such a discussion triggers, given that your company is in both of these areas of transportation?

Mr. Haynal: We are all in favour of competition. I assume that Air Canada, which is a private entity, is in favour of competition as well. I am sure there are many informed debates about airports, their cost and the public investments in infrastructure as well.

Earlier, I might have alluded to the vast pools of capital looking for steady long-term investment in the world. The sovereign wealth funds, pension funds such as the Norwegian state wealth fund, as well as others, would be looking for precisely this kind of investment. I have no idea whether that is viable but there is enough experience now with public- private partnerships, good and bad, such that this might be an avenue to explore if public funds are not sufficient to cover the costs. The major costs are associated with rights of way and the track.

Senator Smith: Do you know the cost of a Windsor-Quebec high-speed corridor?

Mr. Haynal: I would not want to venture a number, sir. It would be in the order of billions because the kinds of trains that Senator Grafstein and Senator Mahovlich were talking about move on their own tracks. The high-speed trains do not share their tracks with other passenger or freight trains. It would be a national investment, but it would be the kind that Germany, France, Holland, Britain and a number of other smaller European jurisdictions are making. Italy is about to build the fastest train in Europe, and it be built by a private company, not the state.

Senator Mahovlich: You are talking about the right of way. Do you know that Ontario has sold a highway to investors?

Mr. Haynal: It is the 407 toll highway.

Senator Mahovlich: There are rights of ways and the province sold the whole package. I imagine you could do the same with trains.

[Translation]

Senator Nolin: I would like to follow up on my colleague Senator Smith's question. Perhaps you are aware of the experience in France: when they built their famous train between Paris and Lyon, airline companies had the same reaction as Air Canada had when the Canadian government indicated that, with your company's cooperation, it wanted to look at the possibility of building a high-speed train in Canada's busiest traffic corridor between Quebec City and Windsor.

This is a comment that I will frame as a question to which you can add your comments. The French government decided to proceed with the construction of the TGV from Paris to Lyon, and imagine the airlines' surprise when they discovered a new market called ``feeders'' serving Paris and Lyon, the two main stations at the time. Now the airlines and the SNCF, the French national railways, get on very well. Am I right, Mr. Haynal?

Mr. Haynal: You are perfectly right. What is more, there is now a new industry in Europe. When the air industry was deregulated in the 1980s, cut-price routes popped up between all the countries in Europe. The market is extraordinary. Ryanair, for example, the largest airline in Europe, started then. It means that competition is likely good for everyone when it means that demand is increased and not that market share is decreased.

Senator Nolin: If we go back to the three markets that our study is focusing on, do you take part in work like utilization studies for future rail lines, preparatory studies with your partners in any or all of these three countries? If so, can the models you use there be of use in a country like Canada?

Mr. Haynal: Yes, indeed. There are a number of studies in Canada on transportation use. To answer your question, yes, we have taken part in railway market studies in the three countries in question. The demand is clearly quite extraordinary. In each country, investment in this area is likely higher than we could imagine in Canada. In China, for example, they are going to lay 17,000 kilometers of track by 2010. The investment in their intercity rail network will be $155 billion, plus an investment of $87 billion for subway systems in six Chinese cities. The scale of these investments is extraordinary, but the level of economic activity and the growth of the Chinese economy demand it. They have no choice. I wonder whether we have the choice here, but that is a question that you have to ask yourselves.

Senator Nolin: That is my question. In these utilization studies for future construction, is the cost worth the effort? What does the effort cost? Does the state assume these costs in the three countries or does the user also pay a share? In Canada, the question would be: what will it cost to use such and such a mode of transportation? And my secondary question is about the environment. My impression is that, ten years ago, when the government examined something, the financing was at the heart of the analysis and led to the decision. Today, we have to add an environmental component, it seems to me, which also has a cost. These days, that cost can be converted into dollars. Do you not think that should be part of the cost analysis for a government considering that kind of investment?

Mr. Haynal: Senator, there is no doubt that environmental costs must be built into any kind of economic development. This is what we ask of the international finance agencies of the governments we are discussing: China, India and other developing countries. The World Bank and regional banks require environmental costs to be built into the overall cost of development projects. Canada is one of the countries that insist on criteria like that. Can we insist on these criteria in countries other than our own? I doubt it. That is not a question for railway construction companies, it is a question for you.

Senator Nolin: These are electric trains, so it raises the question of where the electricity comes from.

[English]

Senator Stollery: My supplementary will be brief because Senator Nolin's question is important.

I notice that only 4 per cent of your market is in Canada and 12 per cent is in Asia Pacific. That is what we are interested in — namely, how this can committee help examine that situation.

I spent two years on the VIA Rail study, and I know more about trains than I ever wanted to know. One of the reasons we do not have high-speed trains is because of the track, not the train. I would point out to everyone that the French train is always going on the hummer when they have a snow storm or a blizzard because it affects the track. The problem we have between Windsor and Quebec City is the need to dig a 15-foot trench to remove all water from the track so that the track does not move when the train reaches top speeds. If that is not done, then a high-speed train is not possible. The cost is enormous and there are not enough people in the corridor to justify the expense.

I believe that that is the reason. We looked at this in depth for two years during the VIA Rail study. They had problems at that time.

I always wonder why people always talk about the French train. I have taken these trains ever since they started. I think the German train is a much more appropriate parallel, because it goes into Poland, where the climate in both places is not all that dissimilar to Canada's. The French trains do not work when it snows. I do not know when that penny will drop.

Mr. Haynal: We helped make the German train, so thank you.

Senator Stollery: It is not the train; it is the track.

[Translation]

Senator De Bané: Mr. Haynal, I have read your résumé and I was very impressed by the various positions you have held. In the public sector, you were assistant deputy minister for the Americas, consul general in New York, first officer of the cabinet's priority and planning committee and a representative to the OECD. You have held some of the highest positions in the Canadian government and in the private sector. You were a vice-president of the Royal Bank, you were a fellow at Harvard University, you are the chair of a jury. You have held many important positions and I must tell you how much our discussions this afternoon have impressed me.

The questions that I would like to put to you are somewhat similar to those that have been asked by my other colleagues. You say that Chinese investment in transportation from 2006 to 2010 is about $150 billion and that you are the world's largest company in this area. What share of the $150 billion are you hoping for?

Mr. Haynal: Even if we are achieving great success in China, we are not the first among the foreign companies there. Our competitors are all there; Siemens and Kawasaki have a significant presence. Our aim is to win as much of the market as we can, but it is hard for me to give you an exact figure. At the moment, we have about 20 per cent of the market, if I am not mistaken, in a number of different areas.

[English]

Senator De Bané: Regarding aviation, in your document distributed to us, you say the following: ``Business aviation in China is still hampered by regulation.'' What does that statement imply?

Mr. Haynal: It implies a couple of things. It is complicated. Business aircraft usually weigh under 25 tonnes. In China, a tariff structure provides for what is a heavy level of combined tariff and value added tax, VAT, on aircraft under 25 tonnes. Those tariffs, unfortunately, also catch regional aircraft, and that is a problem. That is a regulatory issue that we must sort out over time.

Business aircraft, of course, are a new concept in a number of these jurisdictions. Even though India is now the second-largest market for business aircraft in Asia after Japan, huge infrastructure shortcomings limit the number of these aircraft that can be used. By the way, they are not used in the majority of cases for private use. They are for corporate use.

The general proposition here is that these tools, which are tools of economic development, one can argue, and also in some cases personal use for wealthy individuals, are new to these markets, but they will be a big part of their national life.

I will make one observation on that subject, if I may. We often talk about the overdependence of the Canadian economy on access to the U.S., probably a subject on which everyone has spoken more than enough about, although we have not done enough.

In our case, there are interesting figures on the sale of business aircraft. In 1990, if I am not mistaken, over 70 per cent of our aircraft were sold in the United States. Now, it is around 22 per cent. A large part of this gap is taken up in these new markets but they need time to adapt.

Senator De Bané: When you look to India, as you know, it is a country that has the ambition to become the intellectual capital of the world, and they produce a lot of people in the scientific field, et cetera. They still have the policy that all foreign companies should be limited to a minority position in a company that they establish in India. Is that restriction still in operation in India, or have they removed it on foreign companies?

Mr. Haynal: I will get back to you with an authoritative answer, but we have a company in India that is wholly owned. We are establishing a major manufacturing centre there, which will open later this year, because we are now a major supplier. At the risk of extending this conversation to the Delhi metro, which is perhaps the greatest infrastructure project in recent Indian memory, we were able to win a contract to supply them with cars. To do that, we are building a factory there.

I do not know the specific answer to your question, but in our case, we are operating there as a wholly owned company.

Senator De Bané: May I ask one last small question?

The Chair: I would like to respond to this one first. It is a good question that may come up also with India, and that is foreign ownership. We will ask our staff to do a quick study and to send information. I have been thinking about it. I do believe, particularly with India, a lot of restrictions have been lifted. We will get the answers.

Senator De Bané: Export Development Canada, EDC, is an important partner for our exporters. Do you feel that their assistance brings things, to use your expression, to a level playing field with your competitors? Do you receive the support that you expect from them to be on a level playing field?

Mr. Haynal: Yes, we do. The answer is short and clear. EDC is an excellent partner, not only for us but for thousands of Canadian companies, including ones in these markets.

They also bring something important, and it comes back to what I said about representation earlier. They know the business and these markets, which is a unique combination. Sectoral expertise in EDC is admirable and perhaps more exceptional than it should be. They are strong.

I will tag a comment onto the senator's question, a comment that is probably not warranted. I was struck by a little reading I did on India that something like 45 million university graduates are produced in India every year, and it is not a coincidence when we look at the kind of economic development model that India has adopted. Every country is different.

The Indian export economy is largely services-based, whereas the Chinese export economy is largely manufacturing- based. There are many subtleties in how one approaches these different markets in terms of the partnerships we develop and the value chains that we build.

[Translation]

Senator Nolin: My colleague mentioned EDC and I just have a quick supplementary question about it. EDC is an important partner of yours and it seems that you have very favourable things to say about the corporation. Their mandate is to examine, with you, the risks involved in the ventures that you are asking them to link you with. Do you not see important information there for a committee like ours, given that, after all, our aim is to understand how Canada's state effort can be reorganized? At EDC, is there a sufficiently well-informed critical mass that would allow a greater role in the effort to develop Canada's international trade?

Mr. Haynal: That question is a little too complicated for me at the moment. It seems to me that there really is a critical mass of knowledge, expertise, international presence, and a sense of entrepreneurship that is a very significant asset for the Canadian economy. We are not direct partners with EDC; our relationship is somewhat different. They finance purchases by our clients; that is, they do not provide loans, they deal with our clients, not with us. But that still means that they contribute very significantly to our success.

Senator Nolin: It requires them to have the expertise to be able to understand the dynamics of the client they are going to have to serve.

Mr. Haynal: Yes, indeed. I see a very important role for Export Development Canada. The business they do with our clients contributes greatly to its viability. The organization is not funded by the Canadian government. They are self financed, in a way, and that also makes them a little different.

Senator Nolin: So it is something that we should make more use of.

Mr. Haynal: It would be well worth it, in my opinion.

[English]

The Chair: I think the banking committee has studied that as well.

Senator Grafstein: What essences of the things that you do are manufactured in Canada? It goes back to Senator Nolin's points. It is great that we promote your company abroad, but what comparative advantage benefit is there to Canada? I will give you some direction on this question.

You provide a number of things: You provide software such as navigational equipment, and you provide a traffic management item. I divide activities between software and hardware, and sometimes there is an interrelationship between them. Do you have a breakout — using India as an example — where you do both: cars and traffic management systems? What percentage of the total package is done in Canada, as opposed to Canadians working in India? Do you have that broken down?

Mr. Haynal: I do not have that information, because India is only starting, to be honest. We have had a business there that has been autonomous.

Senator Grafstein: Also, do you have information about China, Russia, or all three?

Mr. Haynal: I am not sure that we break things down in those terms. Our signals group, for instance — which is a world-leading group that performs management of signals — is based in Sweden. In terms of rail engineering, our systems integrations team of 300 engineers is located in Kingston, and they work on any number of projects around the world. They are only next door.

Our technology for automated people movers, like the SkyTrain in Vancouver, was also developed and built in Kingston, if I am not mistaken. That technology was exported to Kuala Lumpur. Canada is part of a global system.

Senator Grafstein: Without taking the committee's time, is it possible that your company might have broken this down?

I will give you the model I saw. The iPod, which is worldwide and selling like crazy, is assembled in China. When they performed a recent analysis and broke out the parts, they discovered that some parts of the iPod, which is tiny, were manufactured in Japan, and America was not really losing the business because all the engineering was performed in the United States effectively. In addition, the two keys chips were manufactured in the United States. When they broke down the piece of equipment they could not allocate where the battery was made, but there were Japanese parts, American parts and North Korean parts all in this little iPod, and it was assembled in China. I found that useful because the company was criticized about outsourcing. Frankly, outsourcing was helping in-sourcing jobs based on chips. Can you help us with this information?

Mr. Haynal: I can say more about aerospace than trains. You must remember, the transportation group does not have much presence in Canada because there has been so little investment — back to our earlier discussion — not only in intercity rail but in urban transit. There has not been a significant investment in this country in 30 years.

Senator Grafstein: Not even in the traffic-management systems?

Mr. Haynal: Not really: This is a small rail transport economy. That is another question.

On aircraft, I can tell you a bit more in detail because we have much more of a presence here. In terms of global value chains, I tend to think the diamond is here and links are elsewhere. Value chains are made up of many components.

Our regional aircraft is designed in Canada. The final assembly of our regional aircraft is done in Canada. The final assembly, which is the most technologically sophisticated part of the work, is done in Canada for a number of our business aircraft. The design of our new aircraft, if we build the C series, is done in Canada.

Much of the high-value components of this global supply chain are right here. That situation makes tremendous sense. Montreal is one of only three places in the world where one could build an aircraft from tail to nose, and from drawing board to delivery, if one wanted to. This capability is a huge success for — dare I use the term — industrial policy.

The senator asked me about military industry here. Without taxing this committee more than I already have — there is an interesting story in the Canadian aerospace industry. We had the world's second largest air force after World War II, if I am not mistaken; certainly one of them.

Senator Grafstein: We had the fastest fighter plane in the world too.

Mr. Haynal: The interesting thing is that many of these relatively great assets were given to us. I say ``relatively'' great because everyone else was on their knees after World War II. Obviously, there was no need for the huge industry we developed during the war because we were a kind of aircraft carrier at a safe distance from the European and Asian war theatres. The governments in the 1960s decided we would no longer be in the military business for the construction of aircraft. That is when we gave up, as a deliberate decision, a military aircraft industry.

At the same time, that decision was coupled with a decision to sustain an aerospace industry in Canada, and that was the beginning of what became this extraordinary cluster of expertise in Montreal, Toronto and Winnipeg that is now one of the most successful aerospace industries in the world. This expertise is amazing considering this country is small, the domestic market for these aircraft is modest, and there is no military industry. There is room for thinking about strategic investments in a sector that may be worth considering.

[Translation]

Senator Rivest: My question is along the same lines as Senator Grafstein was discussing. You rightly pointed out that the political dimension helps the development of companies like your own and others in Canada. There is also Team Canada, which we have discussed, and a collection of other initiatives. So subsidies and the tax system help industry; the public sector makes a major contribution — all Canadians, that is — to the development of a company such as yours that is looking at markets like Russia, China and elsewhere.

Often, public opinion in Canada is a little muted, because you win contracts, as a result of your company's expertise, of course, and with government assistance in the name of all Canadians. The company then sometimes builds a plant and creates jobs completely outside the country. You can understand that I for one would prefer all Bombardier's products to be made in La Pocatière or Montreal. Why go to Winnipeg or Toronto? They do not need a company like yours; everything should be made in Quebec!

People are a little sceptical and ask themselves precisely what are the clear benefits that they get from the assistance that the Canadian government and provincial governments provide to you when you decide to set up elsewhere. I assume that there are tax implications, and benefits in expertise and made-in-Canada products. To allow public opinion and the government to keep supporting the efforts and the performance of our companies — because political questions have been raised about subsidizing Canadian companies — public opinion in Canada and in Quebec needs to know that, when Bombardier or another Canadian company wins an important contract in Asia, or anywhere in the world for that matter, there are indeed very clear benefits for Quebec workers and the Quebec economy.

I often find that this is not said enough. In order to develop and support industries like yours politically in Canada, in other words to support an export policy, public opinion must be aware that its taxes are being used to support and maintain competition and performance overseas and that there will be clear outcomes and benefits. We know that there are. Is your company concerned about this too?

Mr. Haynal: Yes indeed. We are always concerned about justifying ourselves. The public has a right to know what benefits are provided by any company that is involved in society and the economy in general.

But I would like to repeat that the support and the subsidies you mentioned and that we received from the federal level are very modest. For example, we received less than 4 per cent from the partnership subsidy program specifically for aircraft development.

We have two factories that produce railway cars in Canada, one in La Pocatière, the other in Thunder Bay. They are the only two factories in Canada. There is no other manufacturer in Canada. For the moment, we are the Canadian industry. We would like to encourage others to be part of the economy. For example, we do not insist on the private contracts that we have just been talking about, we are ready to compete. But the competition must be on a level playing field. In many major countries, you cannot compete for bids without having a presence there. Do we have to insist that others set up shop here, in order to be competitive or do we get a private contract? We would prefer open competition, but we would like to see participation in the economy.

Apart from that, we ask for no other favours, we receive no inherent benefits. We pay taxes just like any other company. We create 18,500 high quality jobs in Canada. When we open a factory elsewhere, it is so that we can be part of world production lines like our competitors. If we do not participate in the same way as our competitors, we are no longer competitive.

This is a reality that we need to explain to the public. It is a responsibility that we take very seriously. I hope to be part of a discussion along these lines. I urge you to become familiar with a recent speech given to the Montreal Chamber of Commerce by Pierre Beaudoin. It dealt with this exact topic.

Senator Rivest: Yes, I have seen it.

[English]

The Chair: You have noticed, Mr. Haynal, that there is a great deal of interest. I thought we would talk more about China, India and Russia but we ended up learning a lot about Bombardier. We are pleased with that and you helped us greatly in focusing our thoughts. You likely will find some of your comments reflected in the report that we make. Thank you for appearing this evening. We look forward to seeing you the next time.

Mr. Haynal: I am grateful for this opportunity and I would be delighted to provide anything that we can do to help your work in terms of additional information.

I noticed that a previous witness suggested that it is time for a royal commission. I humbly support that notion. These issues that you are grappling with are about the future of the country because the countries we are talking about are the future of the world. It seems that there is a desperate need for a national discourse in this area.

The Chair: I thank you for that view and that is precisely why we commenced this study. We understand the importance of these issues and this study will be much less costly than a royal commission. You have helped us and we might come back to you so that the report will be perfect because of your participation.

The committee adjourned.