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

Issue 9 - Evidence - Meeting of April 3, 2014

OTTAWA, Thursday, April 3, 2014

The Standing Senate Committee on Foreign Affairs and International Trade met this day at 10:34 a.m. to study security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters.

Senator A. Raynell Andreychuk (Chair) in the chair.


The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is continuing its study on security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region, and other related matters. We have before the committee today Rear-Admiral David Gardam, Director General International Security Policy from National Defence.

I welcome you to the committee, as I'm sure you've done this before. We are studying Asia-Pacific, and we are homing in to the countries of Myanmar, Philippines, Singapore, and Indonesia. We are interested in security issues and initiatives that Canada may be concerned about or undertaking in the area, so anything you can do to add to our study would be helpful.

We'll ask for your opening statement and then we'll go to questions as usual.

Rear-Admiral David Gardam, Director General International Security Policy, National Defence: Thank you very much. I'll start with my opening statement, and hopefully it will whet your appetite for questions.

Thank you very much, senators, for having me before the committee today to speak on this very important topic. As a Pacific country, Canada's people-to-people and socio-economic ties to Asia are growing, making them integral to our identity, prosperity and security.

From 1981 until 2011, the percentage of Asian Canadians has tripled. In B.C., 25 per cent of the population is ethnically Asian. In Ontario, this number is 18 per cent. These numbers will only grow. Immigration is Canada's largest source of growth and currently 48 per cent of new Canadians come from Asia.

Trade with Asia is also growing. China is our second largest trading partner after the United States. Asia as a region captures the largest proportion — 41 per cent — of non-U.S. Canadian imports. The government is working to expand and build on these connections by pursuing initiatives such as the Trans-Pacific Partnership free trade agreement negotiations and other bilateral initiatives.

While there are numerous opportunities associated with Canada's increasing connections to the Asia-Pacific region, the region's complex security environment poses risks to these interests.

A shift in the balance of power away from the United States and its allies towards China has resulted in increasing tensions and uncertainty in the regional security environment.

Several outstanding boundary disputes, particularly in the maritime area, could escalate into open conflict due to misunderstanding, miscalculations and inflexibility caused by nationalistic audiences. In North Korea, the erratic behaviour of the leadership and its pursuit of nuclear weapons, as well as the technologies to deliver them, pose a grave threat to the region.

The region also faces security challenges related to piracy, illegal immigration, resource pressures and natural disasters. A major task in this region, with increased military expenditures and evolving multilateral security architecture, will be to reduce friction and confrontation and promote collaboration.

As part of the Government of Canada's overall focus on the Asia-Pacific region, the defence team is committed to defence and security cooperation to ensure that peace and stability are maintained in a region which is integrally connected. Our objective is to contribute to the evolution of an Asian security environment that is stable and in which disputes are managed according to international norms and laws. This is important for Canada for a number of reasons. For example, 65 per cent of the world's container traffic originates from Asia. The issue of maritime traffic is something that we will need to focus on because it's going to matter in the next coming decades.

For Canada, 48 per cent of the Port of Halifax's cargo originated from Asia in 2012. And for the Port of Vancouver, it is booming based on Asian trade. Therefore, we have a direct interest in maintaining the security of the area's sea lines of communication.

Contributing to regional security requires the development of a comprehensive strategy. Many of our friends and partners have similar concerns and are undertaking similar processes. Sharing information and coordinating responses with them can only strengthen our respective approaches.

Indeed, we are already actively working toward these objectives. In this regard, the Defence team will, as a first step, work with whole-of-government partners and like-minded countries to explore approaches and develop plans that will take us in this direction. This was the impetus for the Canada-U.S. Asia-Pacific Defense Policy Cooperation Framework recently signed by our minister and the U.S. Secretary of Defense at the Halifax International Security Forum.

However, identifying the requirements to develop strategies and plans does not mean that Defence is not active within the region. The Canadian Armed Forces has been a contributor to the United Nations Command Military Armistice Commission in Korea since 1953, and it's there today. The Defence team also contributes to the mitigation of several regional security challenges through a number of other important activities, such as participation in the multinational investigation into the North Korean sinking of the South Korean ship Cheonan, which occurred in 2010; and numerous DART deployments — Disaster Assistance Response Team — to Sri Lanka, Pakistan and the Philippines, most recently in 2013.

In addition to operations, the Canadian Armed Forces are stepping up participation in regional military exercises. After the United States, Canada has been the largest contributor of troops to many of the main exercises on the Korean Peninsula for a number of years. Other exercises include Rim of the Pacific, the ASEAN Regional Forum's disaster relief exercise DiREX, and as an observer with Southeast Asia's largest multilateral exercise, Cobra Gold.

Developing relations with regional countries through our Military Training Cooperation Program has also been a strong diplomatic tool. It allows Canada to share experiences and expertise with new partners by building capacity and forging new bilateral defence relationships. Eleven ASEAN countries participate in this program, and over the last fiscal year, more than 150 officers from member countries received training sponsored by the MTCP in language, peace support, military staff and professional development programs. Canada has also sponsored several high-profile seminars in Indonesia through MTCP, one of which just completed last month, which was a peace support operations seminar.

We will focus our engagement in priority areas by focusing on key bilateral relations, continuing participation in the ASEAN Regional Forum and pursuing membership to the ASEAN Defence Ministers' Meeting-Plus.

ASEAN institutions provide important opportunities to work on defence and security-related issues and strengthen cooperation in the region. We must also make contributions where we believe we can add value. These include areas such as maritime security, military medicine, humanitarian assistance and disaster relief.

In sum, if the government's objectives and ambitions in the Asia-Pacific region are to be fully realized, defence engagement must remain a priority, with a coherent whole-of-government effort.

In a region of dynamic growth and complex challenges, our status and interests as an Asia-Pacific country require us to contribute to security and establish our security and defence relationships for the long haul. We take our role as an Asia-Pacific country seriously, and we are committed to contributing to ASEAN security. This will help Canada will realize broader aspirations in this dynamic region.

Thank you, and I now anxiously wait your questions.

The Chair: Your comments are very useful because you've covered a lot of areas of activity. When we look to Asia-Pacific, we know of the Korean conflict and we know of North Korea's nuclear ambitions. We're still questioning China, cyberspace and their initiatives. We are not sure how the countries relate to each other — sometimes with a frosty attitude and sometimes with a friendly atmosphere. I note that as historical background.

More recently, as we work economically in the area, you're talking about piracy, illegal immigration, resource pressures and natural disasters as being other security issues. I see one of the other security issues as being that there is no security framework. It's not like working in the Atlantic, where you know exactly what the players are doing and what the framework agreements are.

Are we in a process now of trying to get framework agreements, or are we still identifying the policy issues that need to be addressed?

Rear-Admiral Gardam: That's an excellent question. If I might, I'll start at a very high level, strategically, on the frameworks that currently exist and where Canada is engaging, because I think that you'll find actually we are quite well engaged in some of these forums.

The first is the ASEAN Regional Forum. The ASEAN Regional Forum, as you're aware, would be Brunei, Cambodia, Indonesia, Laos, the Philippines — it's the southern region. Their focus is on maritime security and defence. There are three words I use when I talk about this region: peace, stability and prosperity. It's all about prosperity, and in order to have prosperity, you have to have a group such as ASEAN that is able to bring like-minded countries together to discuss issues such as piracy. In the ASEAN region over the last three years there has been a dramatic decrease in piracy because of the cooperation of countries such as Indonesia and Malaysia, working together with their coast guards, to combat piracy.

A broader defence and security initiative is the ASEAN Defence Ministers Meetings-Plus, which includes all the membership of the ASEAN region. Canada is not a member, but we are seeking membership by working with close colleagues such as South Korea. We're also working with the United States, Australia and others to try and become a member.

We have learned over the last three years, in terms of Confucius, that face time matters. This is not something we're used to in Canada. We're used to Western transactions when it comes to business. It is not the same in Asia. You have to have a consistent approach and leadership, and your position matters.

For example, our minister will go to the Shangri-La dialogue. It is composed of key ministers and chiefs of defence from the region. This dialogue allows a broader discussion to occur on things like how we would resolve a potential dispute at sea between, say, China and another country. These are mechanisms we actually had in the Cold War between NATO and Russia. We're now bringing them forward into a new dialogue, which is the ADMM-Plus.

There are also expert working groups in which Canada is becoming a member. There are working groups in humanitarian assistance and disaster relief. Another area where Canada participates is in information fusion because we have an ability to do that.

However, we have to manage our appetite carefully. As you all very much appreciate, the region is vast, Canada is small, and the distance is great. So we are working with our partners, particularly the Five Eyes community, plus others in the region, to help us in our engagement plan.

I would say we are now becoming much smarter on how we engage.

Senator Downe: Who are the current members of the ASEAN Defence Ministers Meeting-Plus?

Rear-Admiral Gardam: Allow me to refer to my notes because I want to make sure I'm able to give them. It's the ASEAN members, as I mentioned, plus two different groups. There's the Plus Three, which includes China, Japan and Korea, and then the ADMM-Plus is Australia, India, New Zealand, Russia and the United States. It's that meeting that Canada is trying to become a member of.

Senator Downe: Why are we not a member? Why were we not invited when the Australians and the New Zealanders joined?

Rear-Admiral Gardam: Because regional interests matter. We are not an active player, such as Australia and New Zealand are, within the region. When we did our DART operation, for example, we had to fly a C-17 16,000 kilometers the other direction, so space and time matter. What's key here is that we have a consistent application so that we become members.

A very good example of a springboard opportunity is what just happened, through unfortunate circumstances. The terrible tragedy in the Philippines has allowed us this year to leverage that and say, "Canada matters; we came to your aid and were the second country there, ahead of anyone else." It's using those opportunities strategically that will allow us to become a member, but we're just not there. We're becoming more and more a presence because we know it's all tied to trade and prosperity.

Senator Downe: What would be the benefits of membership for Canada?

Rear-Admiral Gardam: One of the biggest benefits is being able to manage the maritime security issues. If you have not got a secure framework to have your global commerce on the high seas move from A to B to C, the economy will come to a grinding halt. Our ability to be a member will help allow us to help develop some of those mechanisms to, if not resolve disputes, at least keep a lid on a simmering pot.


Senator Fortin-Duplessis: Welcome, Rear-Admiral Gardam. I just want to set things up before I ask my first two questions, which will be brief.

For the Rim of the Pacific Exercise, RIMPAC, which Canada participates in, what can you tell us about the extent to which Indonesia, the Philippines and Singapore participated? I am talking about the last time the exercise was held, which was in 2012, I believe.

My second question is, during the 2012 exercise, were the Canadian Armed Forces in direct contact with the Indonesian, Filipino and Singaporean forces?


Rear-Admiral Gardam: Those are two excellent questions. With regard to the three countries you mentioned and Canada's participation and work with them, we actually work actively with those three countries. It's navy to navy. I would like to give a quick history lesson on the navy and where we've been for the last three decades.

The Royal Canadian Navy has been in this region for over three decades. We have been working very closely with the Philippines, the Malaysians and the Indonesians, and we do it navy-to-navy by entering ports and having port visits. Port visits are very much strategic engagement opportunities where our heads of missions, our ambassadors and trade shows focus around those port visits. We work hand in glove with Foreign Affairs to ensure that our two programs are synchronized.

The Rim of the Pacific exercises, as you're aware, comprise 14 different nations. They are the largest maritime exercises of their type in the world. The three countries you have mentioned are actively engaged in that.

Our closest relationship actually is with Singapore. We have many technical arrangements with Singapore. Our navies work quite often together on what we call PASSEX, which is an opportunity for navies at sea to exchange ideas, exchange watchkeepers and to work together. We are actively involved with those three countries.


Senator Fortin-Duplessis: You talked about exchange and cooperation in your introduction. Do you exchange officers with Singapore, the Philippines and Indonesia?


Rear-Admiral Gardam: I know that we have military training cooperation that is going on, which is not exchanges but it's actually where we are training officers from various countries, including two of the three you mention. I am not aware of exchanges that we have. I'll have to actually take that question back. I know that we do have defence attachés, who are a credit to that region, but it's not an exchange.

Senator Johnson: Since 2008, sir, there have been a number of visits to Canada by high-level Chinese PLA officials. While we understand a lot of the content of this dialogue is confidential, what have been the fruits of these conversations, if you can say, and do you feel the Chinese are serious about maintaining peace and stability in the Asia-Pacific?

Rear-Admiral Gardam: Those are two great questions.

On the first question, yes, there has been a lot of engagement between China and, most recently, starting with Minister MacKay, with our military. I will only concentrate on the military. I will not look at Foreign Affairs or any other issues.

We recently signed a cooperation framework initiative between China and Canada. That will allow us to work at exchanging information where it makes sense. One area where we work together is education. We are also potentially looking at sharing lessons with regard to disaster relief.

One thing we have noticed with China is that when we open our door a bit, many come in, so it's very much about a reciprocal, enduring, but also manageable relationship with China. In comparison to China, we are a fairly small interest to China. So it's very much when we look at our engagements with China, it's what do we want out of this? That's the most important part.

I was just in Russia a few months ago. I never would have guessed where we are currently today with Russia. It was the same process with Russia. What do we want out of it? What we want out of it is to always keep a door open for dialogue. That is the best we can hope for.

As we develop deeper and deeper relationships, it will be about prosperity. It will always be about money. Defence relationships often open the door where other doors are not open because we have a common understanding, in particular from a maritime perspective, of what it is to operate on the sea. We have a common framework to have a dialogue.

I forgot your second question.

Senator Johnson: Do you feel the Chinese are serious about maintaining peace and stability in the Asia-Pacific?

Rear-Admiral Gardam: I will characterize this by saying that, for China, it's all about prosperity, all about economic development, and it is very much about how they manage their burgeoning middle class. For China, it's about securing their own influence, their own security, before they move forward.

There's an expression, "China will grow old before China grows rich." That means that because of the single child policy, China is aging. It's a rapidly aging country. As that aging occurs, social unrest is occurring. With China, it is absolutely important that they are able to feed their economy, to satiate that appetite, to satisfy that appetite for that growing middle class and the poor who are moving up. China will do everything in its power first and foremost to maintain control of China; in other words, internal control of China. When we look at China we need to understand, I believe, what the internal issues are in order to actually understand how we can work with them externally. They have a lot of issues.

The Yangtze River, which is fed by the Himalayan ice cap, is almost dry. That has another clear environmental destabilizing impact upon China.

China needs natural resources to continue to move forward. China just had a yellow alert in pollution. We have never seen that before. The environmental issues of China are staggering. Anything we do to help China develop is in our interest and in their interest.

I believe we need to work closely with everyone, whether we agree with their politics; we must work closely with China. That is why Canada is now getting much more synchronized in how we are doing our engagement with China, not just military or foreign affairs but trade in all the other lanes we work with to ensure we have a common framework moving forward.

Senator Johnson: They must be a bit frantic about their environment and trying to manage it. We have to have a manageable relationship with them, of course, but how can they possibly manage this? Every time you read about it, it is getting worse.

Rear-Admiral Gardam: It is a problem of absolute significant importance and national imperative.

Think back to the U.K. and the Industrial Revolution. I am a history and math major, so I want to give another vignette. When the Industrial Revolution happened in Europe, we had absolute environmental disaster initially. Remember the coal clouds in London. You could not see anything. It wasn't until London was able to move up the evolutionary chain technologically that they were able to get a handle on pollution.

China is in the same position. It has to move up that chain, and we need to help them.

Senator Johnson: That is what I was asking.

Senator D. Smith: The committee members have heard this, before but I was first in China 40 years ago when Mao was still living; and I have been there 10 or 12 times since. The changes are incredibly dramatic. One thing I note is that there were certain things you could not talk to them about, like Taiwan, Tibet and Tiananmen Square.

Rear-Admiral Gardam: The three Ts.

Senator D. Smith: There is one thing where there's been little change. I was at a dinner party with the Chinese ambassador about three weeks ago. As well, the MP from Vancouver South had a lunch last week, and the ambassador was there. I said to him that the only country that can help to bring North Korea into the real world is China. "Are you up for it?" We didn't used to be able to talk to them about it.

Two years ago, at an event in Beijing, I raised this subject with some foreign affairs officials. It was interesting because they did not say anything but their body language responded. You could not quote them.

Do you have any sense about that? The ambassador said, "We do not believe in countries interfering with other countries." The body language was that this guy is crazy, but I don't think we can do anything about it. What is your view on it?

Rear-Admiral Gardam: North Korea is a great irritant to China.

Senator D. Smith: Yes, you can tell that.

Rear-Admiral Gardam: I will go back to peace, security and prosperity. China desperately wants that within the region because it is about money. When you have North Korea acting in erratic, irrational ways, it does not help that situation. China clearly sees it has a role to play in trying to moderate that dialogue, however it may come out.

It is interesting when you look at the Koreas, two countries with constitutions fundamentally driven to unification but each by different means: South Korea through peaceful embracement of North Korea; and North Korea through conquer. When you have two fundamental differences in a constitution and how they're driven, you're bound to have regional concerns.

China is absolutely watching this. It is something that I think we all need to watch in the coming months and years to see how this develops.

Senator D. Smith: They aren't doing much.

Rear-Admiral Gardam: China is doing a fair amount in the background because what you haven't seen is a regional conflict.

Senator D. Smith: That is true.

Rear-Admiral Gardam: Obviously I can't guess, but I can tell you what I know; and I know China is working as hard as they can to try to moderate this.

Senator Ataullahjan: I will continue with the topic of China. China has vastly increased its spending on the military, specifically on the sophistication of its navy. It has territorial claims in the East and the South China Sea. Many Asian countries consider it a threat. What has been the Canadian response with regard to China's build-up in defence? Has there been or will there be momentum toward a regional security arrangement?

Rear-Admiral Gardam: What you are talking about, Senator, is the nine-dash line, which is South and East Asia, which is steeped in history. In answer to this, it is all about the past. China has certain claims, whether they are valid, to the south and east ASEAN region; as do other countries within that region.

China, through its navy and the PLA, has been working actively to show its claim. We can remember the Spratly Islands. There is a picture of a young soldier carrying what looks like a rifle, sitting on a lawn chair. Territorial imperative: If someone from another country is there and is claiming it, that carries weight in the international court; and that's what China is doing.

When it comes to managing those disputes, the maritime piece is so important. The dispute mechanisms for that have to be managed through international law. The Canadian military does not take one side or the other on this dispute because it is not ours to take. What is ours to do is to work with other like-minded mechanisms to find mechanisms help resolve those disputes.

ASEAN is a regional forum looking at that. The ASEAN Defence Ministers Meetingis also a regional forum. Some of the expert working groups are forums also looking at things such as how to resolve possible conflicts at sea between warships before a gun is fired. Understand that if naval ships get into an at-sea battle, it is traditional warfare. That is well beyond a regional conflict. The goal is to prevent that. That is what Canada is actively involved in — the Rim of the Pacific exercises that we have been engaged in for over two decades. The exercises themselves are not complex, but it is all about relationship building. You heard the list of characters. Russia, China and India are all there. These are countries we work with but not traditionally; but now we are working with them more and more. The more we work with them, the more we understand and the better we have a chance of resolving those issues. However, I would say we have a long way to go yet.

In the Cold War we had clear mechanisms; it was binary. It's not binary now because it's multilateral.

China, as you may or not be aware, does not like to work multilaterally. China works bilaterally, one country at a time, because they can wear down a country. Multilaterally, which is where Canada is, working our Five Eyes partners, working with China and with Korea, we are all pushing with common messaging and it's the common messaging saying that that is not acceptable, if it comes from all of our lips, whether it's foreign affairs, trade missions or the military, we need to have common messaging and synchronize that with all of our allies. Because Canada is relatively small in population, we need to engage in the region intelligently, which means talking with our allies and asking where Canada will make the biggest impact. Then we need to concentrate on that because we can't take a shotgun approach and do a bit here and there.

To go back to my comment on Confucius, if we do that, we will fail significantly. We have to have engagement that is consistent and enduring, with the correct representation.

Senator Downe: I'm assuming the Asian countries must have much more interest in Canada because of the Northwest Passage that will now affect their trade, which relates to your comments on prosperity. Would this be a chip for Canada to play, that our importance is greater than our military contribution at this stage because of the northern passage through the Arctic?

Rear-Admiral Gardam: Thank you for that question. I just happened to have done my masters on the Northwest Passage, but I will not talk about my thesis. What I will talk about is the importance of the northern sea route via the passage.

The northern sea route is the route off Russia's coast. It has been actively open for many years. Russia is an Arctic nation. They live and work and operate in the Arctic. That's a 400-series highway. The Northwest Passage is a country road. I've been there. The Northwest Passage is filled with treacherous navigation, many shoaled and dangerous waters; weather that changes frequently; small bits of ice called bergy bits and growlers that will hull a ship; and poor visibility. Also, our requirements through the Arctic Water Pollution Prevention Act of 1985 means that if you're going to travel our waters you have to be double-hulled, have very high insurance, and you cannot release any effluents into the water, which means it's not a panacea; it's more a destination. The real route is a northern route off of Russia, where they don't quite have the same environmental concerns that we do.

Senator Downe: Three or four years ago, when China sent a ship across for the first time, I believe, my understanding is that it was the first time they sent a ship through to Iceland. Did they notify Canada? I assume they notified us but did not seek permission. Did we monitor if they met any of those conditions you outlined, such as double-hulled, pollution and so on?

Rear-Admiral Gardam: I cannot comment on the China one because I'm not familiar with the case. I can comment on how it works globally.

The Arctic Water Pollution Prevention Act is a voluntary compliance act that has certain stipulations. There have only been a couple of times where we have not been asked directly. One of them, in arrears, was the Manhattan. We granted them permission after they had gone through.

Senator Robichaud: We escorted them, didn't we?

Rear-Admiral Gardam: We did. The framework itself works because if something happens, for example, a ship has a medical alert issue, gets stuck in the ice, they inform us before they go in because we need to be available to help them out.

Senator Downe: Our position is they have to seek permission.

Rear-Admiral Gardam: No. Our position is they have to inform us. We do not deny the Northwest Passage to anyone. Why would we?

Senator Downe: If they don't inform us?

Rear-Admiral Gardam: As I said, it has only ever happened twice, so it is not an issue really.

Senator Downe: What was the second time?

Rear-Admiral Gardam: I can't remember; I can get back to you on that.


Senator Robichaud: You talked about the importance of maritime security for the transportation of goods. You also talked about piracy and the fact that there has been a dramatic decrease there. Is it still a major issue? And do those countries, Indonesia and the Philippines, have sufficient means to control piracy?

Rear-Admiral Gardam: In short, yes.


The three countries are working together. The profits they gain from not losing their trade and keeping that international channel open far outweighs the costs of their investing in their coast guards. It's a huge success story. Here we had countries that didn't cooperate before but now do. It is that cooperation that is paying off significantly now because piracy is almost down to zero in the strait. That would not have been the case 10 years ago.

The Chair: One other area that you touched is immigration and illegal immigration. That is a problem because of certain treatments. We know in Myanmar, for example, there are groups that have gone over the border and are in official or unofficial refugee status. This is a growing issue of people moving for jobs and tensions within certain groupings. Are we monitoring, paying attention, involving ourselves in that, as it may come to our borders?

Rear-Admiral Gardam: We monitor things that may come to our borders. I cannot comment on what actually happens in those countries, but our partners — CIC, the RCMP, CSIS — actively work to help Canada in queuing. I do not want to go into details. I know that from my last job, but I'm not an expert in that field.

I can say that Canada absolutely cooperates interdepartmentally to determine who is coming here and why. It's all about queuing. You need to send out ships and aircraft to find the vessel before it lands in Canada and we have new Canadians.

The Chair: Twenty years ago, anyone talking about security in the Asia-Pacific would be talking about confidence building and trying to get countries to sit down together even in a superficial way. What you have described is certainly a step forward or perhaps even more. Are we moving to a stronger architecture for security in Asia-Pacific?

Rear-Admiral Gardam: Yes, we are.

The Chair: I see no other questions. Thank you for coming before us and putting forward an area that is of concern. When you talk about the word "prosperity," you have to bring in a word like "security." I think we are looking and monitoring to those countries that we may wish to engage in Asia-Pacific, and we will probably engage with all of them, but to a certain extent greater and others lesser. We thank you for putting that information before us. It will be helpful in our study.

Rear-Admiral Gardam: You are welcome.

The Chair: Honourable Senators, the Standing Senate Committee on Foreign Affairs and International Trade is studying the security conditions and economic developments in the Asia-Pacific region, the implications for Canadian policy and interests in the region and other related matters.

On this panel we have, from Foreign Affairs, Trade and Development Canada, Susan Gregson, Assistant Deputy Minister (Asia); Peter MacArthur, Director General of South, Southeast Asia and Oceania; Jeff Nankivell, Director General for Development in Asia; and Leslie Norton, Director General, International Humanitarian Assistance Directorate. Welcome to the committee.

I think most of you have already testified before us in the past. We look forward to your opening statements, and then we will go to questions. I am not sure who will lead us in. Ms. Gregson?

Susan Gregson, Assistant Deputy Minister (Asia), Foreign Affairs, Trade and Development Canada: Yes, that is right. Thank you very much, Madam Chair and honourable senators. It is pleasure to be back here with you today.


Canada's ties with the three Southeast Asian countries under discussion today are already robust and are growing rapidly. All three are key non-traditional partners for Canada in a diverse and rapidly evolving region of ever-increasing importance to Canada across all three components of our department: foreign policy, trade and development.

I will provide an overview of Canada's relations with each of the three countries separately, after which I will be pleased to answer your questions.

Allow me to begin with Indonesia, the third-largest democracy in the world. Indonesia is a dynamic, diverse archipelago of 17,000 islands with over 300 languages spoken. Our bilateral relationship spans the spectrum of Canadian priorities: human rights and governance; peace and security; development cooperation; and trade and investment.


Indonesia is the "centre of gravity" in Southeast Asia and hosts the Secretariat of the Association of Southeast Asian Nations, or ASEAN. Home to the world's largest Muslim population, Indonesia is a partner for Canada in the global effort to combat international terrorism.

On peace and security, Indonesia has been one of the top recipients of DND's Military Training and Cooperation Program, and has participated in DFATD's Counter-Terrorism Capacity Building Program and Anti-Crime Capacity Building Program as well.

With the biggest economy in the region and a large working-age population, Indonesia represents an important economic opportunity for Canada, and has been identified as a priority market in DFATD's Global Markets Action Plan. Indonesia is one of the few major economies in the world with which we have a trade surplus. In 2011, Canadian direct investment in Indonesia was larger than our investment in China.

However, inadequate infrastructure, accountability issues and lack of transparency remain major challenges. A significant portion of the population lives below the poverty line. Thus, while there is substantial potential for growth, there is much need for progress across a range of governance and development challenges in order for Indonesia to reach its potential.

Canada has been working with Indonesia for over 50 years to address many of these challenges, and Indonesia is one of Canada's five countries of focus in Asia for development cooperation. Programming has focused on sustainable economic growth, governance reforms, skills for employment, and the promotion of democratic values. Canada was the first country to launch a bilateral human rights dialogue with Indonesia in 1997. Indonesia is also a proposed country of engagement for the Office of Religious Freedom, and we launched our first project under this program in August 2013.

Moving on to the Philippines, the Philippines is another increasingly important partner for Canada, as demonstrated by the visit of Prime Minister Harper in November 2012 and the signature of a memorandum of understanding on procurement between the Canadian Commercial Corporation and the Philippine Department of National Defense. On March 28 of this year, the Philippine Department of National Defense and Armed Forces acquired — under this MOU — eight Bell 412EP combat utility helicopters for a value of close to $120 million. Canada is home to some 800,000 people of Philippine origin and the Philippines is a top source country for immigrants and temporary foreign workers in Canada. Those people-to-people ties give Canada a high profile in the Philippines and greatly enhance the overall bilateral relationship.


As in Indonesia, our work in the Philippines is fully aligned with Canadian priorities, in areas such as poverty reduction, promotion of democratic development, governance, rule of law, peace and security, and human rights. Canada also supports the stated priorities of President Aquino, which are to advance socio-economic development, fight corruption, and negotiate a peaceful settlement with the Moro Islamic Liberation Front to end the decades-long insurgency in the Southern Philippines. Canada is supporting the peace process by, for example, chairing the Independent Commission on Policing in Mindanao through deployment of RCMP Assistant Commissioner Randall Beck.


The Philippines, with an estimated population of 97.4 million, is the second largest archipelago in Southeast Asia, after Indonesia. By virtue of its geography, the Philippines is one of the most disaster-prone countries in the world. You'll all remember Haiyan, or Yolanda, as it's known in the Philippines. This is the Category 5 typhoon that struck the Philippines last November. Haiyan was possibly the most powerful storm ever to make landfall. It caused more than 6,200 casualties and displaced 4 million people. In response, Canada provided $20 million to humanitarian partners to meet urgent food, water and sanitation, emergency shelter, medical and basic household needs within the first two weeks. In addition, the Canadian Armed Forces' Disaster Assistance Response Team, or DART, was deployed to support humanitarian efforts.


Challenges aside, the Philippines has been able to make economic progress. A significant level of domestic consumption, a resilient service sector, and large remittances from the nine million Filipinos who work abroad, including nearly $1 million from Canada in 2013, have helped bolster the economy.


Bilateral merchandise trade remains modest, though with potential for growth for Canadian companies in the Philippines, particularly in the areas of agri-food, infrastructure, information and communications technologies and education. Canadian exports could increase were there greater transparency and reduced protectionism, building on the efforts by the Government of the Philippines.

Canada, through its development cooperation program, works with the Philippines to achieve sustainable economic growth by strengthening the investment climate and advancing economic opportunities for the poor, both of which are priorities for the Philippine government.


Finally we come to the dynamic city-state of Singapore. Singapore is the economic heart of Southeast Asia, and punches well above its weight internationally. Our bilateral relationship is characterized by cooperation in trade and investment; science, technology and innovation; and security and defence. Relations are enhanced by the roughly 6,000 Canadians living in Singapore, the 83,000 Canadians who visit every year, and the 16,000 Singaporean graduates of Canadian universities. More than 20 Canadian universities have exchanges or other ties with Singaporean universities.


In 2013, Singapore was Canada's second largest destination in Southeast Asia, after Indonesia, for foreign direct investment, and our largest source of foreign direct investment from Southeast Asia. Over 100 Canadian companies have established a regional presence in Singapore. As one of the world's busiest container ports, Singapore has positioned itself as a business gateway to Asia. Like Indonesia, Singapore has been identified as a priority market under DFATD's Global Markets Action Plan and we have high hopes for the future of our commercial relationship.

Singapore is also an important partner for Canada on security and defence. We have cooperated in areas such as pilot training, maritime security, non-proliferation of weapons of mass destruction, and counterterrorism. We also have significant cooperation in international organizations, including the UN, WTO, ASEAN, APEC and, most recently, the Arctic Council, where there is much scope for collaboration. We look forward to marking our 50 years of diplomatic relations with Singapore in 2015.


In closing, with this context in mind, we look ahead to upcoming milestones in these important and dynamic countries. Nearly 190 million Indonesians will be voting in legislative and presidential elections starting next week. The Philippines will host APEC in 2015. And Singapore will celebrate the 50th anniversary of its independence next year.


All three are important voices within ASEAN and its related organizations. Indonesia is Canada's coordinating country for economic issues within ASEAN for 2012 to 2015. Singapore is Canada's overall coordinating country in ASEAN for the same period, and it will pass the torch to the Philippines from 2015 to 2018.

Canada's relationships with these countries will only increase in significance as Southeast Asia gains in economic strength and political heft, as people-to-people ties deepen, as ASEAN integrates further and expands links with dialogue partners such as Canada, and as Canadian companies further their engagement in the region.

The Chair: Thank you.


Senator Fortin-Duplessis: I have two quick questions. Indonesians will be going to the polls on April 9 to elect a parliament and then again in July to elect their next president. To begin, can you tell us if our diplomats in Jakarta have had discussions with the leading presidential candidates and the leaders of the political parties?

Ms. Gregson: All I can say is that, at this time, our Head of Mission has been in contact with Jokowi Dodo. I, too, was at the meeting in the fall of 2013. I am certain that our embassy will meet with all of the other candidates, and that they will provide us with reports about the candidates and the positions held by their party.

Senator Fortin-Duplessis: Second question: Is Canada sending observers to monitor this election?

Ms. Gregson: No, there are no plans for that at this time.

Senator Fortin-Duplessis: Thank you very much.


Senator D. Smith: I was kind of surprised by the statement on the first page in the third paragraph under "Indonesia":

Canadian direct investment in Indonesia is larger than our investment in China.

That isn't to say that the direct investment there is huge, but I can't believe it's that small in China. Maybe you can give us definitions of these words. When you say "direct" investment, do you have a definition for "indirect" investment, like if they buy 30 per cent of some company?

I find it hard to believe that our presence in China — depending on how you define these — would not be higher than in Indonesia. How do you define this terminology? Is it smaller in China because the laws just don't allow us to take over little companies?

Ms. Gregson: I'll start off by saying that I, too, was quite surprised to see that figure. You know that we have negotiated a foreign investment protection and promotion agreement with China: that has not yet been ratified but has been concluded.

In terms of further details on Indonesia, I'll defer to my colleague Peter MacArthur.

Senator D. Smith: I would be interested to know if you have the exact numbers.

Peter MacArthur, Director General of South, Southeast Asia and Oceania, Foreign Affairs, Trade and Development Canada: That's a good question. The economic mass of this G20 economy, Indonesia and its natural resource base, which is very strong, has encouraged many Canadian mining and oil and gas companies to invest directly in their own operations, their own presence on the ground, subsidiaries.

Companies such as the following would make up a large percentage of this FDI from Canada: Talisman Energy for oil and gas; Husky Energy for natural gas, Ballard for fuel cells; SNC-Lavalin is there in a service capacity, but it has people on the ground; CAE for flight simulators, aerospace sector; Sherritt in mining.

In the services sector, which is also an investment on the ground, both Manulife and Sun Life are there. The Indonesian middle class is a big attraction. As the country industrializes and develops a middle class, the service industry is very much there.

IPR protection in China maybe is something that some of our business community is concerned about.

Senator D. Smith: It's hard to get in. You hear all the debate about Russia and Ukraine and then Canadian investment. Russia, the mineral resources are huge, but the only company you hear anything about is the Kinross Gold mine, whereas in Indonesia you just mentioned seven or eight, I think. So that would be what's driving those numbers.

Mr. MacArthur: It's driven by natural resources and more of an interest by our industry and possibly more of an opening at the Indonesian end for our companies. To answer your question, total stock of Canadian FDI in Indonesia in 2012 was $3.2 billion.

Senator D. Smith: Do you know what it was for China?

Mr. MacArthur: I don't have that number with me, but we can certainly provide it.

I do want to point out that statistically it's sometimes difficult to measure FDI. In the case of India, for example, we know it's higher, but some Canadian companies, like many foreign companies, route their investments through third countries such as Mauritius or Dubai. For this reason, statistically it's difficult to have the full picture on FDI. However, we are very confident that in the case of Indonesia, because it's mining and oil and gas, it's much easier to track — it's right there.


Senator Demers: Hello to all our witnesses. Ms. Gregson, I would like to congratulate you on your impeccable French.


In recent times, countries in the Asia-Pacific have had a lot of riots regarding basic foodstuffs such as rice. What has been the cause of those riots? They seem to be multiplying.

Population growth in countries in Southeast Asia is especially vulnerable to these riots, and why? What is the future to protect food security in Asia?

Ms. Gregson: This is an excellent question. I'll ask my colleague Jeff Nankivell to take that one.

Jeff Nankivell, Director General for Development in Asia, Foreign Affairs, Trade and Development Canada: From a development perspective, one sees the news reports of riots in recent years, and of course in each case there are very specific causes in the country. Thailand has had riots and demonstrations and a shutdown of the city centre over political contestation, which is not really related to the price of food or that kind of thing.

In recent years, in Indonesia there have been demonstrations over changes to the price of oil and gas or the petrol price, because there's a subsidy program still in effect and the government is trying to ease out of that. It has a big effect on the population.

In terms of food production, these are countries that have made huge strides in their ability to feed themselves. Many of the countries in the region are now major exporters in most years, but it's a region that's very vulnerable to climate events, and that has always been the case. Production can be very badly affected by storms. We've seen in the Philippines, for example, the impact of the November typhoon on agriculture has been very significant. It's a big part of the economic losses.

If we take a long-term view, the trends have been good. In terms of improving productivity, Canadian companies play a role in that through technology, through fertilizer exports to some of these countries.

In our development cooperation programs in recent years in the region, in the Philippines we have supported work in the agriculture sector, but it has been from the angle of agribusiness, right from small-scale farming through the production chain, working on private-sector development to improve logistics and distribution and provide opportunities for farmers. The issue hasn't been basic food security, as such. It has been trying to build that value chain, working with partners like the World Bank's International Finance Corporation. We also have similar projects in Indonesia and Vietnam.

We're not focusing on Vietnam today, but that is one area in our long-term development cooperation programs in the region where we have, in more recent years, been doing work on food production, food quality and food safety as a major part of our programming.

In terms of food security, Ms. Norton may have something to add on that. We could just mention that when these disasters do hit, one of our typical avenues of response, and we spend millions of dollars every year in the region on disaster response of one kind or another, much of that is going through agencies like the World Food Programme for provision of food, or food for work and reconstruction activities.


Senator Dawson: I would like to get back to Senator Duplessis' question about sending observers to Indonesia's next election.

Setting aside the fact that observers such as Democracy Watch in Indonesia are not being sent, what does the Department of Foreign Affairs and International Trade have to say about the credibility and reliability of the Indonesian electoral process?

Ms. Gregson: I do not believe that we have major concerns with the elections in Indonesia.

Mr. MacArthur: We feel that Indonesia has made a great deal of progress in terms of democracy over the past 15 years.

We find that it is all in very good order and that the civil society is very vibrant and active compared to previous years, and that the media are independent.

Senator Dawson: That is good news. Now, on the subject of the Philippines.


You talked about $1 million of remittance. How do we measure in this era of electronic transfer? In the old days, with the transfers being done through the big agencies that would take 15 per cent of every dollar that was sent, we could monitor it more easily. You say $1 million. Where do you get $1 million?

Ms. Gregson: This is according to current account data we have. The Philippines, as a government, has a very well-structured system to track and monitor these remittances from abroad. It is a large part of their economy, and they're very au courant with what is coming in.

Senator Dawson: It's monitored on their receiving end?

Ms. Gregson: That's right.

Senator Dawson: Maybe we could monitor how much money we can get from our rich Canadians who are in Singapore. We could get some remittance from them.

Senator Johnson: Unlike Singapore, Burma and Indonesia, which are three of the countries the committee is focusing on studying, the Philippines was not identified in our government's 2013 Global Markets Action Plan. So I was wondering, the other markets, you said, they hold greater promise. What about the Philippines? They said that it does not hold the greatest promise for Canadian business. I am wondering why it was not identified in any way as a priority for Canadian business in the action plan, given the kind of relationship we are building with them.

Ms. Gregson: As in any kind of action plan, you've got to set priorities, and we've done that by looking at which countries have the most promise. There are some issues around accountability and transparency in the Philippines that have caused some concern.

I don't know if Mr. MacArthur wants to jump in here.

Mr. MacArthur: That's a very good question. Thank you, senator.

The allocation of priority markets, one of the factors was who the bargaining countries are in the TPP. Brunei and Singapore are. Philippines, at this stage, is not yet in the TPP. That was one of the criteria that drove this.

Having said that, we have a robust, strong trade commissioner team in Manila, and we also interact with the Asian Development Bank in Manila.

Examples such as Bombardier, the Bell helicopter sale that Ms. Gregson referred to, those was very much supported by the Canadian Commercial Corporation, Government of Canada and the Canadian embassy in Manila. So we maintain a good presence in Philippines. As you've heard, we have had to make some decisions to prioritize for proactive work, but the reactive the work is still there, and we have a good set-up to support Canadian business in the country.

Senator Johnson: I come from Manitoba, a province where we have the largest Filipino population per capita in the country and have had for many years. We know that it's increasing all the time. We also known the amount of money they send back home, not just from the Manitoba region, of course, but across Canada. They're amazing citizens. They have been amazing people in Manitoba and also the work they do.

It's interesting that so many of them are continuing to want to leave. Are you seeing this more and more? They really want to get over here.

Ms. Gregson: That would really be a question better directed to immigration.

Senator Johnson: That's true.

Ms. Gregson: I can certainly tell you from my own previous experience in that department that the Philippines has long been a country of immigration for many parts of the world, but because of the different programs we have had in Canada, certainly in Manitoba with the garment industry, that they went over as garment workers to start. We have lots of foreign workers who have come over to be domestic, live-in caregivers. A lot of people have come over as nurses.

It's really part of the economic situation in the Philippines that drives people to seek employment abroad.

Senator Johnson: Yet in this article in Foreign Affairs, Karen Brooks said that the Philippines is a big surprise, among the fastest growing and promising economies.

You say you have to prioritize. I understand that, but it's such a contradiction in terms of it having this potential and yet, of course, there are so many people that we can't see what will happen. It's such an incredible area and so large in terms of Canadian attraction and business, yet we have so many people here from there. It's incredible.

Mr. MacArthur: Senator, in reply, it's very clear that Philippines plays a key role in filling many specialized labour force requirements that we have, particularly in Western Canada. Some of this is aided by the fact that many of these Filipino workers have worked in the oil and gas industry in the Persian Gulf, so they have skill sets. They've come back to the Philippines, and they're able to bring these to Western Canada.

For example, I'm told by one province that Filipino female welders are very good at welding, and so to meet welding requirements, it's an important source of labour from the Asia-Pacific area.

You're quite right. They're playing an increasingly important role in Canada's economic future.


Senator Robichaud: You said that more than nine million Filipinos send money back to their country. We were told that there was also a $1 million direct contribution from Canada. If I have the figures right, yesterday we were told that $2.1 billion is transferred to the Philippine economy. Is that correct in your opinion?

Ms. Gregson: I believe so.

Senator Robichaud: Thank you. We were also told that there is insufficient food production. You talked about the efforts being made to help people produce more food, also by using the infrastructure. But there are always families that go hungry. When people find themselves in these circumstances, it often leads to unrest.

Can this situation be contained and are enough efforts being made to ensure that these families have something to eat?

Mr. Nankivell: Thank you for the question. It is always a challenge. Our efforts to provide financial support focus on the system and the economic framework in order to create employment to provide people with good jobs. However, it is a long-term project. In the end, it will depend on the state of the economy in general. A great deal of progress has been made in that regard in the Philippines. However, the poverty rate is still too high. According to the most recent statistics, approximately 18.4 per cent of the population lives on less than $1.25 a day in the Philippines.

Approximately 41 per cent of the people are living on less than $2 a day. This means that they are susceptible to poverty. This problem is exacerbated by natural disasters, such as Typhoon Haiyan, or Yolanda.

This is a long-term effort to encourage economic growth and sustainable social development. We are still working on it, but it is a long-term project.

Leslie Norton, Director General, International Humanitarian Assistance Directorate, Foreign Affairs, Trade and Development Canada: I would like to add something. When there are areas with humanitarian needs, such as Mindanao Island, we work closely with our international humanitarian partners to meet these needs. That adds to what Mr. Nankivell just said.

Senator Robichaud: In the case of natural disasters, we are talking about one-time interventions, correct?

Ms. Norton: And also conflicts.

Senator Robichaud: Of course.

You said that 18 per cent of the population lives on $1.25 a day in assistance and that 40 per cent of the population lives on less than $2 a day?

Mr. Nankivell: Forty-one per cent. Including the people below.

Senator Robichaud: That is a lot. Can we say that the rich are getting richer and that the poor are losing ground?

Mr. Nankivell: The situation for the poor keeps improving in the Philippines and in Indonesia, even though things have slowed down in recent years. It is not true that the poor are becoming poorer. These statistics have improved in recent years.


Malnutrition or undernourishment is a separate indicator. It is true that living on less than $2 a day in a country like the Philippines or Indonesia is not like living on $2 a day in Montreal, Ottawa or Fredericton. There are large, poor populations in these countries, definitely.


Senator Fortin-Duplessis: Ms. Gregson, I would like to know how the different federal departments and agencies coordinate their priorities and their activities in the Asia-Pacific region.

Ms. Gregson: Coordination is primarily done in our embassies and community zones. There are a number of departments on the ground, so that makes it easier to coordinate efforts. Here in Ottawa, our department is in constant contact with our colleagues from other departments, especially with respect to official visits or our regional strategies. We often talk to our colleagues in other departments. Other departments are on our radar. We have many colleagues from the immigration department working at our embassies, as well as colleagues from the Departments of Agriculture, Natural Resources and Industry.

Mr. MacArthur: Three times a year, I hold a meeting with my counterparts from all departments on the Southeast Asia file so that we can coordinate our plans, visits and relations and so that we can share our information on this file.

Senator Fortin-Duplessis: Would you say that it is well coordinated and that you are aware of everything that is going on and how it is going on?

Ms. Gregson: Yes.


The Chair: Thank you for coming here and zeroing in on the countries that we are starting to focus on. It is helpful. We may have to have you back again; we are not sure. As we continue to study this, your input has put the government perspective on our work. Thank you very much for appearing today.

Ms. Gregson: Could I add one thing, senator, with your permission?

The Chair: Please.

Ms. Gregson: Recently, we commissioned a study on ASEAN commercial opportunities for Canadian business, and we would like to table that. We have copies in both official languages that we will leave with the clerk.

The Chair: Thank you very much.

(The committee adjourned.)