Hon. Ed Fast (Minister of International Trade):
Thank you, Mr. Chair. Good morning, everyone. Bonjour, chers amis
. Thank you for the invitation to appear before you today. I am joined by Susan Bincoletto, who is our chief trade commissioner for Canada. l'm delighted that the committee has chosen to undertake a review of our government's global markets action plan. This morning I would like to provide you with some background on this landmark plan and also fill in a few details.
It's no secret to anyone here that Canada has been and remains a nation built on trade. We are one of the great free-trading nations of the world. Trade is equivalent in size to some 60% of Canada's gross domestic product, and one out of every five Canadian jobs is related to exports.
One of the first initiatives our government undertook to expand international trade for Canadian businesses was the global commerce strategy. It was a comprehensive plan for expanding Canada's trade network, strengthening our competitive position in our traditional markets, and extending our reach to new, emerging markets. The strategy generated significant success, helping to pave the way for our government to sign numerous trade agreements.
But in a fiercely competitive global economy, Canada must remain nimble and agile. We must keep challenging ourselves. To do just that, our government's economic action plan 2012 committed to building on the success of the global commerce strategy by consulting extensively with Canada's business community to identify new markets, new strengths, and new opportunities.
The result of our consultations is the global markets action plan, or GMAP as we call it. This plan, which I released at the end of last year, is Canada's new blueprint for creating jobs, economic growth, and opportunities for Canadians through international trade and investment.
Under the GMAP, the Government of Canada will concentrate its efforts on the markets that hold the greatest promise for Canadian business, and focus on the sectors of our economy that hold the greatest promise for export growth. We will do this through vigorous trade promotion and effective trade policy.
As we concentrate on priority markets and sectors, the global markets action plan will also entrench the concept of economic diplomacy as a driving force behind the Government of Canada's trade promotion activities throughout its international diplomatic network.
Let me be clear. Placing economic diplomacy at the heart of our broader foreign policy plan is not in any way intended to undermine or compromise Canada's robust development and humanitarian programs, or our peace and global security initiatives.
We do expect our government representatives abroad to promote all of Canada's values and interests, including our economic interests. At the forefront of these efforts is Canada's trade commissioner service. These are Canada's trade professionals, posted across Canada and all around the world, executing the trade and investment promotion activities of the GMAP as a core component of our broader foreign policy plan. Our trade commissioners provide market intelligence, on-the-ground support, and act as troubleshooters in markets that Canadian companies are interested in exporting to.
I recently announced that more than 25 trade commissioners will be embedded in industry associations across our country. Their role is to inform Canadian companies about the tools that our Canadian government has made available to them as they explore export interests around the world. Our embedded trade commissioners will also act as a bridge between businesses and government programs, policies, and agencies such as Export Development Canada, the Canadian Commercial Corporation, and the Business Development Bank of Canada.
Our embedded trade commissioners will also gain better insight into the evolving export needs of Canadian industries and ensure these needs are reflected in the services they provide to our businesses.
Another trade promotion tool I want to touch on is the wide array of trade missions that our government leads to our priority markets.
Sector-focused trade missions are one of the many ways our government supports Canadian companies, particularly SMEs, to explore and succeed in foreign markets. Trade missions are about opening doors, about finding partners, engaging with key decision-makers, fostering long-term relationships, and identifying new trade and investment opportunities.
In fact, I just completed a trade mission to China this last week.
The mission was focused on the sustainable technologies industry, one of the priority sectors under the global markets action plan. During that mission, I announced that we will open another four Canadian trade offices in China, bringing to 15 the total number of points of service Canada offers to Canadian exporters and investors in our second-largest trading partner, China. Over 100 of Canada's trade commissioners will be deployed throughout China. In short, we are committed to aligning Canada's resources with our priority markets. Next month, I'll be leading a trade mission to South Africa and Tanzania with a special focus on the extractive sector, infrastructure, and renewable energy and power.
Equally important to our trade strategy are incoming trade missions. This Sunday I will be welcoming in Vancouver a delegation of my ASEAN ministerial counterparts and senior officials. We're very much looking forward to deepening our trade ties with our ASEAN friends—those will be countries in Southeast Asia such as Cambodia, Vietnam, Indonesia, the Philippines, and Malaysia—and we're looking forward to showcasing the very best of what Canada has to offer. I'm also pleased that business delegates from Turkey will be here in Canada next week. As you know, Turkey is also a priority market under the global markets action plan.
Now, those incoming trade missions to Canada are among the tools we use to connect our SMEs to global markets. I would just note, with regard to small and medium-sized enterprises or SMEs, that the GMAP recognizes that SMEs are the backbone of Canada's economy. We currently have somewhere in the order of one million SMEs in Canada. Many of them have the capacity to export, but only about 40,000 of that one million do so. The number that export beyond North America is even smaller, much smaller. So, our goal under GMAP is to increase the number of SMEs that export into emerging markets from 11,000 to 21,000 companies. I know that's a tall order, but these are the markets that today offer the greatest growth opportunities, and it is critical to our long-term prosperity that our SMEs step up to the plate and now begin to explore export opportunities beyond North America.
The last pillar of the GMAP that I wanted to mention is our commitment to negotiating trade agreements and investment agreements with other countries, which will free up trade between us and our key trading partners and provide more security and assurance for those in Canada who want to invest abroad.
When our government first took office in 2006, Canada had concluded free trade agreements with only five countries. That was a short eight years ago. Today we're approaching concluded trade agreements with 43 different countries, and there are many more to come. Last October we signed the agreement in principle for our free trade agreement with the European Union. When that agreement comes into force, it will mean that Canadian exporters have preferential access to more than half of the entire global marketplace. As the world's largest trading bloc, the EU represents over $17 trillion in economic activity every year. The value of the EU's annual imports—imports alone—exceeds Canada's total annual economic output.
In March we also announced the successful conclusion of a free trade agreement with South Korea, Canada's first free trade agreement in Asia. This agreement will boost Canada's economy by $1.7 billion a year, and just as importantly, Canadian businesses will now be able to use Korea as a gateway to the larger, rapidly growing markets of Asia, where we're also pursuing free trade agreements with India and Japan and within the Trans-Pacific Partnership.
Investment protection agreements are also important as they provide Canadian businesses with greater confidence and assurance when they invest abroad. Two days ago I announced the coming into force of the Canada-Benin Foreign Investment Promotion and Protection Agreement, which is Canada's third in Africa. That brings to 27 the number of bilateral investment treaties Canada has in force around the world.
In closing, I want to state that our government's ultimate goal is a world in which all can share in the prosperity, opportunity, and choice that international trade and investment deliver. The GMAP is Canada's contribution as we all work toward that goal.
Thank you. I welcome your questions, Mr. Chair.
Mr. Don Davies (Vancouver Kingsway, NDP):
Thank you, Mr. Chairman.
Thank you, Mr. Minister, for being with us today. Again, welcome to the committee.
Minister, I want to commend you for your recent efforts to increase our trade presence in China. While we know that trade agreements can provide the framework opportunities to increase economic activities, as you have pointed out today, trade commission offices provide the real, on-the-ground services that help Canadian businesses realize that potential and actually often make the sales.
However, there are an increasing number of commentators, including the Canadian Chamber of Commerce, who point out that our trade commissioner's staff have been under-resourced over the past eight years. Cam Vidler, the director of international policy for the Canadian Chamber of Commerce told this committee two weeks ago, and I'll quote him:
||The trade commissioner service is at the heart of Canada's economic diplomacy, and they need to have the resources and skills set to get the job done right. Despite rising service requests, budgets and staffing are at the same level as they were in 2007 and are set to stay flat for the foreseeable future.
Given the vital role that trade commissioners play in realizing our trade ambitions, Mr. Minister, can you tell this committee why they're not receiving increased resources from your government?
Mr. Don Davies:
Now, Minister, of course Canada is in a competitive world, and many other countries are seeking to tap the very same markets that we are. So it's instructive, I think, to compare our investments and trade assets with our competitors'.
I'll quote the Canadian Chamber of Commerce again. Two weeks ago, they told our committee, “As a share of GDP, the United Kingdom now spends twice as much as Canada on its trade diplomats.”
They pointed out that Australia dedicates 50% more resources and trade promotion than does Canada. The demand is clearly there. The recent Chamber of Commerce report elaborates and states, and I'll quote again:
||Recent developments suggest that resources are increasingly being spread thin.... Much of this demand has come from emerging markets,
—the markets you referred to, Mr. Minister—
||where trade commissioner requests grew by 15 per cent over the past year. In China and India, they increased by 37 per cent and 25 per cent, respectively. The target in the Global Markets Action Plan to double the presence of small- and medium-sized businesses in these markets by 2018 will only add to this pressure.
So, again, logically the demand in our trade commissioner services, in their view and ours, should be met with increased resources in order to ensure success. So are there any plans that you have to try to meet that increased demand with the increased trade commissioner presence to realize that potential?
Mr. Don Davies:
Now, I just want to turn to SMEs for a moment if I may, Mr. Minister.
The Chamber of Commerce also pointed out, in their report, the shutting down of the virtual trade commissioner service, which was an online, streamlined, one-stop shop for the trade commissioner service.
I also have spoken to many businesses and exporters, who tell us that it's very helpful for them to have a one-stop shop, particularly for SMEs who don't have big departments. They don't have the staff, the time, or the resources to have a presence in other markets. They want our government to provide them with a streamlined location, preferably online, where they can get the information they need to access those markets. They say that this service, the virtual trade commissioner service, was crucial for SMEs, who find it “difficult to navigate the trade promotion ecosystem.”
The report of the Canadian Chamber went on to say:
||Often, they have to visit multiple websites, and speak with several representatives in different departments, before finding the relative solution to their problem. This can be enough to deter them from seeking services in the future.
Can you give us a brief explanation, Mr. Minister, of why the virtual trade commissioner service was closed, if we really want to help SMEs to tap into export markets?
Mr. Erin O'Toole (Durham, CPC):
Thank you very much, Mr. Chair.
Thank you, Mr. Minister and Ms. Bincoletto, for joining us this morning. We appreciate your remarks, and we appreciate your efforts, globally.
Minister, I want to seize first on your great breakdown of our government's focus on SMEs, small to medium-sized enterprises: one million, but only 40,000 exporting, and a vast majority of those only looking to the U.S.
We heard, a couple of weeks ago, from Dr. Head, from the University of British Columbia, and Dr. Wright, from York University, who suggested that the growth of SMEs and their export opportunities was critical, and how the focus on SMEs as part of the global markets action plan was a profound departure from the past, where there was more of a scattergun approach taken to trade missions.
Would you care to comment on how SMEs are particularly a part of the global markets action plan?
Hon. Ed Fast:
Yes. Thank you for that question.
We have quickly realized that our large Canadian companies, the multinationals, have the resources to penetrate new markets and have the resources to expand their presence in markets that matter. What we realize is that our Canadian small and medium-sized enterprises are woefully unaware of the tools that their federal government has made and continues to make available to them to be successful, as they look for export opportunities outside of Canada and outside of North America.
The global markets action plan recognizes that, and that's why there's such a special place in the GMAP for SMEs. They are going to drive much of our future export growth around the world. That's why we want to make sure that we also develop a plan, which we're in the process of doing, to promote the tools that the federal government, and by the way, the provincial governments as well, make available to SMEs, so that they can safely start to explore those new markets they probably should have explored many years ago.
I've long ago come to the conclusion that Canadian companies are highly risk averse. They're very cautious, probably more so than companies in some of our key trading partners, and it takes quite something to push them over the line to where they say, “Okay, we’re going to actually take that next step and start to explore these new markets and start to develop our export potential”.
I believe the global markets action plan is a very significant step in the right direction to do that, but it's not going to be only me as international trade minister and my ministerial colleagues and our MP colleagues who will be responsible for promoting those opportunities for SMEs. We're also going to work with the industry associations across Canada, to make it very clear to them that we want them to be our partners as we communicate with our SMEs this incredible world of opportunity out there that they haven't yet tapped into.
Mr. Massimo Pacetti (Saint-Léonard—Saint-Michel, Lib.):
Thank you, Mr. Chair.
What a segue. Yes, I am the Liberal member on this committee.
Your colleagues around the table have decided that I have only five minutes, so perhaps you could try to keep your answers limited. I have a couple of questions.
Thank you for coming, by the way, Mr. Fast. It is appreciated.
I want to ask a question on the SMEs. I totally agree with regard to the SMEs not being able to have the opportunity to export, for various reasons. I have friends in accounting practices who have a lot of connections with small businesses, and the challenge is always the resources, financial and human.
Ms. Bincoletto, you spoke about EDC and BDC working together. My feeling is that as long as BDC is charging 4% or 5% extra for loans, and EDC is asking for extra paperwork, and BDC is asking for extra paperwork, small businesses will not start exporting. It just means more resources they'll have to put out before they get even one dollar back in profit or investment.
Do you have any comment, Mr. Fast?
Hon. Ron Cannan (Kelowna—Lake Country, CPC):
Thank you, Mr. Chair.
Thanks, Minister Fast and Ms. Bincoletto, for appearing at our committee this morning.
As you alluded in your opening comments, Minister Fast, we're talking about the global markets action plan, or as you mentioned, a landmark plan to help Canadian businesses to expand beyond the United States where we've obviously been concentrating for a number of years. They will continue to be our best trading partner and ally, but we need to find ways to expand.
With one of these initiatives I had the pleasure, and I think the opportunity, to travel to Korea with the Prime Minister for the signing of the free trade agreement, opening the Asian market to about another 50 million potential customers. One of the things I heard from investors on the trip, and we've heard in the committee and from my constituents, is the protection of their investments. You alluded to the Foreign Investment Promotion and Protection Agreement that you recently signed with Benin, a record amount. One of the concerns of Canadian investors going into China, which is number two after the United States and continues to expand, is to ensure their investments are protected.
Can you share with the committee the importance of the Canada-China FIPA, and how that'll protect Canadian investors?
Hon. Ed Fast:
Thank you for that question.
Let me start off by saying that investment and trade are two sides of the same coin. Both of them drive economic prosperity here at home. When a Canadian company invests abroad, that also creates jobs here at home. When we attract foreign investment from another country into Canada, that also creates jobs here at home. So investment is very much part of our government's broader economic agenda. The reason we are negotiating bilateral investment treaties is because in many parts of the world investors don't have the protection of the rule of law. They don't have regulatory certainty. They don't have transparency, the way we do in Canada.
I'll make a comment about Canada. When a foreign investor invests in Canada, once they are invested we don't discriminate against them. We don't say because you're a foreign company investing in Canada we're going to treat you differently from Canadian companies. We treat them fairly. We treat them free of discrimination.
That is not the case with many of our trading partners, which is why we negotiate bilateral investment treaties that set out a clear set of rules under which these investments will be treated once they have been made, and these investment treaties also set out a clear set of rules under which investment disputes are resolved.
Suppose Canada has a company that invests in another country. The investment is made, and now the government of that country discriminates against the Canadian company. If we have no investment treaty in place, there really is no protection. That company is at the whim of the domestic courts in that foreign country. But when we have a bilateral investment treaty in place, the Canadian company's dispute with that government is elevated out of the domestic context and into the international arbitration arena where there is the rule of law, where there are clear rules, where there is fairness, and where you have independent, impartial adjudicators who decide on that dispute.
That's why we're anxious to negotiate more of these agreements. They are in Canada's own self-interest. We need to have them in place to protect Canadian investors, and quite frankly, Mr. Cannan, Canadian investors in Canada have been calling for these agreements, including the one with China, for a very long time, and now we're delivering.
Hon. Ron Cannan:
Thanks for that clarity on the importance of the FIPAs around the world.
One other area I'd like to talk about is something I'm passionate about, and that is education. My colleague, Randy Hoback, as the chair of the ParlAmericas committee, and some of us on the trade committee, have recently had an opportunity to go to Peru.
Mr. Pacetti talked about environmental issues, human rights. Canada is leading the way on corporate social responsibility in the mining sector and some of these other areas in other countries we've gone to and heard about first-hand. One of the ways is through reciprocal education.
I know that within the GMAP, the global markets action plan, education is an important portion of the GMAP plan. I know the government understands the importance of the economy. I think of my riding in the Kelowna—Lake Country, and of Okanagan College and UBC Okanagan, which have several international students. It has created a real diversity and ambience in our community that has helped from a cultural perspective in a reciprocal way.
Could you maybe elaborate a little bit as far as how education equals peace and opportunity, and the importance of GMAP and trade and commerce to Canada and international partners?
Hon. Ed Fast:
That's a great question. I'm glad you brought up international education. This is a priority sector for Canada. It's one of the 22 priority sectors identified under the global markets action plan.
Beneath that plan, the umbrella of the global markets action plan, we've actually also released the international education strategy under which we have set the goal of doubling the number of students from abroad who will study in Canada over the next 10 years. Why is that important? It is because when international students come to Canada they, of course, enrich Canadian students because they are doing research in universities, they are working together, and they are studying together. Of course, when these students go back home, they become some of Canada's best ambassadors.
I would be remiss if I didn't mention that the international education strategy goes far beyond simply attracting foreign students to Canada. It's also about internationalizing the education of Canadian students. This strategy will have a focus on making sure that Canadian students, say at universities and colleges, spend at least one or two semesters abroad acquiring the language skills, the cultural skills, and the business skills, that will make them more valuable to their future employers. If they do become entrepreneurs and businesspeople, it will make them much more effective and successful within a globalized marketplace.
The reality is that we live in a global economy and we're going to be more effective, our Canadian students will be more effective, if they actually diversify their educational experiences beyond Canada. This is a two-way street and I'm pretty excited about delivering on this strategy.
Mr. Randy Hoback (Prince Albert, CPC):
Thank you, Chair.
Thank you, Minister, for being here.
Minister, I want to compliment you. It's nice to see your enthusiasm and your passion for the job. It really shows in how you go about conducting yourself in the work you do, and I definitely hear that in talking to the business community and to people who have worked with you. I'd like to compliment you on that and wish you to keep it up, because you're doing a great job.
One thing that I think this committee has been lucky about was to be able to go to Peru—not as a committee but through ParlAmericas—where we toured a Canadian gold mine and saw exactly how they operate in the field. We learned about some of the issues around Peru and some of the human rights and growth issues they're facing.
What really was unfortunate was that this committee wanted to do a study on the Pacific Alliance and wanted to travel to the Pacific Alliance countries, and because of partisan NDP games in the House, they basically.... I'm not sure if it's because of the things that were going on in the House or in fact that they didn't want to hear the evidence of things that are happening in countries like Colombia because of trade agreements, but of course we couldn't travel.
I wonder if you could give us an overview of the Pacific Alliance, of exactly how we're interacting there and just what it means for the region, and why we need to be engaged, or, for sure, at least be at the table observing.