SINT Committee Meeting

37th PARLIAMENT, 2nd SESSION

Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

EVIDENCE

CONTENTS

Wednesday, February 12, 2003

¹

1530

The Chair (Mr. Mac Harb (Ottawa Centre, Lib.))

Mr. David Mulroney (Assistant Deputy Minister, Portfolio Asia-Pacific, Department of Foreign Affairs and International Trade)

¹

1535

¹

1540

The Chair

Mr. Brian Hunter (Senior Economist, Canadian International Development Agency)

The Chair

Mr. John Banigan (Assistant Deputy Minister, Industry Sector, Department of Industry)

¹

1545

¹

1550

The Chair

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.)

Mr. Brian Hunter

¹

1555

Mr. Bob Speller

The Chair

Mr. Bob Speller

The Chair

Mr. John Banigan

º

1600

Mr. Bob Speller

Mr. John Klassen (Executive Director, Investment Partnerships Canada, Department of Industry)

The Chair

Mr. John Klassen

The Chair

Mr. John Klassen

º

1605

º

1610

º

1615

The Chair

Mr. Raymond Drouin (Program Manager, Industrial Cooperation Division, Canadian International Development Agency)

The Chair

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ)

º

1620

The Chair

Mr. David Mulroney

Mr. Jonathan Rothschild (Senior Economist, Policy Branch, Canadian International Development Agency)

The Chair

Mr. Rick Casson (Lethbridge, Canadian Alliance)

º

1625

Mr. John Banigan

Mr. Rick Casson

Mr. John Banigan

Mr. Rick Casson

Mr. David Mulroney

Mr. John Klassen

Mr. Rick Casson

Mr. David Mulroney

º

1630

Mr. Rick Casson

Mr. John Banigan

º

1635

The Chair

Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.)

Mr. David Mulroney

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1640

Mr. Murray Calder

Mr. David Mulroney

º

1645

The Chair

Mr. Raymond Simard (Saint Boniface, Lib.)

The Chair

Mr. Bill Casey (Cumberland—Colchester, PC)

The Chair

Mr. Stéphane Bergeron

º

1650

The Chair

Mr. David Mulroney

Mr. Raymond Drouin

º

1655

The Chair

Mr. Pat O'Brien (London—Fanshawe, Lib.)

Mr. David Mulroney

The Chair

Mr. John Klassen

»

1700

The Chair

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CANADA

Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade

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NUMBER 003

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, February 12, 2003

[Recorded by Electronic Apparatus]

¹  (1530)  

[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): We call this meeting to order.

    First I want to thank you very much for taking the time from your busy schedule to be with us. Without undue delay, we are going to hear Mr. David Mulroney, from the Department of Foreign Affairs and International Trade, and then with your permission and indulgence Mr. Brian Hunter, who is with CIDA. He was supposed to be speaking a little later, but he has to travel. As a result of that we are going to do a bit of substitution, so he will be ahead of the Department of Industry, if that's okay with you.

    Mr. Mulroney.

    Mr. David Mulroney (Assistant Deputy Minister, Portfolio Asia-Pacific, Department of Foreign Affairs and International Trade): Thank you very much, Mr. Chair. On behalf of my fellow panellists and presenters today, I'd like to thank the committee for this opportunity.

    In part I want to spend a few minutes to outline what I think to be some of the things that are going well and that we probably need to reinforce, and then spend a bit of time on some of the things that I think remain significant challenges for us. In both cases we're delighted that the subcommittee is focusing on Asia-Pacific. We really look forward to working with you, and to your report and your advice as things go forward.

    The other point I wanted to make is that the composition of our group today really reflects how we work in the region. Whether it's Investment Partnerships Canada, Industry Canada, CIDA, Foreign Affairs, or a number of other departments, we're all engaged towards the same end, which is to secure Canada's long-term prosperity in Asia-Pacific.

    First, in terms of things we're doing right, we spoke last week a little about some of the changes that have been taking place in the trade commissioner service. They have developed through what they call their new approach a very focused means of identifying the core services that trade commissioners offer and ensuring that they are getting the feedback they need from their clients.

[Translation]

    By way of example, the Virtual Trade Commissioner allows registered clients to order personalized services on-line from our network of trade commissioners across Asia-Pacific, ensuring that the right information is quickly and easily distributed to the right Canadian company.

[English]

    The Virtual Trade Commissioner is a personalized, regularly updated web page that contains market intelligence, business leads, and information that is automatically fed to Canadian companies based on the request for information they have already submitted.

    We do regular client surveys of client companies who use the trade commissioner service. We're getting, I think, a good feedback in terms of high levels of satisfaction. We're pleased to note that our trade posts in north Asia and south Asia are near the top of the list, in terms of client satisfaction, for Canadian business. Overall, the trade commissioner service has improved Canada's business image and credibility, helped firms make better business decisions in the region, and importantly is saving them time and money.

[Translation]

    But we have far more to do to increase awareness of the service and its people.

[English]

    In some ways, although the trade commissioners are doing a great job out there, we still have a lot of work to do in terms of ensuring that Canadian companies that are interested in exporting know about those services.

    In terms of partnerships and presence, we're working to ensure that we're going beyond traditional vehicles such as bricks-and-mortar presence in embassies and consulates. That's certainly an important way for us into the future, but we have to be increasingly nimble and increasingly inventive in the way we serve Canadian business in the region.

    Part of it is through new approaches to partnership. I mentioned the interdepartmental partnership we have, and John Banigan will later be talking about what we call Team Canada Inc. We're looking at partnerships with other organizations.

    In China, for example, we're working with the Canada-China Business Council, which has about 260 member companies. We have worked through them and through the China Council for the Promotion of International Trade to establish small trade-focused offices in Chengdu, Qingdao, and Shenzhen—in other words, in sub-markets of China that are really important to Canadian firms—helping us to be there and be present there in a way that's allowing us to move faster than we might be able to move through more traditional means.

    We're doing similar things in Japan with a variety of organizations, including the Japan External Trade Organization, JETRO, which actually has a person posted in Canada and works with us regularly.

    The Team Canada formula has been a major success, not only in terms of opening up business opportunities but also in forging new partnerships between government and the private sector.

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[Translation]

    Five out of seven Team Canada missions launched to date have been to Asia: twice to China, to Japan, to South Korea, to Thailand and the Philippines, to India, Pakistan, Indonesia and Malaysia.

[English]

    In addition to the Team Canada missions, International Trade Minister Pierre Pettigrew last year led a very successful trade mission to India, our largest ever. We had more than 130 Canadian companies on that trip.

    We're doing a lot of new things under the heading of investment promotion that I think you'll be interested in, but I will leave that to my colleague John Klassen to report on.

    Under the heading of ongoing challenges and areas where I think we need to do better, we spoke briefly last week about the challenge of branding Canada in the region--in other words, ensuring that our various clients and constituencies in Asia-Pacific have an up-to-date sense of how diverse Canada is and all the things Canada offers. This involves identifying key opinion influencers and leaders of tomorrow across the region in politics, business, the media, and academia, and using innovative public diplomacy strategies.

[Translation]

    Our brand must build on success. For example, our education system, especially our universities, can help in branding Canada as a knowledge society.

[English]

    We have to identify champions of what Canada is all about, whether they're institutions or people, and ensure that they're present in the region telling our story. We've begun to experiment in a number of places--Taiwan, Japan, and India among them--on innovative strategies for focusing all of our Canadian activities around key messages, such as that Canada is a dynamic, high-technology, competitive, and multicultural society, and ensuring that all of the activities Canada is engaged in in the region reinforce those messages for key decision-makers.

    We're also working increasingly beyond government with a range of players in the private sector and in other ethnic and cultural groups to bring focus to our activities. Focus India is one of our most successful endeavours in that respect. But we recognize this is an ongoing challenge where we have to keep telling our story in Asia-Pacific effectively and ensure that key constituencies understand contemporary Canada.

    Another challenge I have identified on the Canadian side is re-establishing networks focused on Asia-Pacific. We have had tremendous success in this over the past 20 years, but I think it's true to say that after the 1997-98 economic crisis in east Asia we lost some momentum, and there was an actual diversion to other places and markets. We have our work cut out for us in terms of re-educating those constituencies, passing the message that the crisis is largely over and indeed there are lots of opportunities in parts of the region.

    In part it means being much more focused in terms of where we direct people and what we say. In India, for example, we're working on the Canadian side with a newly revitalized Canada India Business Council and the Indo-Canada Chamber of Commerce and in India with the Confederation of Indian Industry, again to build new networks of people who are interested in the region.

    In Southeast Asia, which is a significantly important market for us, we're working with the Canadian Manufacturers and Exporters and Canadian chambers of commerce in the region and increasingly with the Southeast Asia missions here in Ottawa to build networks of people and ensure that we're reaching out to people who need to know about those markets.

    Let me close, Mr. Chair, by saying that I think we're deploying some of the tools we need to deploy. We're looking at new partnerships and new ways of being present, but we face some challenges in the wake of 1997.

    We certainly look forward to your collective work in the region.

    Thank you.

¹  (1540)  

    The Chair: Thank you very much.

    With your permission, we will now hear from Mr. Brian Hunter, who is with CIDA.

    Mr. Brian Hunter (Senior Economist, Canadian International Development Agency): Thank you, Mr. Chairman.

    As David Mulroney has indicated, CIDA works very closely with DFAIT and other government departments, and this is particularly important in Asia.

    Asia for us presents two realities. With half the world's population, Asia still has two-thirds of the world's poor. Yet at the same time, we've seen unprecedented growth and unprecedented poverty reduction across this region.

    International trade was a significant factor in east Asia's growth. International trade and foreign investment were both critical in Southeast Asia's growth. South Asia has approached the opening of its economies more cautiously. India has the capacity to sustain quite respectable growth in the near future, and there are some hopeful signs of poverty reduction in that area as well, but far less than those countries with more open economies. This provides us with a number of lessons in terms of how development functions.

    China's international trade as a share of GDP has climbed from 10% in 1978 to roughly 50% by 2000, and that's prior to the WTO accession. China is viewed both as an opportunity for other Asian countries and also as a significant competitor.

    Economic growth and poverty reduction were closely related in Asia, as I've indicated, but we need to be careful about what we assume to be that linkage. Asia had invested very heavily in education and health relatively early. The labour force broadly had the skills required for the types of emerging economic opportunities, and the societies had relatively adaptive institutions for the early stages of liberalization. With rapid growth, both were tested.

    With rising skill intensity of the jobs that have been created, societies need institutions that can help individuals upgrade their skills. The east Asian financial crisis showed the limitations of the institutional base across Asia, or large parts of Asia, and the need for significant reforms.

    The Asian experience is a good indicator of the complexity of development and the need to ensure there's a broad range of factors put in place to support sustainable economic growth and to help the poor segments of the population share in that growth.

    Asia responded extremely quickly, perhaps unexpectedly quickly, to the Asian crisis. It has a number of challenges ahead of it, but the prognosis is extremely promising at the moment. The challenges involve the institutions that have to continue to adapt and they have to adapt quickly.

    To support sustainable economic growth in Asia, CIDA basically has three broad mechanisms. Through our multilateral programs, CIDA supports the international organizations that help to form the global-enabling economic environment for countries. Through our bilateral programs, CIDA helps to strengthen the domestic capacity of partner countries, both public and civil society. We work on both policies and the capacity to implement those policies. Through our partnership program, CIDA assists individual companies to develop Asian partnerships.

    Let me close here and just say that I look forward to your questions and advice.

    The Chair: Thank you very much.

    We'll hear from the ADM from the Department of Industry, Mr. John Banigan.

    Mr. John Banigan (Assistant Deputy Minister, Industry Sector, Department of Industry): Thank you, Mr. Chairman.

[Translation]

    I plan to talk about international trade, but there are also other aspects to consider, namely investment and technology.

[English]

My colleague, Mr. Klassen, will talk about investment.

    In my experience, when we're in the field, we're often talking about international collaboration, and often the discussion starts with technology. From that often investment leads and from there trade follows. So the days are gone of just going abroad and trying to sell your goods and services. I think you have to look for a win-win on both sides. Quite often the most fruitful avenue is to start looking for technological cooperation. Trade and investment will flow from that.

    That said, I thought I would talk principally about trade, recognizing the content as often investment and technology as well.

    Within Industry Canada there are basically four thrusts to our trade promotion activities. Firstly, in our regional offices across the country in every province we have international trade centres. They house trade commissioners, often from abroad, posted to Canada. They work within the province with partners in the province--other provincial governments, municipalities, the private sector--what they call a regional trade network. They are often SMEs, small firms, and they often focus on looking at preparedness for export marketing and exporting capacity.

    The second approach is to really secure market access. We work with colleagues in the Department of Foreign Affairs in terms of some of the international trade negotiations, some of the irritants that come along in trade negotiations. Quite often the private sector says to us, it's not just a question of promotion of trade but helping us secure market access and eliminate barriers. There continue to be a number of barriers--formal and non-formal--to Canadian exports of goods and services.

    The third approach is what I would call a sectoral approach. We call them Trade Team Canada sector initiatives, and I'll talk a bit more about that in a minute.

    Then, finally, we are a member of the Team Canada Inc. There are 22 departments and agencies under the leadership of the Department of Foreign Affairs that work together to try to present a cohesive international program for our exporters. So we work in a team setting in that sense.

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[Translation]

    I mentioned the sectoral approach. From time to time, a federal government committee identifies several priority sectors in terms of resources and manpower. These can include aeronautics, biotechnology, the environment and health. Currently, 12 priority sectors have been identified.

[English]

    This list changes from time to time, but it's a consensus as to what priority sectors should be, and the exporter has an opportunity to go to one of two windows. They could go to a regional trade commissioner, an international trade centre, or they could take a sectoral approach. It's whatever they're more comfortable with. Sometimes it's a team Saskatchewan or a team New Brunswick, other times it's a team biotechnology, team aerospace. It's whatever they think is most effective. They're quite free to do either approach.

    We discuss with the stakeholders in the private sector, and other partners, what are the priority markets, what activities work best in your sector, and what sorts of resources should we dedicate to it. And there's a coordination of efforts. So we let the private sector partners choose where the markets are. In some markets, certain activities work better than others. In some markets, governments are influential. In other markets, it's more private sector to private sector. It depends on what the exporters think is best for them.

    Certainly trade with Asia is very significant. Exports of merchandise to Asia accounted for almost 38% of our exports other than the United States, and three Asian countries are among the top ten destinations of our merchandise. In 2001 Japan was number two, China was four--three if you count Hong Kong--and South Korea was number eight.

    There is a need, I think, to improve our Canadian knowledge about what's going on in Asia. It's easy to have an outdated view of China and Japan, for example. They're very dynamic economies, very dynamic societies, and have changed very rapidly. I have led two missions of my director generals to Asia in the last 18 months. In the fall of 2001 I took a group to Japan and we learned when we were in Japan that the economy of Japan is so heavily integrated with the economy of China that you really have to talk about the two. It's very much the same as when you are in Asia you can't talk about Canada without talking about the United States because of the growing interdependence.

    So we made China our next destination in the fall of 2002. Wherever possible, we met with Canadians who were working for Canadian firms or international firms based there. We met a number of private sector people who were in the country and who were there on trade missions, trade shows, and that sort of thing. It was a mixture of a private sector and a public sector exercise.

    There are a number of opportunities, I would say, and some areas where we were quite successful, such as automotive, wood products, information, and telecommunications. But there's a lot of growth in some other areas, such as aerospace, the environment, advanced materials, energy--both traditional and new sources of energy--life sciences, professional services, and plastics. There are a tremendous number of opportunities and Canadians are well appreciated, they're well liked in these countries, and I think there are good prospects for further collaboration through technology, investment, and trade.

    There are a number of challenges, however. For a small business, it's a long way to go. The airfare is expensive if you compare it to going to the United States. There's a learning curve to understand the culture. There are certain cultural practices we need to be sensitive to. It's a society that values relationships. They don't do business on the first trip or the second trip. They often want to develop a relationship of trust. But despite these obstacles, I think the size and growth of the market potential in these countries means it's very important.

    When you talk to Canadians who are in China, for example, they say it's difficult to do business here but you have to be here. It's so big and so dynamic, you have no choice. You need strategic partnerships to work closely as well, and I think you have to understand some of the broader macro-economic challenges as well.

    In Japan, for example, you've read in the media about some of the financial difficulties they're experiencing there with deflation, banks in crisis, and a great deal of government debt. These things I think are true, but many say there are two economies in Japan. You have about a quarter of all the Fortune 500 companies that are Japanese companies. These are world class companies with worldwide operations. They're very sophisticated, they're very diversified, and they want to do business with Canadians of large companies and small companies.

    The domestic industry is less productive than the global companies, but there is a large market there. Despite some of the difficulties they're having with their economy, when you have 130 Fortune 500 companies with headquarters in your country, it's not a market that can be overlooked.

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    China is quite a different matter. It's growing very quickly in the eastern provinces. The growth and development there are really quite extraordinary. There are regional disparities that are quite profound between the eastern coastal provinces and the centre and the west. They have some similar banking problems to those they have in Japan, and there are some market access problems, but the growth in the economy there is really quite extraordinary.

    One thing we took away from our last trip there that was remarkable is that they're not just dominant in a lot of traditional activities like steel, footwear, appliances, and all of those consumer goods; they're investing very aggressively in the new economy in terms of biotechnology, telecommunications, and information technology in an extraordinary way. That was, frankly, quite an eye-opener for us.

    We think Canada has very good potential that is unrealized in terms of our multicultural, multilingual assets, the number of foreign students studying at Canadian universities, and I think this Team Canada approach on a sectoral basis is a model that is well received by partners. We do need to market Canada better in these countries. They don't have a very clear understanding of our capacity. We also need to bring more information and more analysis of what's going on in those markets to our Canadian business community.

    Thank you, Mr. Chairman.

    The Chair: Thank you very much.

    Because Mr. Hunter has to leave, if there are any specific questions for Mr. Hunter, this is the time to ask him. If not, we'll ask him to leave at his own will.

    Mr. Speller, you raised your hand. Do you have a question?

    Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Yes. I can ask Mr. Hunter this too, and I actually wanted to ask Mr. Banigan. And I'm not sure if we're going to hear from Mr. Klassen or not, but I'll ask him too. First, though, I'll ask Mr. Hunter. And the reason I'm not asking Mr. Mulroney is I asked him this last week, so I won't ask him again this week.

    Mr. Hunter, essentially last week the minister was here and he outlined all the good reasons why we should be investing more and all the significance of the Asia-Pacific area. And last week it sounded like I would hear somebody from Europe, or somebody who's responsible for our South American division, or somebody's who's responsible for Russia, saying the same thing. What you have to do is convince us as to what's different in Asia. Why should we be putting more significance in Asia in terms of the budget allocations, let's say, in your departments rather than in other parts?

    Specifically, with regard to CIDA, I'm wondering what role CIDA is playing in Asia in terms of helping governments with issues of good governance in some of the emerging democracies that generally in the past have depended on our support in that area. And I'm thinking of some of the smaller countries of Asia and particularly Southeast Asia, maybe some of the island countries.

    Mr. Brian Hunter: Thank you very much.

    With respect to the first question, on the investment in Asia, one of the questions I'm often asked is why do people enjoy working in the Asia branch in CIDA? It's simply because of the dynamism of the region itself. There is not an issue that comes up that doesn't come up with incredible intensity in Asia. The growth factors, poverty reduction, the social development that's taken place, these are unprecedented.

    So whereas you'll see right now perhaps difficulties in the region.... We can even take the difficulties in the crisis of 1997 and 1998; no one anticipated the quick recovery of Asia from that. So if anybody takes a look at the region and discounts it for any reason, I think we do that at extreme risk, because this is one incredibly dynamic region. They're doing an awful lot of things right. They're doing a lot of things that are wrong, but they are working on the challenges facing them.

    Given the size of the populations, the demographic structures, we're now entering into a process of demographic structures in Asia that is fairly unique. If you take a look at the World Bank studies on Southeast Asia, we had, with a decline in population a few years ago, a significant shift of the population dynamics into the 16 to 64 age group, the most productive age group. That stimulated a lot of the domestic savings, but it also made for a very dynamic labour force. South Asia is just about to enter into that.

    This is probably the most dynamic time for any region in the world. What we have is the coincidence of a large number of countries doing many of the same things at the same point in time. So the opportunities out there are significant. Will they collapse? Will the crisis re-emerge? We don't know. But the opportunities are definitely there, so, as I said, that's the main reason why we enjoy working on Asia programs.

    On the second one, with respect to governance programs, governance is probably the most critical issue we're identifying within Asia, and our programs over the next few years are going to reflect that even more. We've been moving very heavily on to governance issues.

    In terms of the smaller economies, if you take a look at countries like East Timor, most of the projects right now are getting about $6.5 million a year from CIDA. We've spent about $20 million since 1999 in the country. Most of those programs are focused on supporting the governance capacity, the capacity of institutions, civil society and public sector, to manage their own resources. A large number of those are also working in areas of human rights, demobilization in terms of East Timor of the previous military, or local media. So the programs deal with the broad range of governance issues to make sure that issues of transparency and accountability start to emerge within these economies.

    In terms of the larger countries, in China for example, we're working with the human rights centre in Beijing. This is to increase the knowledge on how China can fulfill its international obligations on various conventions on human rights. They've been signing conventions, and some of them have been ratified now. They seem to be interested in working with us on a number of those linking to our Human Rights Commission, so we're working with them to simply implement the things that they themselves say they want to do.

    I can go on and give you other examples or we can come back with further examples later on, if you like.

¹  (1555)  

    Mr. Bob Speller: Maybe you could come back and maybe give the committee some of those.

    The Chair: Sorry, do you have other questions?

    Mr. Bob Speller: I wanted to get a response to the first question.

    The Chair: Mr. Banigan.

    Mr. John Banigan: If I may, Mr. Chairman, I think what's extraordinary about China and India is the size of the market with unrealized potential. The number of people who want to own a cellphone and don't now is quite extraordinary, whereas in the west most of these markets are fairly well penetrated. And this is true of the number of aircraft being delivered for airlines, and the number of people who have never owned insurance before and want to buy insurance.

    Someone described it as a belated modernization. They're going through a modernization in a decade that we've gone through in perhaps a century, and they're leapfrogging technology. For example, in China there's very little service in terms of fixed-line telephones; everybody is just going straight to wireless. It's by several-fold the most rapidly growing cellphone wireless market in the world, still with a very small market penetration. So it has tremendous growth potential, and the same thing I think would apply to India. So those two countries I think are unique in the world, whereas most other markets are quite mature and well served and experience a much slower growth.

º  (1600)  

    Mr. Bob Speller: I have one more question, one I'd like to ask Mr. Klassen in terms of the investment laws. It's always difficult in terms of us wanting to invest over there when the laws aren't similar to ours. What's the situation like, particularly in countries such as China?

    Mr. John Klassen (Executive Director, Investment Partnerships Canada, Department of Industry): I was going to ask if I could answer that as part of my presentation, Mr. Chair. I have some brief comments, and I also have a deck for people to follow along with if we could just pass that out quickly.

    The Chair: Is it bilingual, Mr. Klassen, we hope?

    Mr. John Klassen: Yes, French and English are available.

    The Chair: Please go ahead.

    Mr. John Klassen: Thank you, Mr. Chair.

    First, I'll say a few words on the mandate and strategy of Investment Partnerships Canada. Our mandate is to attract and retain strategic global investments for priority markets and sectors. In this, I must say, we work very much with a partnership approach, Mr. Chair. There are a great number of people, agencies, and institutions involved in seeking to attract foreign investment to Canada, namely the industry sector branch within Industry Canada, for which Mr. Banigan is responsible, the provinces, the municipalities, other government departments, and certainly our colleagues in the Department of Foreign Affairs. We work very closely with our embassies and consulates abroad because they are of course our front line in seeking out and attracting investment.

    Our overall strategy has four points. The first is to get the product right; that is, to build a competitive investment climate. Here a number of the issues we have seen brought forward in the most recent Speech from the Throne speak directly to this, things such as the regulatory reform that is being launched. It deals with the innovation agenda, which is quite wide and is a priority in Industry Canada, and the whole question of community development. All these have a very strong investment element to them and will certainly assist us in getting the product right and in building the climate.

    The second point is to get the message out. It's a sad fact that we are still relatively unknown abroad. We are relatively unknown even in terms of our overall macro-economic performance and just how very well we've done in the last four or five years with the elimination of the deficit. We're the only OECD country to have surpluses five years in a row, etc. Even these basic facts are not terribly well known out in the wider community, and it's clearly something we have to work on.

    The third point is to implement effective targeted campaigns. Here our focus is very much to have very strategic, very focused marketing campaigns aimed at particular sectors and particular markets, to go after those people and those companies we believe have a potential to invest. There's a big question, namely how to define those people, but we have certain mechanisms we are using in working very closely with our partners and having a very, as I say, strategic and targeted approach.

    The fourth point, as I've already mentioned, is the forging of effective partnerships across government. This really cannot be done as a sole effort. There are just too many players involved, and it's important that we all work together even though at a certain level the provinces are competitors in this area. Nevertheless, it's important that we coordinate and cooperate as much as we possibly can.

º  (1605)  

[Translation]

    We have eight priority target markets in the world: the United States, Japan, the UK, France, Germany, Italy, the Netherlands and Sweden. These countries account for over 90% of Canada's foreign investment.

[English]

    The United States is of course the dominant direct investor in Canada by far, accounting for about two-thirds of Canada's inward foreign direct investment. Japan is the only priority market target we have at this time in Asia.

    We have eight priority sectors for investment targeting. They are information and communication technologies and telecommunications, automotive products, life sciences, agrifood, aerospace and defence, chemicals, oil and gas equipment, and metals and minerals. However, each province has its own priorities, and if you develop a matrix of all the priorities everybody has, what you find is a list that covers pretty well every possible industrial manufacturing sector you could think of in the country. These eight are the ones we focus on, but that doesn't mean by any stretch of the imagination that we ignore the others, and we do deal with those.

    It's important to recognize the link between investment, innovation, and economic growth. It's quite clear that innovation is a prime driver of economic growth, and I think it's also quite clear that investment, and in particular foreign direct investment, is a prime driver of innovation. Therefore, we very clearly see the link between what we are trying to do on foreign direct investment and the government's priority on innovation.

    On your second slide you can see that over the last 10 years the outward flow of Asian foreign direct investment has accounted for about 15% to 20% of global foreign direct investment, and it has declined in recent years. Japan and Hong Kong account for about two-thirds of that Asian outward foreign direct investment, and most of their investments are outside Asia.

    Of Hong Kong's foreign direct investment, about 63% is in real estate; only about 5% is in the manufacturing area. The Japanese have a much higher percentage in the manufacturing area. Two countries are emerging but are still small countries for investment. We're starting to keep an eye on them more closely--and this echoes what Mr. Banigan was saying in terms of our trade interests--and they are China and India, although at the moment India only has an outflow of about $2 billion in foreign direct investment.

    On your third slide you have some figures on Asia-Pacific as a source of Canada's inward foreign direct investment. Asian FDI accounted for less than 5% of Canada's total inward FDI in 2001. The total stock is about $15 billion from Asia, but our total stock from the world is about $321 billion. So although foreign direct investment from Asia-Pacific has grown in absolute terms, it has grown--and I think the minister made this point when he spoke to you last week--about 80% in the last 10 years. Overall, our stock grew about 145%, so although Asia-Pacific grew in absolute terms, it has declined somewhat in relative terms.

    Japan now accounts for about 2.5% of foreign direct investment coming into Canada, so it is now the number five source behind the United States, the United Kingdom, France, and the Netherlands. Some 44% of its investment is in the machinery and transportation industries.

    China has a stock of about $203 million in Canada in foreign investment. It's interesting to note that Canadian direct investment in Asia has grown from $9 billion in 1991 to $27 billion in 2001. So Asia, as a share of Canadian direct investment abroad, now accounts for about 7.4%, down from a peak of 10.6% in 1993.

    With respect to your next slide, the one that refers to Japan and China,

[Translation]

    as I said earlier, Japan is Canada's only priority target market in Asia. We have developed an action plan for Japan, just as we have developed similar plans for all priority target markets.

[English]

It's a plan we have developed in full partnership with other departments, our posts, and now also with the provinces. We are now engaging the provinces in the development of these action plans so they are able to see what sorts of priorities we are putting on looking ahead over a year, how they can fit their priorities in, and how we can mesh our various activities as best we possibly can.

    The Japanese FDI is largely concentrated in the automotive sector, and for our investment activities we are focusing on attracting FDI in the high-end R and D intensive manufacturing. We have what is called a deputy minister's investment champion program in the federal government, where a number of deputy ministers are assigned priority markets. Their task is to go to those markets periodically and do what they can to push along investment prospects. Mr. Len Edwards, the Deputy Minister for International Trade, is the champion for Japan and is very active in that area.

    Although China's stock in Canada is only a couple of hundred million dollars, we are seeing an increased interest in investing in Canada. Our investment services division in 2002 handled a total of 126 various requests from China. They were everything from general inquiries to wanting to know about certain services or some missions that came in. But this was certainly a sharp rise in activity and interest from China. The concerns and interests have been mainly in the IT, manufacturing, life sciences, and biotechnology sectors.

    I think it's important to note that China not only provides capital but is also a vital source of highly qualified people, or HQP, as we call them in bureaucratic parlance these days. The Chinese rank second only to South Koreans among foreign students in Canada. This is important, because, as I think Mr. Hunter mentioned earlier when we were talking about demographics, I've seen the numbers vary a bit, but within 10 to 12 years the net population growth in Canada will only come from immigration; it will not come from natural growth. Therefore we are going to be looking for highly qualified people to sustain the economy, to bring those kinds of skills to Canada. Since a lot of developed countries face a similar demographic pattern, we will not only have to find these people, we will be in strong competition for these people from a number of other countries.

    We are in the process now of reassessing the priority markets. Have we got them right, looking at flows, interest, and all that sort of thing? I don't expect China to emerge as a priority market, but it will certainly emerge as the top of tier two, if you will. It's a country we should definitely watch and be involved in.

    On the last page I've just tried to pose some questions that might be of interest to this committee as you go through your work. How do we ensure that Asian FDI in Canada will support the goals of Canada's innovation agenda? Given the increasing importance of China and India as vital sources of highly qualified people, what are the implications for Canada's immigration policy? I think this is something that has to be considered.

    How can we ensure that Canada is well positioned to attract FDI from the emerging sources such as India and China? I expect these countries to be sort of at the top of our tier two. We have to take a longer-term view of the potential of these countries, not unlike what Mr. Banigan was saying on the trade side of things. We have to take a longer-term view of their potential as destinations for Canadian foreign direct investment, but certainly as sources of foreign direct investment to Canada in certain areas.

    To come back to Mr. Speller's question on why Asia, and whether I would give him exactly the same spiel if I were talking about Latin America or other areas, in fact I would not. As you can see from the statistics from this very quick overview, Asia accounts for a very small percentage of the overall foreign direct investment, either flow or stock, in Canada. Outside of Japan at this moment, plus Korea, Taiwan, China, and India, I don't think it really deserves or even requires a huge injection of resources for what we're doing in investment or in trying to seek investment.

º  (1610)  

    Japan certainly continues to be a priority market for good reason, and we need to watch these other countries closely. We should start to build relationships that may pay off 10, 15, or 20 years down the road when these countries may be in stronger economic positions and be more important sources of foreign direct investment.

    Mr. Speller also asked about the laws in those countries and their effect on Canadian direct investment. We in IPC don't really have a mandate to assist Canadians seeking to invest abroad. I would say our posts abroad often get involved if a Canadian investor comes to them looking for a partner, opportunities, and that sort of thing. But from my experience in dealing on the China file, a key priority for us in the negotiations for their entry into the WTO was to have much clearer rules and laws in China to allow or encourage foreign direct investment. There have been some problems with investors going in there and finding themselves in difficult situations when the laws were changed.

    I'm really not very familiar with the situation in India, for instance, but we are seeing globally that India and China in particular are becoming preferred places for a lot of low-cost manufacturing. For instance, it might be a bit strong to say there's been almost a hollowing out of the maquiladora in Mexico because a lot of that manufacturing has gone to China. I was reading the other day about some investor who said he was putting a lot of his business into India because he could hire engineers at $20 per hour compared to $100 per hour in the United States. This is a growing phenomenon that will have an interesting impact on the global flows of investment and manufacturing.

º  (1615)  

    The Chair: Thank you very much.

    Jonathan and Raymond, do you want to add anything , or do you just want to answer questions if you're asked? It's up to you.

    Mr. Raymond Drouin (Program Manager, Industrial Cooperation Division, Canadian International Development Agency): I have nothing to add for now.

    The Chair: Okay.

    Next we have Mr. Bergeron, Mr. Calder, Mr. Casson, and then Mr. Casey.

[Translation]

    Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Thank you, Mr. Chairman.

    You mentioned on more than one occasion during the course of your presentations that the Pacific region, particularly Asia, represented an extremely fascinating and interesting market for Canada and for many other Western countries. This region is probably one of the most promising markets in terms of rapid growth prospects. However, this market is also difficult to break into in many ways, whether from a cultural standpoint, or in terms of domestic regulations that can act as roadblocks for Canadian investors and business people looking to export their products or do business with Asian countries.

    There's another problem that in my view illustrates the paradox in Asia. While the region offers tremendous opportunities for market growth and development, it is also home to some 3.6 billion of the world's poor. Almost three-quarters of the world's poor live in Asia. We're talking about nearly 800 million people who survive on less than a dollar US per day. How do we reconcile our interest in Asia as a potential market for our products and as a potential market for Canadian investment with the endemic poverty that prevails in several Asian countries? If we want Asia as a target market, how do we reconcile this apparent paradox, mindful of the fact that poverty is ultimately an impediment to development? There is a tendency to say that China represents a market of over one billion consumers, but how many of these people can afford to consume? Shouldn't a developed country like Canada concern itself initially with raising the standard of living in these nations with a view to enhancing or increasing tenfold these countries' development prospects?

º  (1620)  

[English]

    The Chair: Mr. Mulroney.

[Translation]

    Mr. David Mulroney: I'll go first, after which my CIDA colleagues may want to add something.

    I admit that poverty is still too prevalent in Asia. You're quite right in that regard. However, great changes are taking place on that continent. The poorest nations and the poorest people in the world are in South and South East Asia. I'm referring to countries like India, Bangladesh, Pakistan, Indonesia and the Philippines. The winds of change are also blowing over Northern Asia. China is perhaps the most intriguing example. Significant development is taking place and the living conditions of most Chinese are changing.

[English]

    If you look, for example, at the eastern coastal part of China and particularly the regions around Shanghai and Hong Kong, they are very much more like Korea, South Korea, and Japan than traditional China. China's pockets of poverty are now in the west, and the Chinese are working to address that.

    So what we're seeing in Asia--and this is a little bit in answer to Mr. Speller's question--is this question of tremendous change. Now you have a middle class emerging in parts of China where it never existed before.

[Translation]

    The challenge for India is to take the same approach, that is to create development opportunities for all of its people. Nevertheless, tremendous change has taken place and some very interesting markets are opening up for Canadian producers.

[English]

    We're seeing the emergence of many markets that we would not have seen previously, even markets for consumer goods in places like China. So it's a question of whether you look at it right now or over a period of time.

[Translation]

    Mr. Jonathan Rothschild (Senior Economist, Policy Branch, Canadian International Development Agency): You're quite right to say that almost two thirds of the world's poor live in Asia. However, this does not mean that the poor cannot benefit from major economic development initiatives. It's important for them to become economic agents. Market development is an important consideration, even for the world's poor. CIDA is involved in developing markets and governments are putting in place structures to enable the poor to become economic agents. One significant characteristic of poverty is lack of access to markets, not to mention the social and political ramifications. Consequently, economic opportunities should not be reserved exclusively for the middle class. The poor can become economic agents. Indeed, this is an important aspect of their development.

    One component of CIDA's mandate is to help governments develop markets and enable the poor to become economic agents.

    The Chair: Thank you, Mr. Bergeron.

[English]

    Mr. Casson is next and then Mr. Calder.

    Mr. Rick Casson (Lethbridge, Canadian Alliance): Thank you, Mr. Chairman.

    Thank you, gentlemen, for your presentations.

    Mr. Banigan, I missed one of the numbers you used when you talked about how many departments came together to make a plan. Did you say 23?

º  (1625)  

    Mr. John Banigan: It's 22.

    Mr. Rick Casson: How easy is it to get 22 departments together to make a cohesive plan?

    Mr. John Banigan: It's surprisingly collegial. I think the deputy ministers have motivated their staff to say we're a trading nation. You know, 40% of our GDP depends on exports and over 80% of our total economy involves two-way trade. This is central to our prosperity.

    There's a remarkable sense of collegiality. They come from different mandates and different expertise, but they all have something to offer. It's a model that has worked very well.

    Mr. Rick Casson: I think all the members sitting around the table are finding more and more cases of trouble with visas, passports, and what not. Is that starting to be a problem in getting people back and forth and getting them to where you need them?

    Mr. David Mulroney: That's an issue we continue to work on. It also has implications for John Klassen and Investment Partnerships Canada. It's a client service issue that I think we're getting better at, though I wouldn't say we're perfect.

    India is a case in point where we've had a lot of issues. People who were not, for example, in the Delhi area were complaining about turnaround time, and we've significantly reduced the turnaround time on visa issuance.

    Have we eliminated all the complaints? Not yet, but we've certainly improved service. And when we identify specific issues, such as a potential investment, with the help of Investment Partnerships Canada and Immigration we try to sort of pre-advise, and to the extent possible, we prequalify people who may be coming to Canada on a frequent basis.

    John.

    Mr. John Klassen: Yes, if I might add to that, I'll just pick up on what Mr. Banigan was saying about the surprising--well, perhaps we shouldn't say it's surprising--collegiality there is among the 22 departments.

    As I have said, on the investment side, it's very much a partnership approach. In fact, we have established something we call a “quick response mechanism”, where we have 19 departments that have now identified a single person. So if we get a particular request or a particular problem, say on the immigration side or a tax issue, Investment Partnerships Canada can go to this quick response mechanism person--and these are all at the director or director-general level in the government--who then has the responsibility within his or her department to get that answer and get back to us quickly so we can service the investor.

    This is working extremely well. I think we're going to see a greater integration of Team Canada Inc. and the investment side of things, because as Mr. Banigan said, we're really talking about trade and investment. I think to keep them separate is a false dichotomy and is not very efficient.

    People realize we're all working toward the same end, and I find there's really a good deal of collegiality.

    Mr. Rick Casson: Today I was reading something where the U.S. is going to start pushing a western hemisphere type of trading area. We have the Asian countries coming together--China, Taiwan, Japan--and everybody is lining up and creating trading zones and partners. Should we be looking at trying to bring these countries all together, or are we better off going with bilateral agreements, one-on-one?

    It seems the whole world is starting to be sectioned off into different trading groups, and we certainly have spent a lot of effort on the Americas with the different lineups we have here with countries.

    What's the best plan of attack? Is some of what's been going on the reason we're not doing so well? You know, we have such a trade deficit with the Asia-Pacific countries, something doesn't seem to be clicking here.

    Mr. David Mulroney: One of the really major differences over the last ten years has been the emergence in east Asia of approaches to trade cooperation that were only talked about ten years ago. Dr. Mahatir in Malaysia had a vision of an east Asian economic caucus, which didn't get off the ground when he first thought of it about 15 years ago. Now we are seeing more interest, particularly between the Southeast Asian countries in ASEAN and the three big economic players in north Asia—Japan, Korea, and China. They meet on a regular basis, ASEAN plus three.

    The economy that's really powering interest in integration is China. China is sitting down now with the ASEAN countries to talk about developing free trade agreements. Even within ASEAN, we are seeing that they are beginning to talk. The challenge for the ASEAN countries is that they tend to produce the same things: they all have car industries, and their agricultural sectors are similar, so they haven't seen much scope in cooperation.

    From a Canadian perspective, a number of things are important. First, our primary focus is still the WTO, where we worked hard to promote China's accession in a meaningful way, as John mentioned. We're working now with the developing countries in Southeast Asia to build their capacity to be WTO members, so that they have the legal infrastructures and regulatory systems in place enabling them to actually live up to their commitments. So encouraging all of these people to play a key role in the ongoing Doha agenda is important. We also have ongoing negotiations with Singapore for a free trade agreement, which could be seen as a kind of building block into the region. We're very enthusiastic about it.

    There are two other challenges. First, we want to be sure we have a constituency of Canadian companies who have an interest in this agreement and a stake in supporting it. This has been a bit of a challenge because of the drop-off in company interest.

    Second, we want to have bilateral agreements that are actually beneficial and in Canada's interests. This remains a significant challenge. We've had ongoing discussions with the Japanese, for example, but we would insist on a free trade agreement covering everything, including agriculture. This has been very difficult to achieve.

    So we're looking at the WTO, and we're active in trans-Pacific organizations like APEC, which includes the Americas. We're looking at opportunities for bilateral pacts, but coming to terms with east Asian regionalism is one of the challenges we face.

º  (1630)  

    Mr. Rick Casson: On the issue of trained people and the value and investment we place on them in this country, the fact is that we're going to need huge numbers of trained people—which maybe we will have to get the immigration people here to talk about. We already have a huge problem, and it's going to just compound over the next years.

    How does all of this fit into the mix? Is this something you can address through some of what you're doing, or does it have to come from a different area? I know that most of the education facilities in this country are maxed out with the number of students they can take, and that they're trying all kinds of things to increase this and to bring people here to train, and to bring those who have already been trained.

    Mr. John Banigan: Mr. Chairman, perhaps I could try to answer that. When we promote Canada as a destination for investment, talking about our workforce, the skills, the work ethic, and so on is a very large part of the attraction. Certainly we have a good track record in that regard with some Asian investors, like the Japanese car assemblers.

    As a country, though, we do face a demographic challenge, as do most western countries. We can't just rely upon our natural growth to meet these skills shortages. Increasingly, skills shortages are going to be a constraint for us.

    This probably leads you to some question about immigration and promoting Canada as a destination for skilled workers abroad to come and live here. Many other nations have similar aspirations as well. Certainly when we talk about India and China, they are really two societies in one. I remember one Indian minister saying, “We have two societies cohabiting on this subcontinent. We have a middle class that is very well educated and skilled, a scientifically advanced society; and we have a billion people who are poorly educated and living in destitution.”

    So India and China are sources of highly qualified personnel. Interestingly, as their economies develop there is perhaps less and less interest there in migrating to the west, because there are now good opportunities there. Indeed, on one of my recent trips to China there were several stories of Chinese with PhDs who were working in America or Europe and who were going back home because research facilities, laboratories, advanced technology companies existed in their home country, and they wanted to live, work, and develop in China.

    So we're going to be competing with China as well as India for highly qualified personnel. Clearly, it is going to be a long-term constraint for us. Canada is a very open society, and I think we do have a good foundation, but this will be a barrier to attracting investment in the future generation.

º  (1635)  

    The Chair: Mr. Calder.

    Mr. Murray Calder (Dufferin—Peel—Wellington—Grey, Lib.): Thank you very much, Mr. Chairman.

    I think one of the interesting things with China, who I believe is definitely the driver in Asia now, is that they watched Russia with a lot of interest when it was going through perestroika and glasnost. I think they came to the realization that, “Yes, we have to get to a market economy, but no, we don't want to go through the same experience Russia is going through”. In the early 1990s we watched them make massive changes to their rail system, going from steam to diesel electric. And actually, I think India has been watching this very closely, too, because they have been right behind.

    David, you said that we have to develop a friendship or partnership with China, which has to develop over a period of time before they would be really interested in trading at the level we would like to see them trade at. My first question would be, where are we in that process right now? Are we a year away from some major breakthroughs in it, or are we even closer than that?

    I'm curious why you chose the three areas you did to establish one-person offices.

    I'll start with these questions.

    Mr. David Mulroney: In China, absolutely, being present, establishing relationships takes time.

    Your comment on the lessons they derive from the Russians is very apropos. They were shaken by what they saw of the Russian emergence and the demise of the Soviet Union. The right lesson they took from that was instead of trying to change society completely overnight, they focused on experiments. They experimented in certain places, in contained areas--financial sector reform, maybe some new regulatory reform--to see if it worked, to work out the bugs, and then apply it more widely.

    The wrong lesson they've taken is that gradual opening in society is somehow the problem. The challenge they face in coming years, although certainly they have the education, the technology, is that really competitive nations are open, transparent, and information flows quickly. China is already beginning to feel some of the constraints, as they look at things such as clamping down on the Internet.

    As far as Canada is concerned, some of the things that we said ten years ago are coming true. The companies who invested and were present, whether in the agricultural sector or the high-tech sector, and who were doing seminars and outreach activities in China now have established partnerships and are probably beginning to make money. The companies who came into China, for example, in the early nineties and some who came in 1994 on the Team Canada process have established offices and are beginning to be present.

    We're present in China in ways we might not have envisaged 15 years ago. In the power sector we're known, active players. In the telecommunications sector we're known, active players. In the transportation sector, from selling a few aircraft, we're known and active. And in the financial services sector, if you look at certain companies such as Manulife, their employee base in Asia is now getting to be almost as large as their employee base in North America. They're highly successful. I think by and large what we said about being there and being present is paying off.

    Where I think we have to be a little bit concerned is there was a falling away post-1997. We can't fault companies. Again, it comes back to the fact that we want to give companies good advice. So a lot of companies, and particularly I talked to some of the Canadian banks, said we have to reduce our presence in Asia-Pacific now because there's so much competitive pressure in North America that even a marginally profitable branch isn't good enough because we're looking at really dramatic increases in return on investment. So you have companies sometimes going from a long-term perspective to a short-term perspective.

    The investment side of things is the longest term. It's going to be a while before Asia is a net investor in Canada. It's starting, but that's long term. The trade side is not quite as distant, but it's still pretty long term.

    So the answer I would give to why Asia is today important and tomorrow really important is to look where China is going, to look where India is going, to look where some of the most dynamic countries of Southeast Asia are going. I guess the message we have to have for Canadian companies is it's a challenge. It's going to cost you, but if you're interested in long-term prosperity, long-term success, this is where you have to be.

º  (1640)  

    Mr. Murray Calder: That would bring me to my second question, then, on our positioning. Our two major competitors over there would be the United States and the EU. The United States will always have a problem with them with Japan and Taiwan. It's because after the Second World War they went in and rebuilt there, so they're used to that technology, and that's one thing we'll have to break through. It's the same thing with India and China itself because of the British presence, when the British Empire was there.

    So my question would be where are we at in competition with the United States and the EU, of them becoming more interested in our technology than theirs?

    Mr. David Mulroney: Let me just say in terms of the three mini offices we picked, in partnership with the Canada-China Business Council and the China Council for the Promotion of International Trade, it's very tough in China to make a decision to say you're going to go here rather than there, because as I was mentioning last week, in the Yangtze Delta region alone, with 34 cities, over one million people, you could go to a lot of places.

    We picked Chengdu, Qingdao, and Shenzhen, in part based on some of the feedback we were getting from companies that are active in the region and because we hadn't been there. These were accessible markets near other major centres where we were active, so we could bridge effectively. But one of the things that attracted us to this kind of partnership is, because it's not a bricks-and-mortar embassy, if we decide we want to move Shenzhen to Wuhan, we can do it pretty quickly.

    So they're not intended to be there forever. They're intended to be there for a short term, to serve a short-term requirement. We think this may allow us to expand our presence in China without the time-consuming and resource-intensive challenges that missions.... We don't rule out having further missions, but we like being nimble in terms of where we go.

    Concerning competitive position, it is more of a challenge for Canadian companies in terms of name brand and recognition. It's changing a little bit in China, because Chinese companies are making decisions for more economic reasons than they were in the past. But in the past it was like the old saying, “Nobody ever got fired for buying IBM.” If you're a Chinese decision-maker and you either have a famous name brand company from the U.S. or from western Europe or a relatively less-known Canadian company, your neck is on the line, because the Chinese system is quite ruthless. If somebody makes a mistake, somebody is going to pay for it. So Canadian companies have to work a little bit harder to make their case, to say here's why choosing our technology is a good thing.

    Now that it's a slightly and increasingly more commercial system, some of those arguments are easier to make. But another reason we need to increase the flow of students to Canada is because when they go back to China they are familiar with Canada's capability and with the fact that we're a technology source.

    Anecdotally, when we talk to potential investors in the regions who know Canada, one of the things that attracts them to Canada is the fact that--and they say this often with a little bit of surprise to you, that they hadn't known this--when they go to almost any major Canadian city, the interaction between the university community and the high-tech sector is something that really catches their interest.

    The other hidden advantage that I would add--and that's the reason we want to keep our brand, we want our brand to include some of the traditional values--is people make decisions about investing in Canada because they want to live in Canada. They find that their employees will go to a Canadian city and they know there's a Chinese newspaper or there's a big population from their home country.

    So we have some other built-in advantages that are going to assist us, but the sense of Canada as why Canadian technology, why buy Canadian, is an argument we still have to get across, still have to work on.

º  (1645)  

    The Chair: We still have another eleven minutes, and then we have to move to another item, in camera. So I suggest that perhaps we ask the questions--those of my colleagues who haven't already asked questions, and Mr. Bergeron also has one--and then, at the end of our questions, maybe our witnesses can answer all of them. Would that be okay?

    Mr. Simard, and then Mr. Casey and Mr. Bergeron.

    Mr. Raymond Simard (Saint Boniface, Lib.): I'll make it very brief.

    It's a bit disconcerting to realize that although we're a G-8 country, you were saying many Asian countries don't see us as a viable trading partner. I'd like to know how Canada is perceived by Asia. Are we hewers of wood? We are a G-8 country, so that really surprises me. What are we doing about that? What are we doing to improve our image out there?

    My second question is with regard to misconceptions about Asia by Canadians, the reverse. Someone I know fairly well, who was a fairly knowledgeable person, well versed, went out to Shanghai and was extremely surprised by that modern city. He said you could have access to absolutely anything world-class in Shanghai.

    So are we doing something to invite the people from Asian countries to come here and basically sell their goods? It's important that our businesses know what they're dealing with out there as well.

    Those are the two questions I have.

    The Chair: Mr. Casey.

    Mr. Bill Casey (Cumberland—Colchester, PC): I had the exact same question about perception.

    My first question is, what's the holdup on the Singapore free trade deal?

    Mr. Klassen, I'm curious to know what you do. Perhaps you could tell us about the last two projects you worked on, without naming the companies or anything, just to give us an idea of what you actually do.

    When I looked over the tentative list of companies that might be called to be witnesses at this committee, I found that of the 50 names only one was from Atlantic Canada. That may be my fault, I'm not sure. Anyway, it does point out that Atlantic Canada probably does not do its share of work in Asia. I just wondered what your thought is on that and how we can encourage companies from Atlantic Canada to become involved.

[Translation]

    The Chair: Mr. Bergeron.

    Mr. Stéphane Bergeron: Thank you, Mr. Chairman.

    I greatly appreciated your comment regarding the paradox of poverty and development in Asia, but I'm not entirely satisfied with the response. I can understand wanting to use trade as a catalyst for development and identifying the world's poor as future economic agents. However, what of the perverse effect or danger of viewing the poor as future economic agents, given their relatively limited ability to consume? Are they not in serious danger of becoming nothing more than cheap labour?

    What effective, productive steps can we take to ensure that these people not only contribute to the market, but also experience in the process an improvement in their living conditions?

    In a similar vein, how do you go about presenting business opportunities to Canadian investors or businesses that are interested in doing business in countries like Bangladesh or Cambodia? How do you convince Canadian entrepreneurs or investors that business opportunities do exist in countries where much of the population lives in poverty?

    With your indulgence, Mr. Chairman, since I skipped my turn earlier, I would also like to ask a question about softwood lumber.

    It's a fact that China consumes about 60 million cubic metres of wood each year and imports a total of 20 million cubic metres. Since becoming a member of the WTO, China has had to lower its customs duties on lumber imports. For instance, China is known for having a healthy furniture industry. Shouldn't we be making an effort to seek out new markets for Canadian softwood lumber, which is currently severely penalized by US customs duties? Shouldn't more of an effort be made to find new markets for Canadian softwood lumber in Asia, particularly in China?

º  (1650)  

[English]

    The Chair: Merci.

    We'll go to Mr. Mulroney and then to anyone else who wants to answer.

    Mr. David Mulroney: Okay, thank you for that. I'll try to offer just a few brief responses, because I know time is of the essence.

    Are we seen as hewers of wood and drawers of water? We do some market research in a variety of places in Asia to get a sense of the impressions of Canada among different constituencies, and it depends a bit on where you are in Asia. In Hong Kong, where there are 80,000 or so Canadian university graduates, they have a pretty good sense of what Canada's all about. And it's changing in some other places.

    I think if we looked at the spectrum, we would probably be seen and known better for our abilities on the resource side, as a tourism destination, and as a peaceful country. Those are good associations, but we do have a challenge to tell more of our story on the technology side.

    We're doing a number of things in a number of countries under the heading of public diplomacy, which means let's take all of the means we have of talking to the people in this country and let's be sure we're all on message. Let's not waste any time or resources reinforcing.... We have existing budgets for tourism. We have existing budgets to reinforce notions of Canada's natural beauty, etc. So let's use additional resources and let's use people as champions to reinforce a sense of Canada as a technology centre.

    So in a lot of our media programs, we won't simply rely on government spokespeople. If we have Canadian professors, business leaders, athletes, and cultural stars, we really highlight them in these countries, because we think people will then make the connection.

    For example, one of the things we did in Taiwan is.... There's a report that lists electrical engineering faculties in North America by quality, and it showed that four of the top ten schools were Canadian. We got that information out to people, and they said they hadn't known that. So we're finding objective sources to tell Canada's story, but we have to do it again and again and again.

    Misconceptions about Asia in Canada are also part of our challenge. It's a challenge we share with Asian countries. I mentioned we've been working with the Southeast Asian missions here in Ottawa to help them. They had a hard time figuring out how to get in contact with business groups and others in Canada. We also have to be sure we're telling Canadian business about the changes we're seeing in places like China.

    On the Singapore free trade deal, I'd say we're now getting down to the final parts of our negotiations. Those are always, I think, some of the toughest, because we want to be sure we're getting the maximum benefit for Canada, and we want to be sure that Singapore understands what's in our offer. We just had meetings in Ottawa a couple of weeks ago. We'll have another round in another month or so. I'm hopeful we'll be able to close it, but we still have some issues to resolve with the Singaporeans, and I think it's often like this in our negotiations.

[Translation]

    I'll let the CIDA officials respond to the question concerning developing countries.

    I think it's important to let countries get involved in trade. For instance, we revised our policy on developing countries as far as access to the Canadian market is concerned. That's very important.

    China has indeed become a major market for softwood lumber and we have launched projects in Shanghai in eastern China. We also have projects under way in Taïwan and in Korea. Japan is already a major market. We have initiated talks with India, but this market is still in the development stage.

    CIDA officials may wish to respond to the question concerning the poorer nations.

    Mr. Raymond Drouin: There were several questions raised.

    Mr. Bergeron wanted to know how we could guarantee that economic development would not occur at the expense of the poor. To my knowledge, CIDA's Industrial Cooperation Program is the only federal government initiative that lends tangible support to Canadian investment abroad. The program funds feasibility studies and when a decision is made to invest, we also fund training plans and so forth.

    Since Canadian government funds are at stake, all of the projects are subject to the provisions of the Canadian Environmental Assessment Act. Care is taken to ensure that at the very least, companies don't offload their pollution problems onto other countries. Businesses are always required to study health and safety codes, for example. I have visited several factories in which fire extinguishers are located. As is the case in Canada, we take steps to ensure compliance with safety standards, to ensure that women have equal access to employment, training opportunities and promotions and that working conditions are adequate.

    This accounts for a very small portion of our overall investment in China --I'm responsible for China -- but I think we can proudly say that government-backed Canadian investments are not proving detrimental to the poor.

    In the past, efforts were made to develop the Third World, as it was called, or developing countries through various state-sponsored initiatives. Very often, these efforts failed. Why are eastern Asia and northern Asia developing at a more rapid pace? Because they benefit from substantial private sector investments. Development is driven by private investment. I agree with you that it's important to comply with certain rules. However, we cannot take the place of local governments.

    How can we get companies interested in investing in Cambodia? We are not in the business of promoting projects. Companies come to us with a proposal for a viable, profitable project in Cambodia. One such recent proposal involved mine clearing. If, after studying the specifics, we find a project to be viable, we support it. However, our role, CIDA's role, is not to get people interested in investing in Cambodia or Malaysia.

º  (1655)  

[English]

    The Chair: We'll have a final question, to close the circle.

    Mr. O'Brien.

    Mr. Pat O'Brien (London—Fanshawe, Lib.): Thank you, Mr. Chairman. I'll ask a very brief one.

    I apologize for not being here sooner. I had an experience that I think all the members can relate to, except this is the first time I've had three committees scheduled to meet at exactly the same time. So far I've managed to get to two.

    If the question's been asked, say so, and I'll read the answer. If not, I just wonder what the views of the witnesses are.

    Are we maximizing our membership in APEC to further our trade goals? I don't think a lot of Canadians out there on Sparks Street could tell you what the hell APEC is. I don't even know if all of the business community know about it. Could you speak to that briefly?

    Mr. David Mulroney: It's always a tough issue to make the case for APEC and to make it real, because one of the challenges is that APEC has spread into areas of economic cooperation that probably weren't foreseen. Canada's thrust in this is to try to keep it focused in the trade liberalization and facilitation areas, and where we're talking about economic cooperation, to keep that focused on areas APEC can really deliver on.

    There are two examples of what we're working on right now. One is trade facilitation, where we've worked with the World Bank to identify what components economies can actually get at to facilitate trade, and of those, which ones really give you the biggest bang for the buck.

    Number two, next week in Thailand, at the first APEC meeting, Canada will be presenting its story for how we've proceeded to meet APEC's goals of trade liberalization. A big part of that is not just telling APEC officials, but making information available to Canadian companies on how all APEC economies are liberalizing, and what these changes mean for them. We actually get a good number of people who visit our sites that provide information on tariff advantages, regulatory changes, etc.

    I guess the ultimate point, though, is that APEC has not done a great job of communicating its story. And APEC itself.... This is an issue that Canada, the Australians, and the New Zealanders have brought to the table, saying there are specific advantages. They tend to be kind of micro, but we need to bundle these up and tell the story better.

    The Chair: Thank you.

    Mr. Klassen, in response to Mr. Casey's question, specifically.

    Mr. John Klassen: I'll give some examples of what we've been doing.

    There is one called DSM Biologics, which is going into Montreal, that has announced--in fact it's now building--an investment of $400 million. This is a major Dutch company that produces pharmaceuticals using biological techniques, though I don't pretend to know the technology. We were competing with the United States, and when we became aware that they were very interested in Canada, what we did was put together a sort of task force or SWAT team, if you want to call it that, because this was very much a partnership approach.

    It involved the sector branch in Industry Canada that deals with life sciences, and it involved the National Research Council because they have a lot of expertise in this area; in fact, the factory that is being built is sort of joining an NRC laboratory. It involved the Province of Quebec, which has taken an equity position in the new company, and it involved Technology Partnerships Canada, which is part of Industry Canada and which provides funding to facilitate and support new technologies coming into Canada.

    By bringing this whole team together, we were able to provide the company, DSM Biologics, with a single-service window so they only had to deal with one of us. We brought in all the other partners and made sure we were dealing with all of their concerns.

    Another example is where the Prime Minister led Canada to Europe, to Germany, last fall. The embassy has followed up on that, and now it looks as if a particular company is going to go hot. They're very interested in coming to Canada. So again, we're going to put together a very similar team to what we did with DSM Biologics to make sure we're addressing all of their concerns.

    Finally, about a month ago we had a Belgian company that is a world leader in some very high-technology areas, who knew nothing about Canada, but who was interested. They sent their vice-president of R and D, we set up a program dealing with the sector branch and the provinces, and we took this vice-president from the west coast all the way across the country. He'd never been to Canada, and he was quite impressed by the level of technology, and--this is something I think David said earlier--he was particularly impressed with Edmonton, frankly, and the collaboration there is there between the university community and the industries. There are some researchers in that area who are working in a very high-tech area his company is extremely interested in.

    Those are examples of some of the things we do. In addition, it's about developing the products, the brochures, and all those sorts of things we and other people use abroad. We do a lot of that kind of coordination.

»  (1700)  

    The Chair: With this, let's bring this part of the meeting to a conclusion.

    I want, on behalf of my colleagues, to thank you very, very much for your excellent presentation and the way you have answered some of our questions. If you do have some other comments or suggestions you want to pass on to the committee, please do so.

    I know my colleague Mr. Casey was interested in finding out if there are some witnesses from Atlantic Canada. If we do have some on our list you think we should hear from, please let us communicate with them.

    With this, we are going to adjourn for about a minute and a half and then go back in camera for some important items.

    [Proceedings continue in camera]