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 19, 2003

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1535

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

Mr. John Wiebe (President and CEO, Asia Pacific Foundation of Canada)

The Chair

Mr. John Wiebe

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1540

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1545

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1550

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1555

The Chair

Mr. John Duncan (Vancouver Island North, Canadian Alliance)

Mr. John Wiebe

Mr. John Duncan

Mr. John Wiebe

Mr. John Duncan

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1600

Mr. John Wiebe

Mr. John Duncan

Mr. John Wiebe

The Chair

Mr. John Duncan

Mr. John Wiebe

Mr. John Duncan

Mr. John Wiebe

Mr. John Duncan

Mr. John Wiebe

Mr. John Duncan

The Chair

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

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1605

Mr. John Wiebe

Mr. Bob Speller

Mr. John Wiebe

Mr. Bob Speller

Mr. John Wiebe

Mr. Bob Speller

Mr. John Wiebe

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Mr. Bob Speller

Mr. John Wiebe

Mr. Bob Speller

The Chair

Mr. Raymond Simard (Saint Boniface, Lib.)

Mr. John Wiebe

Mr. Raymond Simard

Mr. John Wiebe

Mr. Raymond Simard

Mr. John Wiebe

Mr. Raymond Simard

Mr. John Wiebe

Mr. Raymond Simard

Mr. John Wiebe

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Mr. Raymond Simard

Mr. John Wiebe

Mr. Raymond Simard

The Chair

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

Mr. John Wiebe

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Mr. Stéphane Bergeron

Mr. John Wiebe

Mr. Stéphane Bergeron

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Mr. John Wiebe

The Chair

Mr. John Duncan

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1630

Mr. John Wiebe

Mr. John Duncan

Mr. John Wiebe

The Chair

Mr. Tony Valeri (Stoney Creek, Lib.)

Mr. John Wiebe

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1635

Mr. Tony Valeri

Mr. John Wiebe

The Chair

Mr. John Duncan

Mr. John Wiebe

Mr. John Duncan

The Chair

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1640

Mr. John Wiebe

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 004

l

2nd SESSION

l

37th PARLIAMENT

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EVIDENCE

Wednesday, February 19, 2003

[Recorded by Electronic Apparatus]

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[English]

    The Chair (Mr. Mac Harb (Ottawa Centre, Lib.)): I call to order this meeting of the Subcommittee on International Trade, Trade Disputes and Investment. Pursuant to Standing Order 108(2), the order of the day is an examination in view of strengthening economic relations between Canada and Asia.

    We have with us the chief executive officer and president of the Asia Pacific Foundation of Canada, Dr. John Wiebe.

    On behalf of the committee, I would like to welcome you, John. What we will do is have you proceed with your presentation, and we will open the floor for questions and answers after that. Would that be okay with you?

    Mr. John Wiebe (President and CEO, Asia Pacific Foundation of Canada): That's fine.

    The Chair: Great. The floor is yours.

    Mr. John Wiebe: Thank you, Mr. Chairman, and thank you, committee members, for having me here. And let me also congratulate you on deciding to go to Asia, because I think it's important. I hope I make the case here that it's an important region for Canada.

    I'm here to talk about Canada's relations with the Asia–Pacific region, a dynamic region in the midst of significant change, and a region to which I think Canada as a whole pays too little attention. I believe that's a problem for us, and I want to make the case to you today as to why that's a problem and why Asia is important to us.

    There's the usual litany of reasons for why Asia would be important. It's home to two-thirds of the world's population; 60% or so of Canadian immigration comes from Asia today; it is a dynamic economy; and certainly the security issues there are important. But I'd like to focus a bit more on the economic side of things today. I'd like to make the point that Canada's market share of Asian imports is declining, and it has been declining for the last ten years. As one of my diagrams shows, we are looking today at about 65% of the Asian market share that we had ten years ago. While Asia is growing, Canada is not keeping up.

    There are apparently some innocuous explanations for this trend. For example, an increasing use of regional offshore production centres by Asian manufacturers and the resulting growth in regional supply chains have naturally inflated overall Asian imports without necessarily impacting imports from Canada. But if we look further at how things are faring in Asian markets, we find that while few countries outside the region are significantly improving their market share, most are at least holding their own.

    At the Asia Pacific Foundation, we have now looked at Australia, New Zealand, the U.S., Sweden, and Norway. We have compared those countries' Asian market shares in 1991 with their shares in 2001, and essentially they've all stayed fairly even, but Canada's has not. The worst performer in this comparison group was New Zealand, which has maintained 80% of its market share, versus our 65%. You can therefore see that of that group, we certainly are at the bottom end. We calculate that had we maintained our market share, we'd be looking at probably at least a $6-billion increase in exports. So in our view, it's important that we spend some more time building our relationship with that region from an economic point of view.

    Asia accounts for about 38% of Canada's non-U.S. merchandise trade. That's more than western Europe, and it's two and a half times as much as Central America and South America, including Mexico. Japan is our second-largest trading partner, and has been for many years. In fact, the only country that appears to have the potential to overtake Japan is China.

    If you look at my next slide, you'll see that our trade is obviously preponderantly with the United States. But if you look at where the rest of our trade is—China, South Korea, and the Association of Southeast Asian Nations, or ASEAN—versus others, you'll see that Asia is the second-biggest component. In particular, for a province like British Columbia, where I come from, it's even more important than it is for the rest of Canada. If we look at our top ten trading partners, obviously the United States is foremost—and I have not put them on the graph because they would dominate the graph so greatly. Japan and China are our next two most important trading partners, and we also have Korea and Taiwan in the top ten.

    Asia is changing, and it's changing rapidly. You will probably remember the discussion years ago about the Pacific century and how that probably fell by the wayside because of the 1997 crisis. But if we look at Asia today, it is back. It's growing, it's dynamic, and it's far more impressive than any other major region in the world. Change is the order of the day, both within and among the major Asian trading partners.

    As always, change holds opportunities and pitfalls. If we look at our trade with those countries that you're going to visit, you can see it's dominated by China and Japan, which, in terms of our trading relationships, are the two major countries that you'll be visiting. You'll see that India, Malaysia, Thailand, and Australia are all huddled down fairly near the bottom, with a two-way trade of somewhere $2.5 billion. If we look at our trade balance with these countries, you'll see we're basically in deficit with every one of them. I don't have Australia on here because I couldn't get the information in time, but you'll see we have a substantial trade deficit with China and with Japan in particular, and also with India, Malaysia, and Thailand.

    China is in the midst of one of the most profound economic transformations of the modern era. Real GDP growth in China is running relatively strongly at 7%, and it is forecasted to continue in the 7% to 8% range in 2003–04, with inflation very low and with some deflation actually being forecasted. China has had deflation in the past years, and probably will continue with some as the country continues its internal competition and drives for a greater internal domestic market.

    China is not as reliant on trade as one might think. Somewhere around 10% of its GDP relies on external trade. They really have a very large domestic market. The government's interest is in creating jobs; therefore, they will continue to have a fairly easy monetary policy and will probably continue to have some deflation. The renminbi, or RMB, is tied to the U.S. dollar. As long as it stays that way, you're going to see internal competition and some deflation, but pretty good growth. So their interests are in creating jobs and in the internal market.

    In Japan, real GDP growth is pretty low, with continuing deflation in Japan as they try to come to grips with their restructuring problems. In fact, corporate restructuring in Japan is going along fairly well, but the banking sector is still in difficulty. The government can't do much more to stimulate the economy. Interest rates are already at zero, if not a little more. They still have a real problem in their political system in terms of coming to grips with their economic problem. But for those who haven't been there, you will not notice a recession in Japan when you go there. The stores are still full and things are still happening, although unemployment is still relatively high for Japan these days, at around 4% or 5%.

    India is just beginning to reap the benefits of its economic reforms. India has been liberalizing its economy. It is going through a process of restructuring in terms of selling off state-owned enterprises. Air India is likely to be on the market, and Indal, their aluminum company, is on the market. We forecast fairly strong growth. The fly in the ointment there, of course, is the security issues between India and Pakistan. Overall, however, you're looking at fairly good GDP growth and continuing inflation, with a lot of that coming as a result of the reduction in subsidies in the agricultural area and others. The government has reduced its subsidies, and that has therefore increased prices.

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    If we look elsewhere in Asia, we're looking at growth that is not as strong for most of the tigers in the Southeast Asian countries as it was prior to 1997, but it is still reasonably positive growth. Hong Kong has a bit of a problem and will continue to have it to some degree as it gets displaced by Shanghai, but the rest of the countries are looking pretty good. Thailand is at 4% to 5%, and Malaysia is also at 4% to 5%. Those countries that you are going to are reasonably good.

    One of the crucial dynamics underway in Asia is an increasing awareness and acceptance of the benefits of regional cooperation in the areas of trade, investment, and financial affairs. Many influences have contributed to this. There's a momentum for ever greater regionalization in Europe and North America, with the Free Trade Area of the Americas and the European Union system, so Asia itself is starting to look at what it can do regionally. There's an increasing appreciation of the role of trade and investment liberalization in promoting domestic reform. There's a concern developing in Asia that matters of regional importance require regional responses. And there's a recognition that stronger regional institutions will facilitate regional adjustments.

    What you're seeing are a whole series of intra-Asian trade initiatives. The old CER—Closer Economic Relations—was completed in 1983 between Australia and New Zealand. The AFTA, the ASEAN Free Trade Agreement, really started in 1992 and is still evolving. Singapore and New Zealand completed an agreement in 2000, as did Sri Lanka and Pakistan in 2002, and Singapore and Japan in 2002—and that was Japan's first free trade agreement—while Singapore and Australia have just completed one in 2003. And if you look at what's being discussed and is on the table, quite a bit of discussion is going on in the region about free trade agreements or similar kinds of arrangements.

    What's standing in the way of a richer relationship with Asia? It's clearly the allure of the U.S. market. When you do look at where our trading relationship with the U.S. is compared to the other major regions of the world, it's pretty dramatic in terms of where we are. Asia is number two, followed by the EU. If you take Mexico and add Latin America to it, that area would be third.

    There's little doubt that the draw of the United States market diverts attention from other markets. That's absolutely natural. In fact, Canadian commercial interests are extremely fortunate to be able to share a continental language, a commercial philosophy, and a somewhat comprehensive free trade agreement. But just as our proximity to the U.S. has given us an invaluable leg up in ensuring our physical security and economic prosperity, it has also made it that much easier to neglect other markets. What we're hoping to do and what we're looking to do, in terms of our efforts as the Asia Pacific Foundation, is to highlight the potential for Asia.

    When we asked ourselves what the other issues related to our trade and export potential with Asia are, we wanted to look at where our business is really at with those countries. If you look at our slide on that issue, you start to realize that we are still fairly much dependent on natural resource exports to the region. As a result, our image in Asia is quite outdated, although that's not the only reason. Our image in Asia is still that of a country that supplies natural resources, has a lot of free space, and is a wonderful place to visit, but one that does not have a sophisticated economy. That's not necessarily a bad image, but it's an outdated image and one we hope we can get to change, to do some work on.

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    As a result of this image, Canadian firms may not make certain short lists, because buyers think of maple syrup and skiing instead of commuter aircraft and optical switching equipment. The solution put forward is that Canada needs to rebrand itself in Asia. I believe this will take a substantial effort. Rebranding is not as simple and maybe not even as straightforward as we might think. The image has to make sense to Canadians. It must be accurate and it must reflect the reality of a sufficiently large number of Canadians, not just a few. It must not garble an otherwise good message that Canada is a safe and wonderful place to come. It shouldn't be too temporal.

    Another issue that we have with the region is that our measurements aren't particularly accurate. I raise this issue not because it's a very catchy topic, but because it's an important aspect of our deepening relationship with the region. We underestimate our trade with the region. As a result, when you look at those numbers and figures I showed you before, you say Asia doesn't look all that important. But if you look at these numbers in terms of Japanese trade data, you'll see that they say their exports to Canada are $10.6 billion. We say our imports are $14 billion. They say their imports from Canada are $12 billion and we say our exports to them are $8 billion. There's a discrepancy there. Part of it is that some of our experts go through the United States on their way to Japan, but part of it is that we just don't have very good data. Secondly, we don't have a very good handle on our services exports, so we again underestimate the trading relationship with the region, in our view.

    Distorted trade statistics can leave business, the public, and policy-makers with a commensurately distorted sense of Canada's global relationships, and can impact the allocation of scarce policy resources, distract business and media interests from the ultimate consumer, and complicate the process of monitoring and adjusting to external shocks. As I mentioned, merchandise trade statistics are only part of the picture. Other crucial elements of Canada's trade and investment flows are services trade and direct investment flows. Neither of these is measured very well, if at all. What we do know of services trade numbers tells us that the Canada–Asia trade flows on the services side are much more robust than they are on the merchandise trade side. Let me illustrate an example.

    Relating to our export of education services, one important market receives far less attention than it deserves, and that is short-term English-as-a-second-language studies in Canada. The limited evidence available suggests that the ESL industry in Canada is flourishing. Unfortunately, the short- and long-term benefits of this activity to Canada are obscured by the fact that it is difficult to piece together reliable data on the foreign students in these schools from existing sources. A key part is that many of these students arrive on tourist visas and attend for periods short enough that they do not require student authorizations, but this in no way diminishes their impact on our economy.

    The Canadian Association of Private Language Schools, which claims over 100 member schools and annual enrolments of over 50,000, suggests that its member schools make an economic contribution in the order of $450 million per year. Not all these students are Asian, but the majority are. As long as we continue to measure this part of our economy poorly, it will be easy to take for granted the steady flow of such students, just as we have seemed to take for granted the steady flow of tourists. We don't really measure tourism very well, and we don't measure our student flows very well, or our services, if you like.

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    What should we do to pursue a richer economic relationship with Asia? One element of our research agenda relates to the implications of ongoing North American integration for Canada–Asia relations. A couple of years ago, we suggested it was time to devote a commensurate amount of effort to liberalization outside of North America. At that time and given our Asia focus, we suggested Japan and Korea, given their importance to us as trading partners and given a growing sense that they might be interested in entertaining suitors in the wake of the problems the WTO had in Seattle. In short, we recommended that we start the discussion for a Canada–Japan free trade agreement.

    We still believe that kind of initiative would be a signal to the Asian countries, and particularly Japan—or China, for that matter—that Canada is engaged and that Canada is interested. I showed earlier that slide with all the initiatives intra-Asia. I should also say that the U.S. and Mexico in particular are focusing on free trade arrangements with the countries of Asia in a very aggressive manner.

    The final thing I'd like to suggest is that, in the context of engaging Asia, we have often heard that government will follow the private sector, and that, should the private sector get interested, we'll certainly follow through. We would argue that, at this point in time and given the propensity of our relationship with the United States, perhaps it's time for government to lead, because the industry will follow.

    In conclusion, let me just say we are losing touch with and relevance in an important market, an important region, and we need leadership from the political level to alter this trajectory. We should not turn away from the U.S., nor should we ignore the pressing and important concerns relating to the border. However, to be a vital commercial partner with Asia requires us to show them and give them the signals that we are interested.

    At the simplest level of response, one can concentrate on nothing more ambitious than doing a better job of monitoring, cataloguing, and understanding the relationship. That means more focus, more measurement, and less taking for granted. I would argue and suggest to you as a committee that Canada needs to re-engage, Canada needs to indicate to the region its importance to our economy and to our people.

    My last slide is one I would raise with you simply as a contextual one. You're going into a region where radicalization of the Muslim majority in many countries is increasing, particularly in Malaysia and Thailand, as the Jemaah Islamiah, a radical group, gains a certain amount of strength. There is a rising tide of anti-Americanism in the region. Mindanao is becoming a terrorist refuge. It has porous borders with Malaysia and Indonesia, and the JI seems to have set up shop there. You're seeing anti-Americanism and concern in Korea, mainly because of the north–south issue. In South Asia, Pakistan is on edge. There is a rising tide of nationalism in both India and Pakistan, and that could result in some major concerns. And there's a fear of China throughout Southeast Asia and parts of Asia, not in a security sense, not in a military sense, but in the economic sense, as China draws most of the foreign direct investment into it. As many of the business people in that region have said to me, if China wants to build something or do something, they simply cannot compete.

    That's the region you're going into. It's a changing region, a dynamic one, and one that is fraught with certain dangers, if you will. But it's also a region that is important for Canada.

    Thank you, Mr. Chairman.

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    The Chair: Thank you very much for this excellent presentation, John. We're going to ask a few questions, and hopefully we'll be able to send you home before 4:30.

    We'll start with Mr. Duncan.

    Mr. John Duncan (Vancouver Island North, Canadian Alliance): I really enjoyed the presentation. I'd like to try to put this into perspective. My understanding is that about 70% of the world's economic growth over the last five years, for example, would have been in the Asia–Pacific region. Is that your understanding?

    Mr. John Wiebe: No, it's not. [Editor's Note: Inaudible]...the world's growth. I don't have those numbers, but I would be surprised if it was that high.

    Mr. John Duncan: It's a big number, though.

    Mr. John Wiebe: Yes, it's a big number.

    Mr. John Duncan: I was on a panel in Taipei last month, talking about international trade. A couple of U.S. congressmen were on that panel, too. You made reference to the fact that the U.S. administration is actively pursuing Asian free trade arrangements. To concur with your statement, I was quite taken by the fact that they were quite anxious to pursue free trade arrangements with China and Vietnam, and that they were certainly looking at other targets, including Taiwan. It appears to me that we're really slow off the mark here.

    I'm wondering why you would pick Japan. It seems to me that would be a very complicated arrangement. Why pick such a complicated first choice as your target? It seems to me that everybody in the world wants to sign a free trade agreement with Singapore, because it would obviously be simpler to arrange.

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    Mr. John Wiebe: It's a good question, and the answer to it is threefold. Firstly, Japan still is our most important trading partner. Secondly, we believe there are all kinds of opportunities in Japan that we could pursue if we had an arrangement. Thirdly, we recognize the agricultural problem.

    What we're really suggesting when we say “free trade agreement” is a new arrangement. Their agreement with Singapore does not include agriculture. In fact, it isn't a true free trade agreement. It's an enhanced economic relationship. That's what we would target Japan with, recognizing that the difficulty of getting agriculture into that would simply not put it there.

    Our argument is that by simply discussing the idea of a free trade agreement with Japan, we open doors. Whether we actually get to the end or not is not irrelevant, but it is not the end game itself. It's the opening of doors in Japan, the opening of their distribution systems, the opening of a series of potential target areas for our merchandise and our high-tech stuff, rather than coal and agricultural products. In that sense, we think Japan is a very good target.

    Mr. John Duncan: From a political perspective or from the perspective of the countries in Asia, have any administrations in the countries you were discussing today indicated that they wish to pursue some kind of special trading arrangement with Canada?

    Mr. John Wiebe: I would have to turn to my colleagues from the Department of Foreign Affairs to answer that question. I don't know, because I don't necessarily deal with the governments there. I have dealt with the Government of Japan and discussed it at high levels in the government there, and they have indicated interest. I haven't discussed it with any other government, so I really wouldn't know.

    The Chair: If somebody wants to come forward to take a seat, please feel free. It's like home.

    John.

    Mr. John Duncan: So I don't get an answer there.

    Mr. John Wiebe: As a private not-for-profit, we don't always get into the corridors of governments.

    Mr. John Duncan: As far as you know, has there ever been a formal representation by anyone from the Canadian side to one of the nations we're talking about, in terms of trying to get a free trade agreement or some trading agreement off the ground?

    Mr. John Wiebe: I think there was a discussion with Singapore.

    Mr. John Duncan: So as far as we know, that has—

    Mr. John Wiebe: That's nowhere.

    Mr. John Duncan: —gone nowhere.

    I think that covers my questions for now, Mr. Chair.

    The Chair: Mr. Speller, Mr. Simard, and then Mr. Bergeron.

    Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Thank you for coming today, Dr. Wiebe. Unfortunately, I missed most of your presentation, but I do understand the organization you're with. I'm sure that when you talked about Asia–Pacific and some of the difficulties for Canadian businesses doing business in that area, you talked about the problems of branding Canada and about some of the particular issues like governance and some of the problems in some of the countries in terms of laws and giving protection to Canadian businesses there.

    What more can the government do in terms of helping to work out those issues? Do you see the government putting enough effort into those sorts of issues?

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    Mr. John Wiebe: No, certainly not on the issue of branding, but I have to admit that it's a difficult issue. I don't think we've had the discussion in our country in terms of what we want Asians to think we are. We've done the polling in Asia. We've done a number of polls, and we are seen to be a very benign, lovely country, and frankly some of them say we're somewhat naive. They see us as a great place to come for a holiday, but not as a place from which they want to buy equipment, for example. This is perception, admittedly, but these are polls that we've done with corporations and business people in those countries.

    The issue for us is that it's not a bad perception that we're a good country, that we're clean, and a nice place to visit. But how do we get the new idea there, particularly when 86% to 87% of our trade is with the United States, particularly when most of our high-tech products go south? We don't actually sell that much in quantity to Asia–Pacific. If we look at our trade with Japan, we still sell them a lot of coal. We still sell a lot of natural resources to those countries. We sell more natural resources to China than we buy. They send us finished products and we send them resources.

    In a sense, until we start changing our trading relationships, that kind of perspective will be there. If we can't do that, if we can't change the economics that easily, how do we change that image in the minds of Asians? We do it through education. I think this whole process that we have of engaging and getting Asian students to come to Canada is important. It does give them a perspective of Canada that they wouldn't have had. Those people go back.

    In the past, we had programs that purposely brought Asian leaders to Canada in order for them to see Canada for themselves. We've cut those things out over the past ten years in terms of budgets. I think we ought to look at that again. I think we need to re-engage Asia on multiple levels, because there's no question in my mind that ten, twenty, and thirty years from now, Asia will be where it's at again. You cannot ignore two-thirds of the world's population. You have a country like China that is moving very quickly. India is just starting, and I suspect that in twenty years, India will be....

    There are going to be bumps along the road and all kinds of hiccups, but I suspect that you're going to see two major powers in Asia that aren't there today. Canada could very well be left out, particularly if they have an image of Canada as not being a sophisticated, developed country...well, they know it's a developed country, because we're in the G-8. They just don't look to us for the kinds of products that we would like.

    Mr. Bob Speller: Are we just not good at branding?

    Mr. John Wiebe: We're not good at marketing.

    Mr. Bob Speller: We're not good at marketing? We send Team Canadas over and they seem to be very successful when they go over to these countries. Do we need to send more Team Canadas?

    Mr. John Wiebe: The Team Canadas are good, but you have to follow up. One of the things you hear—and again, these are anecdotal and generalizations—is that Team Canada comes, goes, and then nothing happens for a while until you get another one. We have to follow up. We have to put in place arrangements, agreements, relationships that build in between Team Canadas, if you like.

    Mr. Bob Speller: Is it because there isn't the interest on the business side? Or is it because government really isn't providing enough resources to do it?

    Mr. John Wiebe: That's a really good question. The business community has something called the Asia Pacific Business Network, which Canadian companies interested in the region have joined. We have sixty or seventy members. If I had a list of them here, I could show it to you to give you an idea of who is interested and who is not.

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    Mr. Bob Speller: There's probably interest around the world, in international terms, in the European ones—

    Mr. John Wiebe: Absolutely, but specifically these are the guys interested in Asia. For example, of the banks, there's only the Bank of Nova Scotia. The rest of the banks have pulled out. BNS is still in Asia. Of the insurance companies, Sun Life and Manulife are the only ones that are in there. You can almost pick and choose the ones that are interested in the region and the ones that aren't. The rest of the general business community is so focused on the United States and the north–south connection that they aren't interested, for all kinds of reasons, and I don't blame them. I'd be in the same boat. If I could do business in the U.S., why would I bother going somewhere else?

    For that reason, we would argue that this does need some government leadership. We're not arguing necessarily for the government to pour money into this, but for it to show leadership, such as the kind of thing you're doing in going on this trip. Make sure people know about it, and engage them more. One of the reasons we're arguing for negotiating a free trade agreement with one of those countries is that while it may not cost a lot, it's a signal that we're engaged. It's that kind of stuff that we're talking about in terms of leadership by the government.

    Mr. Bob Speller: Thank you.

    The Chair: Mr. Simard and Mr. Bergeron.

    Mr. Raymond Simard (Saint Boniface, Lib.): I had some of the same questions as Bob, actually, but in terms of your graphs, Dr. Wiebe, if you look at 2001, would you say the last of couple of years have been fairly consistent and that nothing has changed, that we haven't had more activity there?

    Mr. John Wiebe: We're seeing increased trade with India.

    Mr. Raymond Simard: Would it be very different from what we're seeing now?

    Mr. John Wiebe: No, not much different.

    Mr. Raymond Simard: Can you just tell me a little bit about your organization, in a couple of sentences? What is your mandate? Who do you represent?

    Mr. John Wiebe: We were created by Parliament in 1984, through an act called the Asia-Pacific Foundation of Canada Act. The purpose of the foundation is to enhance awareness and understanding of the Asia–Pacific amongst Canadians. Our mandate is to educate Canadians.

    The mandate in the act is long. It talks about everything from doing research to doing information dissemination, and it's a mandate on both sides. It's to enhance the understanding and awareness of Canadians about Asia and Asians about Canada. We focus on the Canadian side simply because we don't have the money to do the other stuff—and that's part of the problem, if you like. Asians have a different perspective on us because we're not doing that. And it's not just us, because others aren't doing it either.

    So we have a fairly large mandate. We're funded by Foreign Affairs and the Canadian International Development Agency, to the tune of $2 million a year in total, an amount being cut back every quarter, to the point at which we're getting squeezed fairly dramatically.

    And by act of Parliament, we are also located in Vancouver. The act actually says we will have our offices in Vancouver.

    Mr. Raymond Simard: Do you have a role in informing Canadian businesses about what's going on in Asia?

    Mr. John Wiebe: Yes, we do. I mentioned something called the Asia Pacific Business Network. We have seventy or so members. These people actually pay us an annual fee—because we need to collect some money—and they get from us a whole series of publications. We do a daily news brief on Asia, we do a weekly analysis of key issues, we do a monthly commentary, we do quarterly economic updates for every country, and we do an annual Canada–Asia review. We have a whole series of products that are really focused on the economy, but we have some broader things than that.

    Mr. Raymond Simard: You spoke about how easy it is for Canada to do business with the States. I think it's probably one of our biggest challenges in attracting people to Asia, but there are cultural barriers and everything else that go with that. Do you see any advantages for Canadian companies to partner up with, say, Australian companies or New Zealand companies? Obviously they have a certain level of experience in dealing with the Asian markets.

    Mr. John Wiebe: There's a lot of talk, particularly on the Australian side. The Australians do believe it would be an advantage both for them and for us. They think the advantage for them would be that they would understand and have a better handle on the American market, and they think they understand Asia better than we do and that they could therefore help us.

    We have traditionally seen Australia as a competitor. Most companies look at that when you say to them that they should talk to the Australians about teaming up. Our businesses just say the Australians are their competitors in certain areas. So it wouldn't be a bad idea, since the Australians are deeper into the Asian region than we are, but companies would have to look at it very hard in terms of whether they're in competition or not.

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    Mr. Raymond Simard: You see it as possible for them to step into the market there, then.

    Mr. John Wiebe: It is, and Australia is also a logical jumping-off point for certain companies in terms of having an office there rather than in, say, Hong Kong or Singapore. It does make a certain amount of sense for certain companies.

    Mr. Raymond Simard: Thank you.

    The Chair: Mr. Bergeron.

[Translation]

    Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Thank you, Mr. Chair. First of all, I would like to apologize to Dr. Wiebe for being late. I dare hope that it will be possible for you to send us your slides, so that I can examine them in a more detailed fashion.

    I would like to come back to the last question asked by Mr. Speller concerning our economic relations with Asia-Pacific, compared to that with the United States.

    In a press release from the Asia-Pacific Foundation of Canada, you were quoting from an article published in Canada-Asia Review, and I quote:

Canada will pay the price if we miss the opportunity to reinforce our links with Asia at the level of integration, just because of free-trade concerns in North America.

    My question is simple: how could it be otherwise, given the fact that presently, almost 80% of the products that we export are going south on the American market, on the first hand, and on the second hand, that Canada has a tiny share of Asian markets? In the past year, for example, Canada's share of the import markets of the 10 first consumer countries in Asia has decreased from 1.32% to 1.24%. So you've been asking for more leadership on the part of our government, in order to convince, so to speak, Canadian business people that Asia-Pacific is an important market for them. But in the light of figures such as these, how could we ever convince the government to show such leadership? I am asking for some advice from you, because we will obviously have to make recommendations to the government. As well, what suggestions would you have for us as to recommendations that we could make to the Canadian government regarding the leadership that our government should show in order to signal Canadian business people and investors that the Asia-Pacific market is worth investing in?

[English]

    Mr. John Wiebe: Those are very good questions. Let me start with the U.S. issue.

    Like any company, anyone that becomes too dependent on one market has a potential problem in the long term. We would argue that if you take the trajectory of Canadian dependence on the United States in economic terms, it would behoove us to look for alternate markets. Again, that's not to deny what we're doing with the U.S., but to simply broaden our marketplace. In many ways, just like if you had a monoculture, you are much more sensitive to issues or to problems in that monoculture than you would be if you had a robust diversity. In the same way, if the U.S. economy takes a serious dive and we are 87% or 90% dependent on it, we have a problem.

    Canada is much more trade-dependent that most countries I know of. Our trade-to-GDP ratio is far higher than that of Japan, the United States, or even China, for that matter. In China, trade is 10% of its GDP, but ours is 50% or 60%. So we're very dependent on trade. The softwood lumber issue itself, at least in British Columbia, shows you how dangerous that dependence could eventually be in terms of our economy. In a general economic sense, we're using that as an argument because our interest is Asia. We're using that to ask questions. Why not Asia? Why not look at doing more with Asia?

    In terms of what the government can do, clearly governments can't tell companies where to go or what to do. We wouldn't even suggest that. But what government can do is give industry information, and it can also give signals to buyers that you are open for business and that you have an interest in them.

    My point earlier about the image of Canada perhaps excluding some Canadian companies from being suppliers to Asia rests on the kind of anecdotal evidence that I can give you on Taiwan. We were involved with a group of Taiwanese who came to Canada ostensibly to look at buying up pig farms. When we showed them the information technology industry in Vancouver, they were shocked. They had no concept that Canada could even supply that kind of equipment. They were here to look for farms where they could grow pigs. That was their vision of this country. How do we change that? It's a combination of the efforts of governments and industry. I don't pretend we have all the answers, but I think we need to engage and think about how we can do that.

    In that sense, we're saying that perhaps government can provide leadership—again, not to tell companies where to go, but to provide some leadership in information, provide some leadership in letting the Asian countries know what we have. In that sense, Team Canadas are very good, because they do that. I think we need to do more follow-up with those.

º  (1620)  

[Translation]

    Mr. Stéphane Bergeron: I have perhaps a short question before asking another one on the same subject. Do I understand correctly that you have the feeling that trade commissioners that we have on duty in many cities in Asia are not doing a good job or are not doing enough to help potential investors and commercial partners in Asia understand what the Canadian economy can offer? If I understand correctly, there should be some additional effort at that level.

[English]

    Mr. John Wiebe: I think our trade commissioners are doing a wonderful job in Asia. The problem is that they're overworked in that context. We would argue that, over the last ten years, our presence in the region has been cut back to the point at which they can't do everything.

    Not only that, it's not just the trade commissioners or posts overseas having to carry the burden of this one. We need to build relationships that go beyond the government-to-government ones. We need to have relationships of the kind we used to have between universities and research institutes, people to people, if you like. In that sense, often government needs to lead in instituting those kinds of relationships.

    I'm not suggesting that it's simply a matter of putting more government people on the ground or that they're not doing their job. They're doing a great job, but the breadth of our relationship with that region isn't there anymore, and it's there that government has to lead.

[Translation]

    Mr. Stéphane Bergeron: Do I still have some time, Mr. Chair? Thank you.

    You talked earlier about the issue of softwood lumber and the trade dispute that we have with the United States in this regard. Last week, I had the opportunity of asking government officials about efforts that were made to succeed on the Chinese market, for example, which is a great consumer of softwood lumber. According to the figures that you gave yourself, it would seem that Canada provides some 33.2% of imported houses built in Japan, woodframe houses. We know as well that next July 9, the Chinese tariff barrier on newsprint imports will be eliminated.

    We asked that question to Secretary of State Kilgour, who told us that the government had not yet pursued any activity in order to make our move on the Chinese newsprint market in anticipation of this tariff barrier elimination. In your view, what should be done? Given the significance of the softwood lumber industry and the pulp and paper industry in Canada and Quebec, what should be done, in your opinion, including at the government level, in order to get a better penetration of our products on the Asian markets, particularly in China?

º  (1625)  

[English]

    Mr. John Wiebe: Quite a bit is being done right now to market Canadian lumber in China in particular. A variety of trade missions have gone over. You have to remember, though, that while those markets potentially are huge, they are still really tiny compared to the United States in terms of any kind of real product. We won't see big numbers there, but we will see slow penetration. In Japan, it took probably twenty years to develop that market to the point it is at now, and it will continue to take time to develop. China probably is the place that has the most potential, but it's the most competitive. The ability of the Chinese to afford Canadian lumber to build homes is still a problem.

    I can't think of any specific thing more that government could do. I think there are a number of missions out there. I know COFI, the Council of Forest Industries, in Vancouver, is working with the companies to get them over there. But other than encouraging, providing information, and continuing to do what they do now....

    I have to admit I'm not familiar specifically with the wood file in China or Japan. I would think they're doing pretty well. The government has pursued the issue of building codes. They've helped COFI in Japan and they're doing it in China, and I think that's probably not a bad direction for them.

    The Chair: Mr. Duncan.

    Mr. John Duncan: We've wandered off a little bit into the softwood file, so I just wanted to make a couple of observations. One is that some of the coastal B.C. companies are actually responding to the softwood dispute in the U.S. quite well. When Interfor just announced their profit for the last quarter, they said only 25% of their sales were to the U.S. Knowing what I know about the company, the other 75% of sales were basically to Asia. So some positive things are happening.

    The Coast Forest & Lumber Association has actually taken over most of the functions of the Council of Forest Industries as of January 1. Even prior to that, they put some very significant proposals forward for federal financing to help us retain market share in Japan. The federal government never took them up on it, and we lost huge market share in Japan to dry kiln product and other species away from our traditional markets in Japan, and we lost them mostly to Scandinavia. So I think there is a real role for government if they're listening.

    What's very apparent—and I think it's probably noticeable, although maybe you haven't said it.... I'm from British Columbia. In your slide presentation, you described Asia as the second-largest trade area for us, yet every parliamentary focus, every Canadian administration's focus, the trade minister's focus, is on all the other trading partners first. Whether it's Europe, Latin America, or Mexico, that's where we're pursuing free trade agreements. That's where we did our studies first, even on this committee. Asia always seems to be the last one, so I appreciate your message that we need to change that.

    British Columbians and Albertans and people on the Pacific Rim really need to wake up too. Many people in my community are just awakening to the possibilities in Asia. I enjoyed sponsoring a mini-trade mission to Asia last year. I've really enjoyed hosting Asian business people and political people in my riding. We have some educational business starting.

    On your comments about building relationships, if you don't know people, you can't do business with them. That's the part I think government could help with, because it is a very expensive place to access. So your comments are well appreciated.

    We have companies like Rocky Mountaineer Railtours that are very good at marketing. You suggested that we're very lousy at marketing as Canadians, and we are, but Rocky Mountaineer has gone into the marketing business very well. They go into Asia and they're attracting Asians to Canada to experience that, and I'm sure some other successes are out there.

    I've suggested that this committee talk to Rocky Mountaineer. Do you have any other companies that you could point to?

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    Mr. John Wiebe: I should tell you I know Peter Armstrong very well.

    Mr. John Duncan: That's the name I suggested, yes.

    Mr. John Wiebe: Again, it's a generalization about our marketing. Some of our people do very well over there. But I think the general perception in Canadian business—and it's changing, but I'm using this for dramatic effect—has always been that we were price takers because people came and bought our stuff. Now we have to go sell it, but we're not that familiar with some of the marketplaces over there and how they work. Some of our people in the tourism industry in particular are probably the best at marketing right now. It's in the other areas, in the merchandise areas, that we're not as good.

    The Chair: Mr. Valeri.

    Mr. Tony Valeri (Stoney Creek, Lib.): Thank you, Mr. Chair.

    I just have a quick question having to do with the financing of your organization, because you piqued my interest when you were chatting.

    I don't think there's any dispute at the table about the kind of work you do and the support you provide for those companies, but can you tell me what your budget should be? If we, as a committee, are looking to improve the relationship, information is critically important if we're going to entertain and attract companies and expose them to the market opportunities. If government should be leading the way, what should your budget be? If you had a larger budget, what are some of the things you might be doing that you cannot do today because of unaffordability?

    Mr. John Wiebe: That's an excellent question. Let me give you a little background just to give you the picture.

    The budget of the Asia Pacific Foundation was $2 million in 1984, so it hasn't changed in sixteen years. However, in 1992 it was $8 million. What we did was start at $2 million in 1984, go to $8 million in 1992, and then back down to $2 million in 2002. In my mind, that reflects the interest in the region and what happened.

    To answer your question on what I think we need, I would say we would do very well with $5 million. What could we do? We could do all those things I talked about in terms of building relationships over there with Canadians that we haven't been able to build so far.

    We used to run something called the young leaders program, in which we brought up-and-coming young leaders from Asia to Canada to spend two weeks at the Banff Centre for Management and then to tour Canada. They would then go back to their countries, where they were in high positions in their governments and industries. They obviously had an interest in Canada at that time, but that stopped in 1990 because we didn't have a budget.

    We also had a program called the media fellowship program, in which we sent Canadian journalists to Asia so that they could understand Asia and write about it in our media. Part of the reason Canadians don't know much about Asia these days is that they never read anything about it because it's not in our papers anymore. We don't have a bureau in Tokyo anymore. We used to have one, and we used to send these people there. We had to cut that out because we don't have the budget.

    We don't have the ability to do very much in Asia at all, because, as was pointed out by one of your members, it's expensive to fly over there, to get over there, to do things. We don't have that kind of budget, so we're limited pretty well to desktop operations in which we do the analysis and disseminate information. But we can't build the relationships. It was pointed out that you do business with people you know and trust and you do business with people you understand, but we're not building that understanding.

º  (1635)  

    Mr. Tony Valeri: Just as a quick, little follow-up, I'm not sure if this is a fair question or not, but when the budgets were more than they are today, did the Asia Pacific Foundation engage in any sort of tracking in terms of activities that you were engaged in and the kinds of outcomes you were hoping for? You're going to track successes. Are you now able to see where your successes are falling off as a result of not being able to do some things?

    Mr. John Wiebe: There's a certain amount of tracking you can do and you can tell how much influence you're having on certain things. What we did track and what we could track was the amount of coverage of Asian issues in the newspapers. For example, we tracked the interest of Canadian students in taking Asian languages. We tracked trade, obviously, but whether you can take credit for it or not either way is...none of these are items one can take direct credit for, but all of these are down. The slope is down for all of these. As you saw, the slope for our market share is down. Even though some of the actual numbers are going up, the market share is going down. So, in general, we can say there has been a disengagement from Asia.

    The area in which we have the most potential or in which we're still quite engaged in Asia is tourism and our airline. Air Canada is still flying dramatically there. I should tell you that we'll take credit for introducing Air Canada to Asia. I personally took the chairman at the time to Hong Kong for his first trip. We still work with them and they're still a sponsor and a supporter of the Asia Pacific Foundation, so there is obviously a success story to some degree. Alcan is in the same boat.

    We also used to have offices in Montreal, Toronto, Winnipeg, Regina, and Vancouver. We don't have them anymore, because we can't afford them. We can't reach out to the people in the rest of Canada as we could before.

    The Chair: Mr. Duncan.

    Mr. John Duncan: Just as a quick question in the same vein, we have Chinese newspapers in Vancouver, like Ming Pao, World Journal, and some other Asian newspapers. Do you have the ability to look at Chinese-language newspapers, for example, and to translate them? Do you have that capacity?

    Mr. John Wiebe: Amongst our staff, we have the capacity to read them and translate them. Although we don't translate them per se, we do review them and scan them, and we take material out of them that we use for our purposes.

    Half the staff at the foundation is Asian, and half is not Asian. My vice-president and chief economist, Yuen Pau Woo, is originally from Singapore. We have capacity in the foundation in Chinese, Japanese, Hindi, and Korean, so we cover the bases reasonably well. But we don't have professional translators, so to speak.

    Mr. John Duncan: You cover the bases just barely.

    Thank you for that clarification.

    The Chair: John, on behalf of my colleagues, I want to thank you very much, but there's one thing I want to ask of you. I know you made an excellent presentation and you answered our questions very directly and to the point. Over the next few weeks, I wonder if you can send us some specific recommendations that you would like to see the government take action on. When we are reviewing this file, we can then go back to those recommendations to see whether or not we have a consensus in this committee, in order that we can make a report to the House of Commons and thereafter to the Government of Canada.

    We were quite interested in your comment about your foundation and what you were doing in the past. I know you were chopped as part of what were, at the time, called program reviews. That happened to you, along with every other department. But what was really surprising was that every other department was able to come back. I suppose you didn't make enough noise in the past to get the attention you deserve, but I think this is a good time for you to have made your presentation before this committee.

    I want to thank you very much, and I hope you will get back to us with some specific recommendations.

º  (1640)  

    Mr. John Wiebe: Thank you for having me here, Mr. Chairman.

    The Chair: It being 4:45, we'll adjourn.