We have a cattle operation in addition to field crop production, wheat, barley, canola, and peas, which is our primary pulse crop.
I have served on the Alberta Pulse Growers commission for six years now, entering my seventh year. I have been their representative on Pulse Canada for a number of years, and was most recently elected chair of the national organization.
Pulse Canada is a national industry association funded by the farmers who grow peas, lentils, beans, and chickpeas across Canada, as well as by the processing and exporting companies that export pulses to 160 countries around the world.
For more than 15 years, Pulse Canada has been focused on market access as one of the members' top priorities. Access to markets in a predictable and stable trading environment is a prerequisite to building an export-oriented resource economy for Canada.
We'd like to use our time to talk about the Canadian pulse and special crops industry's perspective on the Pacific Alliance and what may be possible to achieve in terms of enhanced regulatory harmonization with the countries involved.
Each of the member countries of the Pacific Alliance—Mexico, Colombia, Peru, and Chile—are among the Canadian pulse industry's top 20 importing countries. However, taken together, exports of Canadian pulse and special crops to the four countries are valued at $148 million annually, equivalent to 206,000 tonnes per year. This is averaged over the years 2009 to 2012.
Measured as one, the four countries would represent the fifth largest export market for the Canadian pulse and special crops industry, equivalent to just under 8% of the value of Canada's total pulse crop export program.
Lentils are the most significant pulse and special crop export to the Pacific Alliance members, with average annual exports of 135,000 tonnes, or approximately 12% of Canada's annual lentil export volume. The primary competition is lentils of U.S. origin, although this is limited, as Canada is the dominant supplier of lentils worldwide, with more than 60% of the global trade.
Canada is also a significant supplier of dry peas and beans to the four countries, which is an important region that ranks behind only the U.S. and the EU in the case of dry beans, and in the case of peas, behind India, China, Bangladesh, and the EU.
The Canadian pulse industry is very supportive of the development of bilateral and multilateral trade agreements at the government-to-government level, because they provide the opportunity to create a more permanent and lasting trade policy framework that levels the playing field with other exporting nations. They also ensure that yearly fluctuations in domestic production are not met with yearly fluctuations in import or access policy. Predictable trade policy is a vital component of food security and, equally important, a vital component of affordable food.
The Pacific Alliance is an interesting opportunity from the Canadian pulse industry's perspective. On one hand, Canada has already negotiated free trade agreements with each of the four member countries, and these either address or are in the process of addressing most tariff, quota, and trade escalation issues.
Mr. Chairman, committee members, I'd like to spend the rest of our time highlighting one emerging challenge that all commodity exports will increasingly face in the years to come, as current zero thresholds that are on the books in importing companies collide with analytical methods to test against those tolerances that have now ranged down into single parts per billion.
As you know, crop protection products—herbicides, fungicides, and insecticides—have been critical to improving agricultural productivity. Unfortunately, new crop protection products and their rapid adoption have challenged market access as importing countries could take years to establish legal tolerance for residue levels in grains, oilseeds, and pulses. This is further complicated as countries have zero or near zero default tolerances that apply when the country hasn't got around to setting a legal tolerance.
As an example, in 2011 the pulse industry had a high-profile glyphosate breach and MRL gap encountered on lentils to the EU. The issue was that Canadian farmers were using a crop protection product—glyphosate or, by another name, Roundup—that was fully approved in Canada for use on the crops, and the residues within the exports were well within Canadian food safety standards. However, the EU had never gone to the process of establishing an MRL, or maximum residue limit, for glyphosate on lentils, and consequently applied a near zero default MRL of 0.1 parts per million. This caused rejections as well as product recalls from retail shelves, so it was quite significant. As you know, detection of pesticide residues, even when well below levels considered safe by the world's leading regulatory bodies, can create headlines that undermine the consumer perceptions of the safety of Canadian agrifood products.
I want to emphasize that all of this happened solely as a result of the lack of regulatory harmonization. I want to be clear to all committee members who may not be familiar with the policy and processes around the establishment of crop protection product tolerance levels. Canada is among the toughest regulators in the world when it comes to establishing safety margins, and the product pulled from EU retail shelves was easily compliant with Canadian standards. Underscoring that there was no food safety risk in this particular case was that EU regulators, after they consulted with their own health authorities, increased their default MRL, which was near zero at 0.1 parts per million, by a factor of 100, to 10 parts per million after the dust settled.
The pulse industry then did a lot of work to identify the extent of similar hidden risks across other products and markets where trade is at risk solely due to regulatory gaps and not food safety concerns. That analysis revealed that the value of trade at risk is approximately $900 million for pulses and close to $3 billion for the cereal crops and oilseed crops grown in rotation with pulses. This is categorized as markets that have one or more MRL gaps or missing MRLs.
The four countries of the Pacific Alliance each have a different process to establish MRLs, none of which is effectively aligned with each other's or Canada's. Mexico uses a combination of MRLs established by the U.S. and by the UN body Codex. Peru uses Codex exclusively. Chile has begun to develop its own MRL list as of 2010 but considers Codex and U.S. MRLs. Colombia is currently reviewing its MRL policy but has relied on Codex.
What does this mean for exporters in practical terms? Of the 19 crop protection products registered for and commonly used on lentils in Canada, Canada has MRLs for 19, Colombia has MRLs for 3, Peru for 5, Mexico for 17, and Chile for 6. The key issue is that because absent MRLs get interpreted as zero or near zero tolerances, shipments that are fully compliant with Canadian safety standards would be rejected by the importing country. This creates enormous uncertainty for trade. While the asynchrony between Canada and importing countries is not new, the potential for trade disruption is increasing as testing becomes less expensive, capable of detection at lower levels, and more prevalent in response to increasing consumer interest in food safety, driven by issues such as the EU horsemeat scandal.
The opportunity as we look ahead is to use FTA negotiations and all other multilateral forums to attain the commitment of importing countries toward regulatory harmonization of MRLs. This is occurring now within the TPP, of which three of the four Pacific Alliance countries, except for Colombia, are currently members.
The long-term solution is represented by a best practice currently used by Canada, the EU, the United States, and Australia, and increasingly Brazil, to improve the coherence of crop protection regulation by participating in OECD global joint reviews, which involves splitting the workload of pesticide evaluation among participating regulatory authorities, exchanging data, and peer reviews.
A short-term to medium-term solution is to establish interim MRLs, which could involve the importing country applying an MRL of the exporting country, or some other OECD-referenced country, according to internationally accepted processes. A precedent already exists. The UN World Food Programme uses as the importing country's MRL the MRL that is in place in the exporting country.
In closing, the pulse industry has also been working with other Canadian agriculture stakeholders to identify specific work that can be done by the Canadian industry to complement the work we are asking of government. Agriculture industry stakeholders understand the value of partnerships and are ready to work together to achieve measurable outcomes.
Thank you, Mr. Chairman and members of the committee.
Thank you, Mr. Chairman.
Thank you for inviting me to attend and make comments to you. My name, as indicated, is Theresa McClenaghan. I'm the executive director of and counsel with the Canadian Environmental Law Association. We're a 43-year-old federally incorporated not-for-profit environmental NGO and an Ontario specialty legal aid clinic.
I will provide remarks in the hope that we can be of assistance in your study of the potential benefits of Canada joining the Pacific Alliance as a full member. I understand that the relatively recently formed Pacific Alliance's full members consist of Chile, Colombia, Peru, and Mexico, and Canada has been an observer since last November. I also understand there are now a number of other observers.
I have read with interest the transcripts of some of the committee's earlier studies and am somewhat familiar with the testimony you've heard.
I also searched for any information I could obtain with respect to the Pacific Alliance and its agreements to date. For example, I obtained translated text of the Lima Declaration signed by the four member countries. The Lima Declaration, which is very high level, describes a process for the designated senior ministers in the four countries to work together to develop a framework agreement toward a deep integration area.
My focus will be on issues relating to environmental protection in the event of Canada joining the Pacific Alliance as a full member. My remarks will, in general, explore potential benefits and also potential risks. My remarks are very general because it's very early in the process, and of course, there are no specific agreements, as I understand it, or proposed language to which Canada would be bound that we could consider at this time. I will be drawing largely on CELA's prior work on environment and trade matters. We've spoken to this committee in the past, in earlier Parliaments, on some of those.
My primary question is the extent to which participation in the Pacific Alliance would improve both Canada's and the current four members' situations in terms of sustainability. For example, I noted that a witness from Canada's Department of Foreign Affairs and International Trade indicated that Canada is pursuing three pillars in terms of its engagement in the Americas. She outlined these as consisting of economic opportunity, strengthening security and institutions, and fostering lasting relationships.
I would strongly encourage the adoption of a fourth pillar, namely, pursuing sustainability and environmental stewardship.
Sustainability, as normally understood, includes pursuit of environmental, social, and economic goals to ensure we're not only meeting the needs of the present but also ensuring opportunities and resources for the needs of the future.
If this pillar of sustainability were explicitly added to Canada's engagement strategy for the Americas, there may be opportunities that would then be evident in further discussions. I want to be clear that l would see these opportunities as operating both in advancing and improving Canada's own pursuit of sustainability as well as in the Pacific Alliance member countries.
For example, with Canada extensively engaged in mining investment and activities in the Pacific Alliance countries, a question arises as to whether Canada's mining laws are adequate for strong protection of the environment and provision of strong labour, health, and safety rules both at home and abroad. We would want to see these areas improving wherever Canadian companies are operating.
Similar questions arise with respect to oil and gas operations. An opportunity could be created to improve Canada's reputation respecting environmental sustainability if the discussions were to provide a mechanism to develop and implement 21st century solutions whereby trade and investment are focused particularly on sustainable practices.
Those opportunities extend, for example, from research and development from academia, ENGOs, or environmental non-governmental organizations, governments, and the corporate sector, through to implementation of best practices. A necessary part of a sustainability approach is to keep track of whether the sustainability and environmental stewardship goals are being achieved versus whether negative impacts are occurring. There is a need for monitoring and enforcement. Equally important is to ensure that public participation and transparency in those frameworks are considered. I might add, I say that in the sense that those would need to be very seriously pursued. We often see the agreements talk about monitoring, enforcement, and transparency, and then when it comes to finding information, it can be quite difficult.
Examples of the types of inquiries that would need to be considered in analyzing a sustainability framework in this context are illuminated in the sustainability reports of the Inter-American Development Bank for Latin America and the Caribbean.
For instance, the bank's 2011 report outlined the challenges arising in that area from growing incomes and greater opportunities in that it becomes urgent to consider integrated approaches to energy, food, and water security—all are under pressure with those changes in their economic and social structure—and to ensure future supplies of all of these while not degrading the underlying environment on which those goods depend. Significant issues of sustainable agriculture, low carbon development, and sustainable resource extraction are just a few of the most obvious and urgent issues.
If Canada is increasing activity and investment in the regions, and if its activities are accelerating the pace of change and contributing to greater environmental stresses, then I would submit Canada is obligated to explicitly consider how to turn its actions into impacts, such as resource extraction, for example. It's imperative that this analysis be done very early in the process of considering further activity in the region. I would urge Canada to apply the lessons learned at home as well as in other areas of the world.
I noted that there had been a Pacific cooperation platform established by the members of the Pacific Alliance. This was stated to be the area where issues of environment, climate change, innovation, science, technology, social development, and educational institutions are being considered by the alliance in terms of further integration, but I haven't been able to find details on those discussions. I would suggest this would be an area for productive inquiry by the committee to ascertain the extent to which sustainability issues are already under discussion, if they are, and the extent to which Canada's full participation could advance sustainability.
Turning to the risks of participation, I will briefly mention some of those that have occurred in the various bilateral and regional trade agreements and I would urge the committee to consider them in your recommendations.
One issue of ongoing concern for us is the continued provision of investor rights in the agreements, as is the case with the currently existing bilateral agreements with all four members of the alliance countries. Our concern, as some of you may have heard me say before, is that the agreements provide the opportunity for non-domestic investors to bring claims against our governments for regulatory action. We are of the view that this is not appropriate. It's couched under the term of expropriation or indirect expropriation. In our view, if there is a claim of true expropriation as understood by our well-developed court system, then it should proceed under our domestic legal system in the way that our nationals would proceed.
Another concern is the frequent aim in the agreements to pursue harmonization of standards. This is often framed in terms of efficiency. Our concern is that we want all of our governments to be free to pursue strongly protective environmental, labour, occupational safety, and health standards. Harmonization approaches often result in the adoption of those standards that the least progressive nation will pursue.
We're also concerned to ensure that Canada consistently protects the rights of governments at all levels—municipal, provincial, national, and first nations—to own, manage, operate, and make decisions with respect to public drinking water supplies in particular. Any discussions about providing additional private investment in this area has to be cognizant of the high priority Canadians place on public drinking water control that was stressed after the Walkerton experience in the year 2000.
To conclude, there may be opportunities to pursue additional environmental and sustainability commitments in the areas of habitat protection, restoration, wildlife conservation, legacy contaminated sites restoration, and many other areas. Attention to quality of life issues is also essential in any expansion of economic activity by Canada. We would suggest that those include fair safe work, environmental health, application of the precautionary principle, reduction of use of toxic materials, and public participation in decision-making with respect to land use. Those would be just a few, but those very same areas may be worsened if the sustainability issues are not examined and explicitly pursued before economic activity by Canada is increased in these areas.
Thank you for the opportunity to make these comments. I will be pleased to answer any questions.
I'd like to thank our guests for being here today. I've appreciated your testimony.
I want to make an opening comment, if I have a brief amount of latitude, Chair, because I think it ties into setting some of the backdrop of our whole review of the Pacific Alliance.
One of the things we've heard, and you'd all appreciate this, is that when Canada has entered into free trade agreements, somehow we have been disadvantaged as a result of that. We've heard that certainly from at least one member opposite. However, I was doing some research and I just want to enter it into the record. I think it would tie in particularly to the pulse industry. I just want to share this.
With respect to Chile, which is our longest standing trade agreement, in merchandise trade going back to 2009, we had $644 million in exports, and in 2012 we increased that up to $789 million. In service trade in 2007 we had $89 million in exports, and we increased that in 2010 to $137 million.
For Colombia, in merchandise trade back in 2009, there was $602 million in Canadian exports. In 2012 this increased to a whopping $827.9 million in Canadian exports. Service trade with Colombia back in 2007 was $80 million in service exports. This had increased, three years later, to $146 million in exports.
For Mexico, in 2009, in terms of merchandise trade, we had $4.8 billion. Certainly it's our largest player in Canadian exports. In 2012 we increased this to about $5.4 billion of Canadian exports. In service trade in 2007, we had $677 million in exports. In 2010 this moved to $691 million in service exports.
Finally, for Peru, in merchandise exports, in 2011, Canada, for merchandise trade, had $516 million of Canadian exports. This increased the next year to $536 million.
My point is that in every one of these countries where we have free trade agreements, we have increased, and in some cases significantly increased, our exports both in merchandise trade and service trade.
I have a question for our representatives from lentils. We had a question the other day, and I want to ask this on behalf of some members, because this became a question: can you define what lentils are?
I'd just like to ask you to explain that in simple terms, Mr. Kurbis, for those of us who don't have an agriculture background.
On the zero tolerance issues, you proposed basically finding some minimum standards for residues on products. I think the group presented a three-point solution. I don't recall all the points, but we'll certainly have them in the evidence.
One of the biggest issues the agriculture sector is facing now on trade is our production methods versus those of other countries. Where the level is zero tolerance, we can be out of the market in a minute and have a hell of lot of bad publicity, which doesn't do us any good.
I would suggest that's a proposal that goes well beyond the Pacific Alliance study. When we, as a committee, are doing our discussions on our report, we should perhaps consider writing a letter to the minister suggesting that those three points be considered in our discussions with all the countries that currently have zero tolerance. I see that as one of their major concerns. That's just a suggestion. I really appreciate receiving those three points.
To the pulse industry as well, if we join the Pacific Alliance, what do you see are the opportunities coming out of it, in terms of processing in Canada if possible? In some of the industries you don't process a lot of your products.
Do you see other opportunities within Canada, beyond the raw trade of products, where we can create some economy within Canada?
I hope we resolve this. It has to be a main part of the discussion.
Ms. McClenaghan, you're absolutely right. When companies, particularly Canadian companies, go into other countries, we want to make sure we're not dropping a standard that the other country has already, just to take advantage of profits.
We had the mining people in a little while ago. They weren't necessarily the miners, but they were the ones who provide all the equipment. They gave an interesting account that shows the significance. Some 3,000 firms across Canada are offering mining-specific products or services. They're in hundreds of countries.
Canada is recognized, as I think my colleague said, for our expertise not only in technology, but actually in how we run; we do have a conscience, when we go into these countries.
What I'm wondering is, when we look at a standard, is it a Canadian standard that needs to be established? Or, when we move into other countries, are there international standards there that actually serve as a benchmark to start from, which are then phased up to meet some other higher standard as we work through a project?
Many of these countries will not have even that, if there is an international standard.
Is there one? Should there be one?
Thank you, Chair, for the opportunity to appear before the committee. I look forward to an exchange with you on our perspectives on the Pacific Alliance.
Again, my name is Pierre Seïn Pyun. I'm vice-president for government affairs at the corporate office of Bombardier. What I would propose to do is to give just a very quick overview of the company and our priorities, and then look at our activities and perspectives in Latin America overall, and then conclude with our take and comments on the Pacific Alliance in particular.
As you know, Bombardier is a manufacturer of trains and planes. We have a global operation with our headquarters located in Montreal, and we are listed on the Toronto Stock Exchange. We have around 72,000 employees and 80 manufacturing and engineering sites around the world in 26 different countries. Our revenues were close to $17 billion for the fiscal year that ended on December 31, 2012.
We're a very export-oriented company from our base in Canada. We generate 95% of our revenues from outside of the Canadian market. We are the third largest civil aircraft manufacturer in the world, with the widest portfolio of business aircraft. We're actually number one for business aircraft, going from light jets to mid-size, super mid-size, to intercontinental-range business aircraft with our Learjet, Challenger, and Global families of aircraft. We are the world leader in regional aviation. We are actually the inventor of regional aircraft with our CRJ regional jets and Q400 aircraft.
We are currently developing a new narrow-body trunk line aircraft that we call the C series. It's going to be the most cost-efficient, fuel-efficient, and environmentally friendly aircraft in its category, seating between 100 to 160 passengers, depending on the configuration that the customers want. The CS100, the smaller version of the C series, will do its first flight by the end of June and will enter into service next year.
On the rail side, we are the largest rail equipment manufacturer in the world, supplying light-rail vehicles, metros, trams, commuter trains, regional trains, locomotives, turnkey systems like automated people movers, monorail systems, and also very high speed trains, as well as the key components for train technologies, including bogies, train controls, signalling systems, propulsion systems, and so on and so forth.
I would flag two major priorities for us this year.
We're very heavily invested in research and development with the C series aircraft program that I mentioned, but also we are working on other aircraft, the new aircraft programs, like the Global 7000 and Global 8000 and the Learjet 85. The company is spending a lot on research and development. This year we'll be spending $2 billion on property, plant and equipment overall for the company.
Also in keeping with this focus on research and development, we're currently working on our very high speed train technology, which will be introduced into revenue service in the Chinese market. We're talking about trains that can go up to 360 kilometres per hour.
The second priority that I would flag, and I think it relates to the topic at hand today, is our increasing focus on emerging markets. Europe and the U.S. remain very important markets for us. In the aerospace segment, Europe generates 20% of our revenues and North America 56%. They will remain important for us. For rail transit, Europe is 63% of our revenues and North America is 18% of our revenues, but there's no question that we're increasingly turning our attention towards emerging markets.
At this point of time, Asia Pacific represents around 12% to 13% of our overall revenues, but we're intent on growing that share and growing the share of other emerging markets as well. To give you a sense of the progress on that front, in the last five years our revenues from the so-called BRIC countries have quadrupled from $500 million to $2 billion. That's a good segue to Latin America.
Overall I think we have a fragmented presence in Latin America. We're quite strong in Mexico. We have a strong manufacturing presence and I would say a growing presence in Brazil as well, particularly on the rail side, and also in business aircraft. But we think that our record in Latin America, again, overall from a broad perspective, is quite spotty in light of the significant potential that the market presents. We still have a long way to go, with perhaps the exception of business aircraft. In that sector we're doing quite well, with a 26% market share in Latin America.
As I mentioned, we have a strong presence in Mexico, with over 3,000 employees. We have manufacturing sites on both the aerospace side and rail side, with our sites in Sahagún and also Querétaro. Sahagún is on the rail side and Querétaro on the aerospace side. Querétaro has been really a good-news story for us. We have invested one-half a billion dollars in that site, which produces different components for our aircraft, including electrical sub-assemblies, harnesses, and structural parts for our aircraft.
I mentioned that we're also present in Brazil. We're actually expanding our presence in Brazil, where we have a little fewer than 400 employees at this point in time. Last year we inaugurated a new manufacturing site in Hortolândia, which is in the state of São Paulo, for rolling stock manufacturing. Currently we're working on a large-scale monorail project for the city of São Paulo. There's a lot of input coming from Canada, from our site in Kingston. It's an engineering site, and Kingston, Ontario, is doing the design, engineering, and testing for that monorail system, for which the vehicles will be manufactured in Brazil.
We also have an aerospace presence in Brazil, with a parts distribution centre in São Paulo and a regional support office there as well. We are pursuing aerospace opportunities in other Latin American countries. On the commercial aircraft side, just to give you a sense of our presence, we have in total close to 70 aircraft. That's our installed base of commercial aircraft. We have a few customers obviously operating those aircraft. But overall it's a region dominated by our competition. So for ATR, which is a European company for turboprop aircraft, the installed base of ATR aircraft is double our installed base of Q400 aircraft. Of course, Embraer is very strong in Latin America and they have as customers many, if not most, of the large carriers such as AviancaTaca, Aeromexico, and so on and so forth.
With respect to countries that are part of the Pacific Alliance, on the rail and metro side, we see some opportunities in Colombia, for the city of Bogota and Medellín as well. We are pursuing signalling opportunities and also propulsion system opportunities for real projects in Chile and Peru.
For business aircraft overall, as I said, we have a large fleet of aircraft in operation in Latin America, close to 450. That's a 26% market share. That's one segment where we're doing quite well. I was talking about the overall potential the market offers. We see a demand for around 2,300 business aircraft in the next 20 years for Latin America. On the commercial aircraft side, we see a market for around 930 aircraft in the next 20 years, but as I mentioned, currently our penetration is quite minimal.
I'm going to conclude with a few comments on the Pacific Alliance.
Overall there's no question that we're a strong supporter of all the efforts undertaken by the Canadian government to engage in trade negotiations to open and diversify markets. We think that removing barriers to trade and improving certainty for foreign investment obviously are key for companies such as Bombardier that are outward looking. We benefit from trade agreements from a number of perspectives, including that agreements facilitate investments and business mobility as well as trade in equipment and services.
With regard to the Pacific Alliance, we welcome and encourage deeper commercial ties with the region. We believe that this will be in the interests of the rail and aerospace sectors here in Canada. We also think that participation as an observer at this point in time in such groups as the Pacific Alliance reinforces Canada's commitment towards regional integration and to market-centric international cooperation schemes or arrangements with like-minded countries that will facilitate growth in investment and trade linkages.
At this point in time, we don't face any particular market access barriers in that region and with respect to the current members of the Pacific Alliance. However, more engagement from the Canadian government in the region with a view to increasing Canada's influence in the region with, as I said, like-minded countries, would be very welcome, because we see significant potential for Canadian businesses, including Bombardier, in the markets that are covered by the Pacific Alliance.
I will leave my comments at that. I would welcome any questions.
My name is Mathew Wilson. I'm the vice-president of national policy with Canadian Manufacturers & Exporters.
I'm pleased to be here on behalf of 10,000 members across Canada to discuss Canada's possible entry into the Pacific Alliance and to provide our support for the government on this initiative.
For those of you who don't know CME, we're a national organization with offices in every province and every region of the country and members right across the country, as well as offices in Europe, Mexico, and the United States.
Eighty-five per cent of our members are small and medium-sized enterprises that represent every industrial and every export sector, and from all regions of the country.
Manufacturing is the single largest business sector in Canada. Canadian manufacturing sales totalled $571 billion last year, directly accounting for 13% of Canada's economic output. Manufacturers employ about 1.8 million Canadians in highly productive, value-added, high-paying jobs. Their contribution is critical for the wealth generation that sustains the standard of living of each and every Canadian.
Manufacturing is an export-intensive business. More than half of Canada's industrial production is exported directly each year. In fact, manufacturers are responsible for 63% of Canada's total merchandise export and more than 70% of Canada's goods exports to the countries of the Pacific Alliance.
It is increasingly critical for Canadian manufacturers to succeed in global markets and to diversify their customer base, just as Pierre was talking about in Bombardier's case.
As manufacturers further invest in innovation and become more agile, specialized, and able to serve niche markets, the more they need to find customers, suppliers, and business partners globally.
While Canada and the U.S. remain the priority for most of Canadian industry, we must also understand that a growing share of our membership is looking to take advantage of new and emerging opportunities beyond North America in countries such as those in the Pacific Alliance.
The opportunities the companies are looking for are to find new customers in new markets, to find potential investors in Canada, to seek investment opportunities abroad, to be able to source services from around the world, and to find qualified personnel to bring back to Canada.
While Canada has existing free trade agreements in place with Chile, Colombia, Mexico, and Peru, these markets are still being developed and discovered by many Canadian manufacturers. In a recent survey of our members who represented almost 2,000 facilities across Canada, companies outlined how their supply chains and customer bases are expected to change over the next three years. Increasingly, manufacturers are looking less and less at domestic markets and more towards opportunity in developing markets.
Mexico, which has by far the largest economy in the Pacific Alliance, is in particular expected to be a significant growth market for Canadian exporters. Over the next three years, based on our survey results, there will be nearly a 20% increase in the number of companies exporting to Mexico, with more than 90% of companies expecting to be exporting there by 2015.
Total exports to the region of the Pacific Alliance were worth more than $7.5 billion last year, of which $5.3 billion were of manufactured goods. Many of these exports are in traditional sectors, such as aerospace and automotive production, which is deeply integrated across the NAFTA region; however, exports are much more diversified and growing across such sectors as agricultural products, iron and steel, mining equipment, oil and gas extraction equipment, and electronics. Given the expected growth of the economies in these markets, they should provide additional market opportunities for companies in these sectors as well as in such other sectors as construction, engineering, insurance, transportation equipment, and financial services.
In order to take full advantage of these trade agreements, CME's priority for the government's trade agenda policy as a whole, as well as for specific trade agreements such as this one, is to ensure that it enhances manufacturers' and exporters' ability to compete and win in domestic and global markets. In other words, our priority is to ensure that trade agreements put us in a position to grow and strengthen Canada's manufacturing base, and by extension to grow Canada's exports of goods and services.
We believe, in the case of the Pacific Alliance, that given the existing FTAs with these countries, it can be an important initiative to strengthen trade relations with existing business partners and better position Canada to lead regional integration throughout the Americas and into the Pacific region.
This agreement will help set the framework for further supply chain strengthening and for growing export throughout Central and South America and across the Pacific. CME believes that this opportunity and strategy are similar to those of the Trans-Pacific Partnership, which started with a small group of companies and grew to a much larger collection of economies, one which now represents more than 650 million consumers and more than $20 trillion in GDP.
We also believe that using multilateral frameworks such as the Pacific Alliance provides Canada an opportunity to elevate all countries to the same high level of ambition that Canada has in its negotiations, including those of the TPP and CETA currently under way, and ensure that free trade agreements not only eliminate tariffs but also will open up foreign markets through the elimination of non-tariff barriers, will open procurement markets, and will facilitate the movement of goods and people among these trading partners.
CME is very supportive of Canada's full involvement in the Pacific Alliance and in other such trade agreements that expand market access on a reciprocal basis and will deliver a net benefit to Canadian industry.
Thank you for letting me be here today. I look forward to the discussion.
Thank you, Mr. Chair, and thank you, witnesses, for being here. It is always good to hear from the horse's mouth. The witnesses are on the ground and they know from their experience on the ground, and they can always enlighten the committee about the potential benefits or the challenges their businesses face on the ground so that we can address those issues in negotiations.
I'll start my questions with Mr. Pyun. Bombardier, as you said, is basically an exporting company. Bombardier has its operations in, I would say, approximately 40 countries or so. I specifically note in terms of this Pacific Alliance that Bombardier has its operation in Mexico.
My first question is, if the company has business operations in Mexico, why doesn't Bombardier have their operations in the rest of the countries? I'll ask multiple questions because the chair is very good at cutting me off.
Some hon. members: Oh, oh!
Mr. Devinder Shory: My second question is, what is the likelihood, depending of course on the negotiations, that Bombardier would go ahead in these three countries: Peru, Chile, and Colombia?
My third question is, if we become a member, what are the barriers, if any, that we should overcome and which you would want the government to address during the negotiations?
With regard to Colombia, Chile, and Peru, at this point in time we don't have a significant presence. We have people on the ground because we're looking at opportunities in rail and also aerospace. We have some prospective customers in those countries.
In rail, as I mentioned briefly in my opening remarks, we're looking at opportunities to supply signalling systems and train control technologies for the metro lines that they want to expand in Chile and Peru. For instance, Santiago has a number of metro line projects that we're currently looking at.
In Colombia, as I also mentioned, there are opportunities for metro and light-rail train projects, for which we may have an opportunity to be a supplier of either the rolling stock or of systems for these infrastructure projects. There are also refurbishment opportunities, existing cars that we can refurbish.
With respect to whether we could invest in those countries, we have invested in Mexico for a number of reasons. On the rail side, we acquired many years ago an existing company that manufactured rolling stock, and that is what we're doing. In aerospace, we invested in Mexico because we were, to put it simply, quite attracted by the investment environment and also by the aerospace cluster that they were ready to establish in Mexico, with support for training and for putting educational facilities in place as well to make sure that there's a supply of a specialized workforce able to grow and support our investment.
I would say that the business model is different between aerospace and rail. With rail, the projects tend to be longer term. When we get involved in a rail project, we become almost an investor, because we have to send engineers, often for a number of years, to work on projects. There might be requirements sometimes to localize, or some offset requirements.
If the size of the market justifies the investment, as in Brazil, and we see a good pipeline of projects going forward for the country—the market itself, but also the region—we may consider localizing production, to some extent.
I think it does a couple of things. One is that the Pacific Alliance, with Canada's involvement, should go beyond the existing FTAs, especially in some of the areas around labour mobility that Pierre was talking about in his testimony and that we mentioned as well.
The other thing it does is it opens up new markets for us. Yes, we have the bilateral FTAs with the four countries, but the Pacific Alliance, with the additional countries that come into it over time, will open up new markets.
The third thing I'd say, concerning resources, is, first, let the folks at the Department of Foreign Affairs and International Trade determine specifically where the resources are spent. In Canada's trade agenda, clearly they're focused heavily on the TPP and on concluding the CETA negotiations. Japan and India are on the side of this right now.
What's unique about the Pacific Alliance, which is similar to the TPP, is that it targets countries that are high growth in developing markets, areas in which our exporters can find new market opportunities that don't really exist right now, especially if they grow beyond the original four. It looks as though they'll let a few more in this fall.
That's a different opportunity from what may exist in Europe for some companies. Europe is a great market for a lot of companies, and we're fully supportive of that, but it's a different type of market from what something in Central America might be.
That's why we think it's good to go beyond the existing bilaterals. It gives new opportunities for companies.
I agree with what Pierre is saying about the opportunity to get in early in the negotiations to help set some of the framework for the negotiation.
I think one of the challenges Canada finds itself in with the TPP is that we're getting into the agreement fairly late, and a lot of the rules and guidelines and set-up have already been established concerning what they're negotiating on. Canada is having a bit of a difficulty in moving things along the way they want. If we get in at an early stage and get to help set the agenda and the framework, I think it's helpful.
In terms of what countries should be involved, it's hard. The will be going to a meeting in the fall, as an official observer, it looks like, and there could be a slight possibility that we will be invited in at that point, but it's probably a longer way off than that, and trying to dictate who should be in and who shouldn't is pretty difficult for us at this time.
As to the market priorities for our members in both global trade relations and global supply chains, as I mentioned in my remarks, there is a huge and growing importance of Central and Latin America. That's really, in this agreement, looking at if we can expand it beyond the four...[Inaudible—Editor]...Central America. Even that in and of itself would be a huge step forward, for many of our members.
I think that should be the initial priority. Let the TPP take its course, because it will be a bit ahead of this. It will probably give us an opportunity to look at other countries across the Pacific Rim that are outside the TPP and that could perhaps be invited in at a later date.
In the case of ATI, I don't want to oversimplify the reason for their being very competitive in this market. I think they've been active in this market longer than we have, so we have some catching up to do. They have put in place the infrastructure as well to support their business. They have a training centre in Brazil. That's an important piece as well. I think we need to bridge the gap and keep on working hard to be more competitive in the region.
What I was referring to is that in the sectors in which we do business, there is often very strong government involvement. The government can be our customer in the case of rail, most times.
In the case of aerospace, we can play different roles. Regulator is one, of course. In some cases we're competing for business with state-owned enterprises, carriers that are state-owned, that are flag carriers of countries and owned by the government. In some cases we're seeing new entrants into the aerospace business—China and Russia—and we're facing competition from state-owned manufacturers that get very strong support from their government.
In order to level the playing field, what I'm talking about is economic diplomacy at the highest level, because whether we like it or not, this is what is expected, by our customers, by foreign governments, because in our deals, in the sectors in which we operate, constantly business interests rub shoulders with public policy and sometimes with politics as well.
In order to level the playing field—and we very much appreciate all the work currently being done by the government to ensure that we get this level playing field—sometimes we need ministers to express political support for a campaign we have going on abroad. , , and the in some instances, have been extremely supportive of the interests of Canadian firms, including Bombardier.
This is what I was referring to. Sometimes we work with our ambassadors abroad; we work very closely with the trade commissioner service to gather intelligence, to compare notes with them. But I was referring to high-level political support in the sectors in which we operate.