SINT Committee Meeting

SUB-COMMITTEE ON INTERNATIONAL TRADE, TRADE DISPUTES AND INVESTMENT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

SOUS-COMITÉ DU COMMERCE, DES DIFFÉRENDS COMMERCIAUX ET DES INVESTISSEMENTS INTERNATIONAUX DU COMITÉ PERMANENT DES AFFAIRES ÉTRANGÈRES ET DU COMMERCE INTERNATIONAL

EVIDENCE

[Recorded by Electronic Apparatus]

Wednesday, February 16, 2000

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[English]

The Chair (Ms. Sarmite Bulte (Parkdale—High Park, Lib.)): Ladies and gentlemen, I'd like to bring this meeting to order, please. This is the second meeting of our study of Canada-Europe economic relations, and we're especially delighted to have former Ambassador Clarke here. For those of you who don't know, Ambassador Clarke was our ambassador to Sweden and certainly was integral to the mission to the Baltic states.

We're delighted to have you here, now in your new role as the assistant deputy minister of international business and chief trade commissioner. Welcome.

Mr. William Clarke (Assistant Deputy Minister, International Business and Chief Trade Commissioner, Department of Foreign Affairs and International Trade): Thank you very much, Madam Chairwoman, and thank you and good afternoon, members of the committee.

First of all, I want to say right up front that we welcome your initiative. Great idea. Certainly it's time, and it would be helpful to have a good review of what we're doing in Europe and how we're getting along in terms of our commercial and economic relations with our European partners.

I would like to say, on behalf of our ministers and on behalf of our department, we are very willing and able to give you as much cooperation and help as we possibly can to make your deliberations positive. Also, we look forward to your visit to Europe with the opportunity to meet people from our missions and also to meet business people and government officials in Europe, if and when you are able to go. If there is anything we can do from the Department of Foreign Affairs and International Trade, in terms of helping you along in terms of your work, please just let us know. We stand ready to do so.

I know you have a lot on your plate and you're very busy people, so I thought I would try to keep my briefing as brief as possible. You also had what I think was a very good presentation from my colleagues Bertin Coté, the assistant deputy minister for Europe, and Claude Carrière, the director general for trade policy, last week. I'm trying not to repeat anything they've given you and I also would like to leave some time for questions and any issues you wish to raise with myself and my colleagues.

Before I get into my little presentation, I would like to introduce my colleagues. Gary Scott is the director of our European trade and investment bureau for much of western and northern Europe. Gary is a key architect of Canada's current trade promotion strategy for Europe and also our investment promotion strategy. He has played an integral part in developing our presentations last week and this week.

I also have with me Cameron Siles. Cameron is a trade policy officer from our EU, which in our parlance means the trade policy section of the European bureau. Cameron is knowledgeable and an expert on trade policy issues, particularly as they apply, of course, to the European Commission. He has joined me here today to help field any questions you might have in that regard.

First of all, I have one slide up there, which I think you've probably seen. Basically it shows Canada and Europe and the sum totals of our investment. The projector doesn't seem to be too great, but at any rate, basically what you see there is the two totals for investment and the two totals for trade currently. The top ones compare 1990 with 1999 and the bottom ones on our trade side compare 1990 with 1998 and roughly show the level just as an indication of the level of the trade and investment we currently have with Europe and the growth we've had over the past ten years.

As you can see very clearly, the investment side is quite impressive. We are now talking about roughly $100 billion worth of two-way investment, and it's basically in balance, with $1 billion here or there. It's about $50 billion each way. The great growth there has been in Canadian investment into Europe during the past decade.

On the trade side, it's not quite as impressive, although I think it's still quite positive. Basically it shows that Canadian exports to Europe are just slightly under $20 billion and Canadian imports from Europe are about $33 billion to $34 billion. So the Europeans are doing quite well on the trade side, and in the past year or so they have run a significant surplus on our accounts in terms of trade and goods.

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Europe is, I don't think it's any surprise to any members of this committee, a huge and sophisticated market in which our exporters, our business people, have been successful for many years and continue to be successful. We have a very large penetration, and anyone who has been to Europe recently will find that city after city in western Europe has a very large representation of Canadian companies.

The big boom in the last 10 years has been because a lot of our high-tech companies are emerging companies. I've just been ambassador to Sweden, and when you go to Stockholm now, you find 16 Canadian high-tech companies, companies that you see in the newspapers every day, with marketing sales offices there and partnership arrangements with local companies, actively and aggressively looking for business within the EU market and also selling into neighbouring markets: the Baltics, Russia, and other neighbouring countries.

I can tell you that 10 years ago not one of those 16 high-tech companies had an office in Stockholm, and I think you'll find that this is repeated as you go through Europe. In most of the major centres there's now a fairly extensive network of Canadian companies with marketing sales and factories in the European theatre.

You also have, of course, the major companies. Our big companies, the Bombardiers, the Nortels, the Alcans, the Seagrams, and the CAEs, just to name a few, are very active and have major operations and major facilities throughout Europe.

But I think it's important to focus on the fact that of these companies going in there, a lot of the growth in recent years has been high-tech, informatics, telecommunications companies from Canada opening up in Europe. They've now done this pretty well in the United States, and they're now moving further into Europe with their products and services.

This certainly, it is fair to say, is no longer our traditional export market, particularly for our raw materials, although we still have an important stake in the raw materials import market of Europe. We have expanded the range of products we deliver into the European market considerably and quite dramatically in the last 20 years. Certainly a lot of our firms are trying to forge alliances with European companies—joint ventures, strategic partnerships, and that type of arrangement. They're not simply selling goods as we used to do. There's a lot more partnership, teaming up with European companies, to try to exploit the EU marketplace. At the same time, Canadian companies are bringing technologies and products back from Europe for sale and distribution into the NAFTA market.

There's no question that both sides of the equation look at the opportunity from the same point of view. For European investors coming into Canada, European people trying to sell here, they are looking at Canada as one option in terms of growing their market share of the NAFTA market. Almost no European company looks at Canada strictly as a Canadian market. They look at Canada as an option to set up a base, or one of their bases, for doing business in the NAFTA marketplace.

Similarly, Canadian companies are certainly looking at different marketplaces as the gateway for their products in the EU market. They're doing it quite strategically as well and looking at it on a regional basis. Certainly, as I mentioned, some companies where I was in Scandinavia are locating either in Copenhagen or Stockholm to take advantage of the northern European markets. Some companies are in Hamburg. You can go through the whole of western and eastern Europe, for that matter, where companies are strategically picking out their marketplace and saying, I think we'll use Amsterdam or Brussels for our mid-Europe penetration. Often their head offices are in those two places, and other companies are setting up in U.K., Germany, France, Italy, and so forth.

But both of them are looking at the marketplace, I think. Canadian exporters and business people doing business into Europe are certainly looking at it in terms of the European market where they want to grow their share of that market, not as single individual countries.

Recently we've done a survey with great help from Jay Myers and the alliance, who will be speaking to you a little bit later, to see what Canadian business people thought about the services provided by the Canadian government abroad, particularly the services of our trade commissioners. We surveyed over 2,000 companies last year and asked them specific questions, in terms of how they viewed our services.

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I'm pleased to say, just as a small advertisement for our offices and our trade commissioners, that we had a respondent's rate of 90%. Of those respondents, 81% were pleased and positive toward the services provided by the Canadian government trade commissioners abroad. So that was good news.

At any rate, we asked them what sorts of companies—we wanted to get a feel for this—were doing business in Europe. To our surprise, we found that of the 2,000-plus firms that were surveyed, 55% were SMEs and were relatively new in the past two years to the European market. That was a much higher share than we thought.

It's indicative of what I'm trying to outline, which is the fact that we've seen a trend where a lot of the SMEs that have carved out important niches in the U.S. market and been successful, as we've seen with this tremendous growth in exports to the United States, are now turning their attention to other markets, particularly Europe, Asia, and to a certain extent Latin America, as they try to grow their market share in other parts of the world. I think you'll see that will be a very strong trend in the coming 10 years. The JDS Uniphase and Corel-type people will be growing their businesses throughout Europe.

In terms of our resources in Europe, I think we have quite a decent balance. We certainly have representation in all of the commercial centres of western Europe and good representation now in most of the eastern European region. We cut back certainly in the 1990s because of government program review. We've cut back, to a certain extent, on the number of Canadian trade commissioners we have abroad, but we have substituted them, because of cost savings, with locally engaged commercial officers. So we have roughly about the same number of people in our embassies working on trade and investment promotion as we had 10 years ago.

We've certainly put a lot of time into developing specialist skills. We've given a lot of time to training. As some of you may be aware, we've had a new approach to the work of the trade commissioners in the past year and a half, whereby we have attempted to define core services that our trade offices in Europe provide.

The Chair: I don't mean to stop you. We have an unscheduled vote in 28 minutes.

Mr. Bob Speller (Haldimand—Norfolk—Brant, Lib.): Orders of the day.

The Chair: Orders of the day.

Mr. William Clarke: Would you like me to stop now then?

The Chair: No, I don't want you to stop at all. I'm just letting you know.

Mr. William Clarke: I will go for five more minutes and then we can at least start with some questions.

The Chair: Please, yes.

Mr. William Clarke: I just want to mention that there's been a lot of training and we have a new approach to things. That is very much a part of the way we're doing business in western Europe. We are now delivering core services to our business community across Canada. We're trying to give the best value-added possible to what our business people want, which is hard leads, strong market information on what's happening in that country, advice on how to do business there, and problem solving.

In our embassies and our offices abroad, particularly on the trade side, we are no longer doing a lot of the logistical stuff we used to do, such as hotel reservations, arranging cars, helping with translators, and all that sort of stuff. We're now saying there are lots of commercial services, and unless you're in one or two countries like Kazakhstan where's there's only one hotel in town and you can't get a room without help from the embassy, we don't do logistics as much as we used to. We just don't do those services; that's quite important to get across.

Finally, one area that may be of interest particularly to the committee, because I've seen some of the questions, is promotion. Because of program review and reduced resources, we have had a fairly sharp cutback in the amount of activities we go to, in terms of direct trade promotion—trade fairs, missions, and Program for Export Market Development support to our business community. It's gone down significantly.

I'm pleased to say the government has recognized, particularly in markets overseas for our SME community, it may be worthwhile to stimulate and help these companies do business with a little bit more direct support, in terms of trade fairs, missions, and PEMD support.

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The government announced in its throne speech last fall that it had plans to increase the amount of resources devoted to trade promotion, particularly in high-growth industry sectors. If and when we get the money and some of those resources, I'm sure Europe will get a very good share of those resources to help companies.

I'll show you the second slide very quickly. This is what I referred to earlier, the European trade strategy of Gary Scott and the European bureau. In the department we have refocused our trade promotional program in recent years. Certainly we're trying to get SMEs and exporters who are active in other markets to come on over to Europe and test the waters. Companies, I think, feel very comfortable in markets like the U.K. and France, particularly, and we're trying to entice them to look a little wider, to get their market niches very carefully picked out and developed in the rest of western Europe.

We also have identified target sectors. We have 12 high-priority sectors that have been identified by our partners in Team Canada Inc.—that is, the other 22 government departments and agencies across the Government of Canada who have indicated what are the high-priority sectors where we should be putting most of our trade resources. I won't go through them all here, but they are all available. We can give you a list of those.

Of course, a very important part is something we've always been quite interested in, and that is opening negotiations on a transatlantic free trade agreement. We're now hopeful, and a little more positive than we were 12 months ago, say, in that Commissioner Lamy of the EU commission has indicated that, in principle, the EU would be willing to look at it again if we could put together a good business case.

That is the current challenge for our department and the Government of Canada, to put together a good business case as to why EU and Canada should get into a free trade arrangement. That will be a big part of the work program of anyone in the trade policy community and in our missions in Europe during the course of the next 12 months.

The next slide is on investment. I had a little bit more to say on investment, but I will try to restrict my remarks.

As I said before, we're doing quite well on the investment side, both out and in. We have a very aggressive and active investment program in Europe involving investment counsellors, our ambassadors, our heads of mission throughout Europe, and our trade commissioners, who are extensively calling on companies in Europe in an effort to promote Canada as the best alternative or the best option for them to make investments in our country as they try to grow their market share in the NAFTA market.

We have some very good cards right now, better cards than we have had, in my view, in many years in that certainly the macroeconomic situation in Canada is better. We have lower costs than the United States, in many cases. We have more loyal workers. We don't have near the turnover in terms of workers in our factories and our operations. As well, we have some very good social programs that in many ways, I think, are more familiar and make the European investor more comfortable in doing business here.

We also like to point out to European investors that we are a much less litigious society than are our friends to the south. Although you certainly can get sued, as we have told European investors, and get into legal trouble in Canada, the penalties are not nearly to the same extent as you can face in the United States. So I think those arguments are bearing fruit.

At the same time, we have the country champion program. Basically, we have deputy ministers from the Government of Canada looking after and representing the Government of Canada to foreign investors. For example, Kevin Lynch, the deputy minister of Industry Canada, has been the country champion for Sweden for many years. He's been able to get over there once a year, call on Swedish companies with the help of the embassy and the ambassador, and follow up with companies. Most importantly, for any Swedish company who wishes to do business in Canada and has any difficulties, any problems, any issues that they feel they'd like to resolve, they can go right to Kevin Lynch. He and his team will try to sort out those problems as much as is practical.

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This program has been repeated in most of our major investor partners: France, Germany, the U.K., the Netherlands, the United States, of course, in spades, Japan, Hong Kong, Taiwan, and other countries. This is another very important element of our promotional program.

We've had some very strong successes in terms of investment into Canada in recent years. I was going to tell you a little bit about some of the Swedish success stories, but given the time limitations, I'd better jump over that for now. But we could certainly table that with you.

The Chair: Could you, please?

Mr. William Clarke: Just to give you an element, over the past six years, we've had over $2 billion of new Greenfield investment from Sweden alone into Canada, with some tremendous success stories—Ericsson, Astra, and Stora—all with extremely large investments.

I think the messages they get out are very important for the work of your committee, because they explain why a company like Ericsson would choose to have 1,100 engineers in Montreal when they had four only 10 years ago. Astra has put almost $600 million into Toronto and Montreal, with major manufacturing facilities and research development facilities in Montreal; that's another tremendous success story. Stora, probably the largest forest products company in the Nordic companies, put $800 million into Cape Breton to build a state-of-the-art paper mill.

There are a lot of good news stories in Europe, and I think if you get the flavour of that, it would be very important for your committee and the work, because it really would reflect on what people are looking at in terms of making investments in this country.

I should just say a word, and you don't hear about it as much, but certainly the Government of Canada, at least from my perspective—and I have to watch what I say here—at the moment is fairly positive towards Canadian companies investing abroad, because I think during the last 25 or 30 years, we've seen that trade follows investment.

At one time I think a lot of the government and a lot of people were concerned that when you invest abroad, you're basically transferring jobs abroad, because you're taking factories out of the country. But in point of fact, the lessons we've seen from the European countries, from the United States particularly, and to a lesser extent from countries such as Japan is the more investment they've put into other countries, the more trade has grown as a result of those investments. I think there's a very direct link to that investment.

You could take a look at Bombardier, which is a great example. It made important investments in Europe and at the same time is making very large commercial sales throughout western Europe as a result. In other words, their stake in the investment side is very helpful and supportive of our export interests in those countries as well.

I've put up slide 4, the last slide I have. I'll be very brief here. It is on science and technology, which is a very important point. I think we're all aware that Canada has not been doing well on the question of innovation. We've not been doing well in leading the way in terms of new technologies. As, Porter and some of these other experts have mentioned in recent months, Canada is still guilty of being very replicative and not very innovative. Therefore the Government of Canada has announced in the throne speech that it will be more aggressive in terms of helping our international science and technology program to help our business community identify and transfer to Canada new technologies, new products, to help us gear up in terms of R and D programs.

There's a very major program. The government set up an experts group in the fall of 1999. This is a panel of 10 experts who are looking at Canada's international science and technology relationships and are going to make recommendations. They're holding hearings across Canada. They'll be meeting with the science and technology counsellors that we have at our embassies around the world, and they will be making recommendations to the Government of Canada in June 2000.

I think you will find that will be extremely useful to the work of your committee and also to our departments in Ottawa, which are hoping to get a better handle on how we could conduct our international science and technology relationship.

Madam Chairperson, I think I'll stop there.

The Chair: Thank you very much, Ambassador Clarke.

Mr. William Clarke: I'm open for questions.

The Chair: Right now, it's 3.55 p.m., or almost 4 p.m., and the vote is scheduled at 4.16 p.m.

Ambassador Clarke, perhaps what we could do is have you come back another time to finish.

We have 10 minutes. Mr. Myers and Mr. Keyes, you could maybe make an opening statement, and then we could have you back at another time.

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These are unforeseen votes, I'm sorry. I don't want our work to stop, unfortunately. We're in your hands.

Mr. Robert Keyes (Senior Vice-President, International, Canadian Chamber of Commerce): I'd be happy to come back.

The Chair: All right.

Mr. Jayson Myers (Senior Vice-President and Chief Economist, Alliance of Manufacturers & Exporters Canada): I would too, if you're pressed for time. I think rather than just rush to put a few words on the record, I'd—

The Chair: All right, then maybe we could—

Mr. Deepak Obhrai (Calgary East, Ref.): I have a suggestion to make. This is going to happen, as you know, Bob, quite frequently with the Bloc coming out with this thing. Why don't we change the timing of our committee to after 4.30 p.m., so if these things happen then, at least in terms of the witnesses who come in we can listen to them right through? This is the second time this has happened to us and we are not doing it. So I suggest we do that.

Mr. Robert Keyes: I'm happy to go late in the afternoon if it suits you folks.

Mr. Deepak Obhrai: From 4.30 p.m. onwards.

The Chair: I think we're going to have to regroup, but we still have a little bit of time and maybe everybody could get a quick question in.

Deepak, do you have anything in particular for Ambassador Clarke?

Mr. Deepak Obhrai: Yes, I did, but I think I lost it. I have a lot of questions to ask in general terms, so I think—

The Chair: I know.

Mr. Deepak Obhrai: —it would be wrong for me just to go on a small question. I'm very much—

Mr. William Clarke: We'll be happy to come back.

The Chair: I think maybe if we could and then if you would—

Mr. William Clarke: If we can go last, our colleagues from the private sector can go first. We'll wait until last and then we can also have a discussion.

The Chair: But if you would agree that we could start at 4.30 p.m., that certainly may be one way to keep—

Mr. Bob Speller: If you talk about the legalities, this is the year of the auditor, not the year of the lawyer.

Mr. Deepak Obhrai: Absolutely right.

Mr. William Clarke: No lawyer jokes.

The Chair: And we know them all.

I'm sorry, we're going to have to adjourn. Thank you so much. We will definitely bring you back. There's so much information, good information, and I could see Mr. Keyes and Mr. Myers nodding as Ambassador Clarke was speaking. But please do come back so we can continue with our study and make it totally meaningful.

Thank you for your suggestion, Mr. Obhrai.

The meeting is adjourned.