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37th PARLIAMENT, 1st SESSION
Standing Committee on Industry, Science and Technology
COMMITTEE EVIDENCE
CONTENTS
Tuesday, February 19, 2002
| ¿ | 0905 |
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The Clerk of the Committee |
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Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.) |
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Mr. Charlie Penson (Peace River, Canadian Alliance) |
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The Clerk |
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The Chair (Mr. Walt Lastewka (St. Catherines, Lib.)) |
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Mr. Andy Savoy (Tobique--Mactaquac, Lib.) |
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Mr. Volpe |
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Mr. Charlie Penson |
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The Chair |
| À | 1055 |
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| Á | 1100 |
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Ms. Sophia Leung (Vancouver Kingsway) |
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The Chair |
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Hon. Lui Ming-wah (Chairman, Parliamentary Liaison Subcommittee, Hong Kong Legislative Council) |
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Hon. Philip Wong Yu-hong (Chairman, Finance Committee, Hong Kong Legislative Council) |
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Hon. Tommy Cheung Yu-yan (Deputy Chairman, Panel on Food Safety and Environmental Hygiene, Hong Kong Legislative Council) |
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Hon. Michael Mak Kwok-fung (Representative, House Services, Hong Kong Legislative Council) |
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Hon. Fred Li Wah-ming (Deputy Chairman, House Committee, Hong Kong Legislative Council) |
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Hon. Yeung Yiu-chung (Chairman, Panel on Education, Hong Kong Legislative Council) |
| Á | 1105 |
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Hon. Chan Kwok-keung (Chairman, Establishment Subcommittee, Hong Kong Legislative Council) |
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Ms. Rosanna Ure (Director, Hong Kong Economic and Trade Office (Canada)) |
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Ms. Sandy Chu (Parliamentary Secretariat, Hong Kong Legislative Council) |
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Mr. Kenneth Cheng (Deputy Director, Hong Kong Economic and Trade Office (Canada)) |
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Dr. Lui Ming-wah |
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Ms. Rosanna Ure |
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Dr. Philip Wong Yu-hong |
| Á | 1110 |
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The Chair |
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Mr. Dan McTeague |
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Dr. Lui Ming-wah |
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Mr. Dan McTeague |
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Dr. Lui Ming-wah |
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Mr. Dan McTeague |
| Á | 1115 |
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The Chair |
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Mr. James Rajotte (Edmonton Southwest, Canadian Alliance) |
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Ms. Rosanna Ure |
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Mr. James Rajotte |
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Ms. Rosanna Ure |
| Á | 1120 |
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The Chair |
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Mr. Savoy |
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A voice |
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Dr. Philip Wong Yu-hong |
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Mr. Savoy |
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Ms. Rosanna Ure |
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| Á | 1125 |
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Mr. Fred Li Wah-ming |
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The Chair |
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Mr. Dan McTeague |
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Mr. McTeague |
| Á | 1130 |
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The Chair |
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Mr. Dan McTeague |
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Mr. Fred Li Wah-ming |
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The Chair |
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Mr. Dan Shaw (Committee Researcher) |
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The Chair |
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Mr. Dan McTeague |
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The Chair |
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Mr. Lui Ming-wah |
| Á | 1135 |
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The Chair |
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Ms. Lalita Acharya (Committee Researcher) |
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Dr. Lui Ming-wah |
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Ms. Lalita Acharya |
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The Chair |
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Dr. Lui Ming-wah |
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The Chair |
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Dr. Lui Ming-wah |
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The Chair |
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Ms. Rosanna Ure |
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| Á | 1140 |
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Dr. Lui Ming-wah |
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The Chair |
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Dr. Philip Wong Yu-hong |
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The Chair |
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Mr. St. Denis |
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Mr. Savoy |
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| Á | 1145 |
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The Chair |
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Mr. Dan McTeague |
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The Chair |
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Dr. Philip Wong Yu-hong |
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The Chair |
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| Á | 1150 |
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Dr. Lui Ming-wah |
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The Chair |
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Mr. St. Denis |
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Dr. Lui Ming-wah |
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Mr. St. Denis |
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Dr. Philip Wong Yu-hong |
| Á | 1155 |
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Mr. St. Denis |
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Dr. Lui Ming-wah |
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Mr. St. Denis |
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Mr. Tommy Cheung Yu-yan |
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Mr. Dan McTeague |
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The Chair |
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Mr. Fred Li Wah-ming |
| Â | 1200 |
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Mr. Dan McTeague |
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The Chair |
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Dr. Lui Ming-wah |
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The Chair |
CANADA
Standing Committee on Industry, Science and Technology |
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l |
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l |
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COMMITTEE EVIDENCE
Tuesday, February 19, 2002
[Recorded by Electronic Apparatus]
[Recorded by Electronic Apparatus]
¿ 
(0905)
[English]
The Clerk of the Committee: Yesterday I received a letter to the effect that Ms. Whelan has resigned as chair of this committee. Therefore, pursuant to Standing Order 106(2), the first item of business is election of a new chair.
Do I have motions to that effect?
Mr. McTeague.
Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.): The most senior member of this committee, I think, is Walt Lastewka. It's my privilege and honour to put forward his name as chairman. And perhaps he's not the oldest, but he ought to be the oldest. He's also probably the best-looking. It's therefore my privilege to move that he be the chairman of this established and noble committee.
Mr. Charlie Penson (Peace River, Canadian Alliance): I'd like to second that.
The Clerk: It is moved by Mr. McTeague and seconded by Mr. Penson that Mr. Lastewka assume the chairmanship of this committee. Is it the pleasure of the committee to accept this motion?
(Motion agreed to)
The Clerk: Congratulations, Mr. Lastewka.
Some hon. members: Hear, hear!
The Chair (Mr. Walt Lastewka (St. Catherines, Lib.)): First of all, let me say thank you to the committee for expressing your confidence in me to be your chair. I thank both the opposition and the government side for allowing this to happen. I'm sure we can get a lot of things done by working together, just as we have in the past. Again, thank you.
At this time I'd like to open the nominations for vice-chair, and we can complete our executive.
Mr. Andy Savoy (Tobique--Mactaquac, Lib.): I'd be very pleased to nominate Paddy Torsney for the position of vice-chair.
A voice: I'll second it.
Mr. Joseph Volpe (Eglinton--Lawrence, Lib.): I want to nominate Dan McTeague.
Can I have a seconder?
An hon. member: Yes.
Mr. Joseph Volpe: There you go.
Mr. Charlie Penson: Are you electing just one vice-chair?
The Chair: One vice-chair, yes, because you are automatically....
There are two nominations. I'll ask the clerk for a roll call--or perhaps just a show of hands.
Show of hands for each?
Some hon. members: Agreed.
The Clerk: Five for Paddy Torsney and six for Dan McTeague.
The Chair: Dan McTeague is the vice-chair.
Some hon. members: Hear, hear!
[Proceedings continue in camera]
À (1055)
[Public proceedings resume]
Order. My name is Walt Lastewka, and I'm the newly elected chair of this committee, the Standing Committee on Industry, Science and Technology.
I would like to introduce my colleagues. When we're meeting in committee, we usually have the opposition on one side and the government on the other. I try to get them together somehow to make something happen.
I would like now to introduce Mr. Rajotte, who is with the Canadian Alliance, the official opposition in Parliament. He was newly elected this past term, I think in the year 2000. He brings to the committee much of our industry and science background.
Mr. Bergeron has been with us since 1993, so we would call him the older member of the group. He comes from Quebec and brings the French culture into our committee. Many times we have much discussion on that.
On the other side is Dan McTeague, also a member since 1993. He comes from Ontario, and is very involved in competition, and competition law. He's also the newly elected vice-chair as of this morning.
Andy Savoy comes from New Brunswick, so he brings to the committee some input from the Atlantic provinces. He also was elected in 2000.
Brent St. Denis is the member from northern Ontario, where there's heavy snow and cold weather. He comes to Ottawa to warm up. He has been a member since 1993, and he represents a very large area.
Doctor, I welcome you to the....
Oh, I'm sorry, I didn't see Sophia Leung. She comes to our meeting as an associate sometimes, and she is also chair of the Canada-Hong Kong committee. Sophia comes from British Columbia, and has been a member since 1997, and a parliamentary secretary. She has very good chocolate manufacturing in her district, so make sure you ask her about chocolates.
Á (1100)
Ms. Sophia Leung (Vancouver Kingsway): I especially wanted to come today, Mr. Chair, because I missed them yesterday.
I met you in Hong Kong, so it is a very special day for me to see you here. I had wanted you to come and visit us so that we could have some exchanges, so welcome.
Thank you.
The Chair: Thank you, Sophia.
Perhaps I can just give you a little bit of a summary. The industry department in the government is a very big department. It has 13 departments altogether, dealing with everything from large business to medium-sized and small. It has involvement in communications, in the space program, in research, in scientific research, in consumer affairs, and in competition law. So the industry department is a very large one in our government. We are in fact currently reviewing the competition law and reviewing how research dollars are spent in large universities, small universities, and colleges across the country.
That gives you a little bit of an understanding of the industry, science and technology department.
Doctor, maybe I'll just turn it over to you to make some remarks, and then we can open it to questions. I'm sure our members would be glad to participate in any discussions.
Hon. Lui Ming-wah (Chairman, Parliamentary Liaison Subcommittee, Hong Kong Legislative Council): Thank you, sir.
Mr. Chairman, ladies and gentlemen, good morning. We have a large group here today. I will let all the members introduce themselves.
As for me, I am a part-time--or full-time--legislator in Hong Kong. We are not paid as well as you are, so we do it part time.
Voices: Oh, oh!
Dr. Lui Ming-wah: I deal in electronics and special paper products in Hong Kong and China. I am the temporary chairman, or temporary leader, of this mission, for five days only. I'll let the next leader introduce himself.
Hon. Philip Wong Yu-hong (Chairman, Finance Committee, Hong Kong Legislative Council): I'm Philip Wong, and I represent a functional constituency called the Chinese General Chamber of Commerce. Privately, I am a manufacturer of paper products as well. I've been a member of the Legco since 1991.
Hon. Tommy Cheung Yu-yan (Deputy Chairman, Panel on Food Safety and Environmental Hygiene, Hong Kong Legislative Council): My name is Tommy Cheung. I represent the catering and restaurant trades in Hong Kong. It's a new functional constituency, and I was elected in the year 2000. This is my first term. I'm a member of the Liberal Party in Hong Kong.
An hon. member: All right!
An hon. member: It might not mean the same thing....
Voices: Oh, oh!
Hon. Michael Mak Kwok-fung (Representative, House Services, Hong Kong Legislative Council): I'm Michael Mak, representing the House services constituency. My constituency is composed of all health care providers--nurses, pharmacists, occupational therapists, psychologists, and so on--except for doctors. My constituency consists of more than 30,000 electorates. I'm a full-time legislator, elected this term. In the past I was also a manager. I sit as an independent.
Hon. Fred Li Wah-ming (Deputy Chairman, House Committee, Hong Kong Legislative Council): I'm Fred Li, directly elected member from Kowloon East. I represent 1.1 million people living in Hong Kong, and I'm a member of the Democratic Party. I joined the council in 1991.
Hon. Yeung Yiu-chung (Chairman, Panel on Education, Hong Kong Legislative Council): Good morning. I am Y.C. Yeung. I am a secondary school principal. I come from the Party of Democratic Allies for the Betterment of Hong Kong.
Á (1105)
Hon. Chan Kwok-keung (Chairman, Establishment Subcommittee, Hong Kong Legislative Council): My name is K.K. Chan. I represent the constituency of labour in Hong Kong.
Ms. Rosanna Ure (Director, Hong Kong Economic and Trade Office (Canada)): Well, unlike the rest of the honourable members, I am just a humble career civil servant. I am the director of the Hong Kong Economic and Trade Office based in Toronto, but we represent the Hong Kong government in Canada. We are responsible for the logistical arrangements of this visit.
Ms. Sandy Chu (Parliamentary Secretariat, Hong Kong Legislative Council): I'm Sandy Chu of the Legislative Council secretariat. I'm clerk to the delegation.
Mr. Kenneth Cheng (Deputy Director, Hong Kong Economic and Trade Office (Canada)): Hi, I'm Kenneth Cheng, the deputy director of the Hong Kong Economic and Trade Office.
Dr. Lui Ming-wah: Ladies and gentlemen, I believe you don't know that much about Hong Kong's industry or economy. I'm very sad to say that in the early 1980s Hong Kong's manufacturing accounted for almost 25% of its GDP. Now it is at 6%. As to employment in the early 1980s, 950,000 employees were working for the manufacturing industry. Now there are less than 200,000.
Well, it's not like Canada. You still have about 25% of the GDP coming from the manufacturing industry. I think that's very healthy, just like the rest of the world. Singapore used to have 25%, Taiwan about 24%, the States has 19%, Japan has 19%, Germany has over 33%, and England has about 20%. We have less than 6%.
The consequence of moving out of the manufacturing industry is very significant to Hong Kong's employment. We have 6.1% unemployment right now, and it used to be 1.822% unemployment. As the representative of the manufacturing industry, I have been trying to push the government to revitalize Hong Kong's manufacturing industry. But so far I have not been successful.
In the last speech of the chief executive, he didn't even mention the manufacturing industry at all. He thinks, or the government thinks, Hong Kong can survive solely on the service industry. That means the service industry now accounts for 85.5% of Hong Kong's GDP.
I don't know. What do you think? I don't think it's very good at all. I think Hong Kong needs, and every country needs, a manufacturing industry as a foundation of the economy.
Probably Rosanna can supplement what I have said, as a government representative here.
Ms. Rosanna Ure: I'm afraid I'm the sole government representative here.
I think it's a matter of the economic development of Hong Kong. It started in the 1980s when China began to open up to outside investment, so a lot of our manufacturers chose to move their manufacturing base to southern China, in particular, where they had abundant and cheap land and labour. Obviously, whether that has something to do with the government's policy or whether it is a natural progression whereby the manufacturing base kept steadily moving from a high-cost base to a low-cost base, I think probably this is something that honourable members would have more understanding about in a Canadian situation.
Certainly I think that right now the government has been trying a lot of ways to help small and medium-sized enterprises. But the Hong Kong government's philosophy is that we should adopt as little intervention as possible in terms of helping the various industries. Our main focus is to create a level playing field and to maintain a pro-business investment environment, so that people can decide where they want to invest and on what.
Obviously in the case of Hong Kong, because of the relatively high operating costs, we are advocating that there should be more value-added manufacturing industries rather than the ones that are more labour intensive.
Dr. Philip Wong Yu-hong: If I may, I'd like to put the issue in its proper perspective. What Dr. Lui said is very true to a certain extent, in that the shift of employment is really quite significant. For the last few years, the whole economic benefit for the whole of Hong Kong has been quite dependent on China's open policy. This doesn't benefit only Hong Kong people; it benefits those who went overseas and invested in Hong Kong, into China.
I can imagine that if China did not open its open-door policy when it did, the world wouldn't be what we see today. The products that we are so used to would be a lot more expensive. It benefits not only Hong Kong people but others who went into China through Hong Kong. I'd just like to put that in the proper perspective.
Á (1110)
The Chair: Mr. McTeague.
Mr. Dan McTeague: First of all, thank you all for being here. It's good to see you as well, Kenneth. It's been some time. I extend also my congratulations to Bryon Wilfert, who is the chair of the Canada-Hong Kong Parliamentary Friendship Group. Of course, he has been very active in promoting this occasion, and I'm very pleased to see that you're here.
I'm fascinated by your comments with respect to manufacturing. Of course many of us treat Hong Kong as the economic wonderment in many respects. I won't engage in the competition side of things. I'm more interested in your comments with respect to manufacturing.
Dr. Lui, you mentioned concern about the decline in manufacturing. I'm wondering about the unemployment and the devaluation of the currency in China, which seems to have had an impact that reaches even North America. I know that in Mexico the maquiladora, which is always considered as our low-cost, labour-intensive region of North America, is now losing its.... A lot of shops are closing, a lot of manufacturers are closing in favour of China, primarily because of its low labour wages and its reliance on standards that are perhaps not akin to what we would expect in other parts of the world, certainly in terms of emissions of carbon dioxide, etc.
Is it your view that Hong Kong would have to then follow a pattern of devaluing their currency, or perhaps having labour at a lower cost, which makes it practically impossible to compete with other parts within China? Is this part of the challenge you face in Hong Kong?
Dr. Lui Ming-wah: That's a difficult question. Even the Hong Kong government hasn't decided yet. I don't think the devaluation of the Hong Kong dollar is the way to go, because the size of our economy is so small. It's an open door for speculation.
I remember before 1997, the Hong Kong dollar had gone down to 9.7-something, even over $10. There's a huge fluctuation there. I don't think we are going to have that again.
I don't think Hong Kong's wages can go down as low as China's either, but these manufacturing industries in all the developed countries.... America has a very good manufacturing industry, Canada has a good manufacturing industry, and the rest of the western European countries do as well.
What I'm thinking is that Hong Kong should have high-tech manufacturing or high-value-added manufacturing. As for myself, I just opened up a new factory in Hong Kong, Tai Po Industrial Estate. I can survive because the wages compared to the added value are still small. We can have a manufacturing industry survive in Hong Kong. I'm not going to say that the manufacturing industry in China should combat that in Hong Kong. No way, they wouldn't survive.
Mr. Dan McTeague: So you're suggesting a specialization in a way, so that what you're manufacturing can not only compete against your own in China, but also perhaps provide value-added, as was suggested earlier. I'm interested in that.
Does your tax system in Hong Kong advantage you or disadvantage you in the long run in terms of provision of services for those who live within your regions and your constituencies?
Dr. Lui Ming-wah: The property tax in Hong Kong is still about 16%. Comparatively, western countries seem very low. In Shanghai or other parts of China, they provide personal treatment to the high-tech industries coming into China. For example, Shanghai provides five years of tax-free profit and five years at half of the tax. There were very good incentives for the semi-conductor industry going to Shanghai recently last year.
Mr. Dan McTeague: Really? Okay.
Mr. Chairman, finally, I wanted to add a comment. I'm a member from the Toronto area. Part of the economic prowess of Toronto is in large part due to the migration of many from Hong Kong. Although to some we may be “unsuspecting” about the affairs in Hong Kong, I can assure you in many of our constituencies the concerns you've raised here certainly fall within the parameters of our political system.
You have made a “dynamic” in terms of our city of Toronto. We're proud of it and thank you for it. Many of your friends, colleagues, and neighbours will come back at some point. They're making a valid contribution to our constituencies and our country. We thank you. There is a greater link than you could possibly imagine, at least from this side of the table.
Thank you sir.
Thank you, Mr. Chair.
Á (1115)
The Chair: Mr. Rajotte.
Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chairman. Welcome to all of you, and thank you very much for coming here today.
I do have some questions on the manufacturing industry, following up on Mr McTeague. Are there certain industries within the manufacturing industry that have left? Are there certain industries within the manufacturing industry that have stayed?
You mentioned the high-tech industry. With the lower cost of land and labour within mainland China, is it attracting certain industries within manufacturing? Do certain other industries perhaps require a more highly skilled workforce so are staying within Hong Kong? Are you seeing a correlation?
Ms. Rosanna Ure: I do not have the data in hand, but I would imagine there are people who choose Hong Kong not only because of the operating cost. I think all along we have been saying so in Hong Kong. Obviously, when comparing the costs to China, we certainly have a high operating cost. Therefore, as a result, we do not compete on the cost itself. We compete on the quality.
There are certain things that Hong Kong people are still very good at, especially in respect to products that involve intellectual property. For instance, in Hong Kong we have a very rigorous enforcement regime. We also have the legal framework to protect the patented rights and intellectual property of people who are developing software, for instance.
Obviously there are other things that come into play, such as the rule of law, the anti-corruption regime in Hong Kong, and the experience of the people in Hong Kong in terms of raising money and the other associated business and professional services offered to the masters.
I think government is also investing in, for instance, the industrial estate. These are industrial estates developed by the government, or something like a crown corporation, that aim at offering affordable land to selected industries.
We are in the process of building a cyber port. We have just completed phase one of the cyber port and the science park in Hong Kong. These are facilities that are particularly designed for the IT industry, for instance. We are providing infrastructure as well.
I hope I've answered your question. We have a host of factors to take into consideration when investors decide to invest in Hong Kong as opposed to China. Obviously the operating cost is one very important factor, I have to admit.
Mr. James Rajotte: I have one more question I'd like to ask. One of the things the committee is doing now is studying how we fund research in Canada, how we fund research and development at the universities, and the way we've commercialized the research. We're also studying how it impacts on large universities and small universities, how we fund science and technology generally in Canada, and what our science and technology policy is.
Is there someone who wants to comment on the science and technology policy of Hong Kong, whether the government does fund research, and how it does so?
Ms. Rosanna Ure: Within the government, certainly, we have invested very heavily in education. We have now eight universities in Hong Kong, and in fact, education has taken up a very sizeable percentage of the annual budget prepared by the Hong Kong government.
Apart from that, in the government we have a department called the Innovation and Technology Commission, and the mandate of this commission is to encourage research and development of high tech, biotechnology, and that sort of thing.
Within this commission, they have a few funds that they administer. The funds are open to local companies that have viable projects that they want to do more research into. So, for instance, there is this Edmonton-based biotech company that has gone to Hong Kong. They have two projects, and they collaborated with a university in Hong Kong. They got the funds from this commission to do more research into the particular patented rights they have developed. This is a very good example of how the government tries to help promote research and development in the high-technology field.
Á (1120)
The Chair: Mr. Savoy.
Mr. Andy Savoy: Thank you very much for coming and meeting with us today. I had the pleasure of meeting many of you last night at a reception.
On the same vein as Mr. Rajotte, you spoke earlier of a value-added society or a new move toward value-added, which I think is very important. Coming from a rural riding in New Brunswick, it's something I encourage. We are encouraging moving toward value-added there.
In looking at value-added, there are a number of components we have to look at quite closely. Value-added, I think, is not just in manufacturing, but also in society. We have to look at our education levels. We have to provide an environment to make it enticing for companies to invest in research and development--in other words, providing an environment where companies can prosper and focus on value-added and research and development.
What incentives do you offer as far as taxes are concerned for research and development? Are there specific tax--
A voice: Not from the government.
Dr. Philip Wong Yu-hong: Our taxes are really so low, so nobody's complaining about Hong Kong tax as a problem. In fact, a lot of people take advantage of the low tax and come to Hong Kong to invest.
Mr. Andy Savoy: With regard to institutions--learning institutions and educational institutions--what is the extent of government involvement? Have you looked at, as Mr. Rajotte indicated, research and development opportunities specifically with private-public partnerships or university and corporate partnerships, how to foster that? Has there been much work in that area?
Ms. Rosanna Ure: I think the example just mentioned about this Edmonton-based biotech company is a good one.
The fund is open to local Hong Kong companies. Of course they have to put in a proposal, and if the proposal fits with the description of the fund and the government believes it is beneficial to the development of the biotech industry in Hong Kong, for instance, then they will get the funding. This particular company also chose to collaborate with the Chinese University of Hong Kong to test the components of Chinese herbal medicine, so because Hong Kong is part of China, and we feel there is a particular niche area that Hong Kong can develop--in Chinese herbal medicine--this company got funding support from the Innovation and Technology Commission.
So what I'm saying is that there are, of course, certain preferences. The government would like to encourage development in a certain area. In this case, I think, we have invested very heavily both in terms of information technology and, latterly, in biotechnology as well.
Obviously a lot of the initiatives come from the private sector, because, as I said earlier, our main objective is to provide a pro-business environment so private companies will find that there are commercial opportunities in researching and development new technology. So we very much encourage that. As Dr. Wong said, the Hong Kong tax regime is very simple--a very low tax for corporate tax, for profits tax. It's only profits made that are taxed. On top of that, obviously we invest also very heavily in human resource management. We're hoping that, with properly trained people, this can spur the development of new industry.
Coupled with that, I think Hong Kong is also the centre, certainly in Asia, for venture capital. With respect to private companies that are interested in investing in some new technology industries, provided of course their proposals are viable commercially, I do not think they would have great difficulty trying to get investors investing in their projects.
Á (1125)
Mr. Fred Li Wah-ming: Mr. Chairman, I'm not trying to answer any questions. I think for exchange purposes, I would rather like to propose a question to the committee, because in your opening remarks, if I listened carefully enough, you mentioned a competition law. It sounded very interesting to me, because I'm the spokesman on competition on behalf of my party in the council. I know in the United States they have a really comprehensive anti-trust law. They have the authority to handle monopoly issues, all the capital issues. For example, Microsoft still has a case.
In Hong Kong, we don't have anything--ordinance, law on competition. We only have policies on competition to make sure nobody is trying to dominate the market. What is the progress on this subject? Is competition law already enacted in Canada, or is it in process? I want to know further.
The Chair: Dan, do you want to do an expert quick summary?
Mr. Dan McTeague: I thought everyone wanted me to avoid the issue, but I'm glad you raised it.
Canada's competition law came into effect one year before that in the United States, in 1889. We have a balance of civil prohibitions as well as criminal law--criminal sanctions--many of which in our own case law, in the case of our own common law tradition, are very difficult to prove, particularly in the areas of price-fixing and predatory pricing. We have an entire apparatus of prohibitions under civil provisions that are known as “civilly reviewable”.
This committee is currently undertaking a number of comprehensive reviews and possibly changes, some of them the most significant since the Competition Act was written, as long ago as it was. In particular, this committee led a rather significant change to provide something known as “private access”.
So you'll understand that we have an enforcement body known as the Competition Bureau, and we have a judicial side, which is known as the Competition Tribunal. Very few cases get referred to the tribunal. They are usually adjudicated, or there is a remedy sought by the competition police--if we could call them that--and more often than not those matters never go to trial. It means that Canada's case law is very thin relative to the case law in the United States, which has a more aggressive and perhaps a more definable judicial process by which cases are often solved, or aggressively attacked for strategic purposes or other reasons, in courts.
The incentive in the United States of course is the triple damages under their Clayton Act. Their Clayton Act, beyond anti-trust under Sherman, provides for triple damages. There's an incentive obviously for people who believe they're subject to an abusive or anti-trust situation in the United States to take the matter to court.
Canada has taken, as its tradition in common law, the belief that if there is a definable problem within our competition framework, it is in the public's interest. Therefore the crown, or rather in this case the bureau, acts on behalf of the public in almost every circumstance. They act also as gatekeeper. So we are now at a crossroads where we recognize that our largest trading partner, the United States, has legislation that is far more aggressive than ours.
We also recognize that we are a small economy. Many of the instances that would not be accepted in the United States--for instance, the domination of an industry by one or two players--are an inevitability in a smaller country like ours where there isn't the kind of economy of scale. Incidentally, we have decriminalized mergers and merger review. Up until 1986 it was a criminal act to engage in a merger that might have negative consequences.
So these are some of the undertakings of my colleagues. They probably have been the prime focus of this committee over the past couple of years. I hope that helps.
Á (1130)
The Chair: There's one more thing to add, which is very important. If there's a complaint to be lodged, there are different ways of doing it, but if six people decide to complain about a certain subject being unfair under the Competition Act, the Competition Tribunal commissioner will immediately investigate. It doesn't take a lot of complaining in order to have an item reviewed. We use the six-person guideline. I'm not sure how the six-person guideline came about, but it's very easy for six people to complain about something that could be against the Competition Act. The commissioner or his department would be involved in investigating.
Mr. Dan McTeague: Mr. Chairman, a number of countries have modelled their competition law on our competition model. South Africa was the most recent. There is a variety of jurisdictions around the world, like Australia, for instance, versus the United States, versus the groups that make up the Treaty of Rome and the European Community.
For instance, you used the example of Microsoft. The more recent example might also be the merger between GE and Honeywell in Europe. It was accepted in the United States because it had pro-consumer outcomes, whereas the model in Europe was, sorry, we're not necessarily concerned about consumers; we're also concerned about the framework of our economies.
So you have, from the global perspective, a number of competing views on how competition enforcement should occur. I think there is increasing pressure to move towards a harmonized, globalized enforcement framework. Which one is the best model is really up to those who are making the pitches, particularly in the area of mergers, although mergers have subsided somewhat in recent times.
Your position of not having any type of enforcement or legislation per se may provide you with opportunities to pick and choose, whereas other countries may have to go through a rather tortuous process of trying to amend their competition law. From firsthand experience I can tell you that even small changes are impossible to make, particularly when you have large business interests versus small business interests versus consumer interests, all competing, even in your own national jurisdictions.
Mr. Fred Li Wah-ming: We do have a government policy that has tried to, sector by sector.... Take a sector like telecommunications, which is one that is easily dominated by one player. That would hurt the interests of the consumer, so for that ordinance, that law, an anti-trust clause was put into that particular ordinance. But the government would not make a general fair competition law in Hong Kong. That is the position of the government.
May I follow up about the bureau? Is it a government bureau or it is semi-independent? How does it work?
The Chair: The bureau is independent in its policy. Any restructuring and funding goes through the Department of Industry minister, but it is at arm's length.
Mr. Dan Shaw (Committee Researcher): It gets its independence from the act, a specific legal framework.
The Chair: As for any information like that, I'm sure we could furnish it for you.
Mr. Dan McTeague: And you can find it on the web.
The website is very good. Perhaps I could suggest the government website, www.strategis.ic.gc.ca. I'm sorry. I'll write that down so you will know. I'm sorry, but it is very good and it'll give you all you need to know about Canada's competition law. It's great stuff if you need to go to sleep in the evening.
The Chair: I'll give you my card. It's on the back of my card.
Mr. Lui Ming-wah: Mr. Chairman, I'm interested in research funding in Canada. I just wonder how much the amount of the investment is. What is the amount of the investment into research in the whole nation? How do you fund research in the private sector?
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The Chair: We have a number of ways to do that. We fund university, college, and institution research through granting councils. We have a number of granting councils, whether it be in the social sciences, in science, or in health. Our discussion for the last while has been on the distribution across the country, how it is being reviewed, the peer review system. We're looking at making some improvements. So we do have those granting councils.
In the Department of Industry, we have what we call Technology Partnerships Canada, which works with mainly large industry on research and development. For example, in the aerospace sector, some of the funds are paid. There are different arrangements of payback on it, everything from royalties to delayed payments.
Then we have what we call the Industrial Research Assistance Program/Technology Partnerships Canada, which is aimed at small companies. This research basically assists the research in small companies. It would be different types of grants with that industry to do research with those small companies. Then whatever the research develops is shared with everybody else.
Our big pitch--in fact, I've long been a proponent of it--is that we've put in a lot of infrastructure to help small businesses. The research pot for small businesses now is too small. There's not enough money there. A lot more industry needs to do research and development in order to stay competitive. The number is around $100 million or more just for the small business portion.
I should also tell you that when you look at Canada and you look at our business and industry distribution, we have very few large companies in Canada. Of our companies, 99% are under 100 employees and 80%-plus are under 10 employees. So Canada really is a small business industrial country. We've been trying to do more and more research availability for those small companies.
As for the percentage of GDP spent on research dollars, we're at the bottom of the list, or second to the bottom of the list. We're very low because of our previous budgets. What we've been recommending as a committee is that Canada double our research on a continuous basis. The amount of funds is low for us as a country as far as GDP goes.
What is the percentage at now?
Ms. Lalita Acharya (Committee Researcher): It's just over 1.6% of GDP.
Dr. Lui Ming-wah: That's very high. Japan is at 1.8%. America's at 2.0%. So 1.6% is very high.
Ms. Lalita Acharya: We're the lowest on the list for the G-7 nations, though. The average for the G-7 is 2.1%, and OECD is about 2.2%.
The Chair: We should actually be doubling what we're spending on research in Canada.
Dr. Lui Ming-wah: I hope the Hong Kong government will double that, too.
Some hon. members: Oh, oh!
The Chair: I was going to add one more thing to that. You talked about going from low cost to a higher cost. Low cost usually is low-tech. Higher cost needs to be high-tech. What is your government doing to assist that transition for your businesses?
Dr. Lui Ming-wah: I think we should ask the government representative here.
Some hon. members: Oh, oh!
The Chair: This is where we have found that we've been lacking, in the transition. What we've been trying to do is improve that more and more across the country. How do we transition our manufacturing areas to be the high-tech best practice and best model and still be competitive?
Ms. Rosanna Ure: As we said at the very beginning, the service industry is still the most important industry in Hong Kong. Traditionally we are a financial centre, a trading centre, a logistics centre, and a tourism attraction as well. These are the very important revenue earners for Hong Kong.
Regarding manufacturing, I believe the remarks that I made in this committee demonstrated that the government's intention is to assist the transition from low-value manufacturing, which is no longer in existence in Hong Kong, into more high-value-added manufacturing.
In regard to infrastructural projects, I have mentioned a few, such as the science park and the cyber port. We are also encouraging development through funding--I mentioned the Innovation and Technology Commission--although certainly our funding is far from adequate, certainly way below whatever list you have. I think Hong Kong is still very low in terms of this. But we are catching up, especially on the educational aspect.
We are encouraging the universities to invest in research and development projects and trying to encourage start-up companies by having incubator projects for them. This is undertaken by the Hong Kong Productivity Council and some other crown corporations in Hong Kong.
Apart from that, I think really it's very much the private sector that has to take the initiative, because, as always, the Hong Kong government does not adopt an interventionist approach. We facilitate, we encourage, and we try to make sure the environment is ripe for this kind of development.
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Dr. Lui Ming-wah: Mr. Chairman, in the history of Hong Kong's economy, you can see even before 1997, the colonial Hong Kong government didn't do anything to help the local manufacturing industry. That was the beginning of the reason manufacturing started moving out in the 1980s. Since the transition in 1997, the Hong Kong SAR government has been doing something to provide some money, some funding, for the manufacturing industry, for research, but it's far from enough. I think that's the case.
But I do think it's very difficult to transform a small manufacturing industry to a high-tech manufacturing industry. You have to start afresh, from scratch. If someone is doing plastic flowers, as we had in Hong Kong many years ago, you can't just transform to make electronics. You have to have the people, the human resources, to start afresh.
The Chair: Okay. Are there any other questions?
I have two members who are on my list.
Dr. Philip Wong Yu-hong: Yes, I would like to answer the question.
We all know that China is now a member of the WTO, and the fact that it is, I think, is bound to have some impact on member nations all around the world, and in Hong Kong as well. I would like to know what Canadian industry is doing, how they are positioning themselves to face this problem, the fact that China is now a member of the WTO. Has there been any discussion in industry?
The Chair: Does anybody want to answer that?
Brent, and then Andy.
Mr. Brent St. Denis (Algoma--Manitoulin, Lib.): I represent a rural area, and I'll talk more about that when I come to my question, but I'm not aware that there are any specific actions or concerted efforts being made in Canada to deal with that. I think it's sort of “wait and see”. We are so accustomed--and you only have to go to the shops here to know--to so many of our products coming from China that I think we've been inoculated to that. I don't think people are thinking in terms of whether we will see a huge increase in imports. Until the emergency comes, if there is one, there won't be much planning for it. That's my take on it.
Mr. Andy Savoy: Very briefly, in the agricultural sector there have been some concerns. Canada has a fairly stringent Canadian Food Inspection Agency--the CFIA--and there have been some concerns in the agricultural sector about imports of Chinese produce and livestock, with regard to their practices.
On the environment side and health and safety side, now that they're within the WTO, there are concerns that they have to look at compliance with various pieces of legislation, whether it be food safety or environmental legislation. I know it's a concern for some of my constituents.
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The Chair: Dan, do you want to answer the question?
Mr. Dan McTeague: Yes.
Doctor, I had almost alluded to that in my first comments and my question to you. Coupled with the favoured-nation trading status that has been accorded by the United States, it creates some rather unique challenges for Canada as a nation that is primarily reliant on exports, particularly of energy and primary goods. We do have a significant manufacturing component in many of the urban areas and, to a lesser extent, in the agricultural areas.
Our concern, however, beyond agriculture may also exist in the lowest possible means in which to produce a product, or to create an item that will be used for international consumption. Our belief is the standards are not uniform, particularly health standards and environmental standards.
It is an issue I wanted to ask about. I will hopefully anticipate a question from Mr. Michael Mak.
On those questions, how do Canada and other nations compete when it is possible to receive products, or to have a body of individuals who are prepared to provide and manufacture products, at the lowest possible cost around the world? I think in that circumstance, the strategy you've taken in Hong Kong may be an interesting one. You're basically on the cusp of the issue to find your own niche target markets that you do well in. Otherwise, it becomes simply a question of manufacturing.
The rules of the WTO obviously favour those who have a particular intellectual product, a particular patent, or a right to do a certain thing, and can have recourse in almost any jurisdiction in order to bring that against a particular party or government who may put up barriers. We have a number of things in the agricultural industry that are still supply management and may be subject to further challenges down the road. It creates real problems for Canada.
We can't ignore what China is doing. We know, for instance, countries like Japan have not been able to get up off the economic mat they've been on. The devaluation is one. The entrance of the WTO is another. It creates recognition for us in North America, particularly since we want to trade more with your region of the world.
How can we do it without jeopardizing our standard of living? Do we have to eventually see a drop in our standard of living in order to meet the standard of living of those who are labouring and manufacturing in China? They are real options for us. We recognize they are going to create a real indelible challenge to our standard of living.
The Chair: Dr. Yu-hong.
Dr. Philip Wong Yu-hong: There are a lot of things Canada can do. The fact that China is now a member of the WTO means all your high-tech products can gain access to the markets without being penalized for tax. There's a tremendous demand for communications equipment and processed food products. It's bound to have a large impact on the Chinese market.
There are a lot of opportunities. I really think Canadians should study this and see how much market share you can develop in China.
The Chair: I know there has been a lot of discussion within the industry in the trade departments.
I was parliamentary secretary a few years ago for industry. We had discussions on how to abide by the WTO rules. In which areas, with what products, can we become the most competitive? Within industry and trade, there have been centres of excellence set up to assist Canadian businesses to go after that type of trade.
With China coming into the WTO, this allows us many opportunities. It's why the Prime Minister's trade mission was there. I know John Manley has been there. I have been there a number of times in various areas, and then feeding back to the companies in Canada, plus our research areas, to make sure we're going to be the best in class for trade. It requires work done both ways.
What we want, as a country, is to abide by the WTO, compete in the WTO, and find all those items that we can compete in and be the traders of that product or service. There has been a lot of work done for a number of years. It's probably going back eight or nine years that I've been involved with it.
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Dr. Lui Ming-wah: Mr. Chairman, talking about China's access to the WTO, everybody knows China is a huge market, and most of the markets are untapped markets. As Dr. Wong has said, there are many goods Canada can provide to ship to China. But the thing is, as you said before, many companies in Canada are small businesses, and by themselves, individual companies cannot go into China to compete at all in their environment. That's why people talk about Hong Kong as the gateway to China. I think that's very true. If they come to Hong Kong and have a joint venture in Hong Kong, and then go into China hand-in-hand, I think their chances of succeeding are much better than just going in by themselves.
The Chair: On that discussion, what we've been trying to do in Canada is to try to get clusters of business, and then the cluster represents that cluster elsewhere in the world. I know that we are doing that in all different types of products--creating clusters of business and let the cluster go and sell the business rather than the small business person.
I come from the Niagara area. We have a cluster of woodworking in windows and doors--very simple. But we have one of the largest clusters, and we are selling in the Middle East and in China--direct.
Okay, before we lose time, I had Brent--I kept you back--and then Dan.
Mr. Brent St. Denis: I want to tell you very briefly about my constituency.
But welcome to those who are in Canada for the first time. Is there anybody for whom it's the first time to Canada? Everybody has been here before. Well, hopefully you'll come at a time of year when it's spring or summer. As nice as our winters are, we have four seasons to choose from.
As to my constituency in northern Ontario--I know Dr. Lui has lived in Saskatchewan, so he knows what big is--if I drive at 100 kilometres an hour, it takes nine hours to drive across my constituency. There are parts of my constituency where you're driving and you might see five houses or buildings in an hour in the north part. It's inside out compared to your relatively large population in a small area.
We have our challenges when it comes to an industrial manufacturing industry, because our young people move to the cities, and we are left with the parents and the grandparents and with the hope that maybe when people retire at 55 they will come back and maybe have a second career.
I was most interested by what was mentioned by Dr. Lui a moment ago, about Hong Kong as a doorway to China. I think maybe Taiwan is tempted to do that in its own way as well. But it would seem to me that because of your unique relationship with China, your doormat would be the biggest and most welcoming as a doorway to China.
Let's say I have a small business person in my constituency, as an example, or a little group. We do have some unique things that we can do, and certainly in a population as big as China, we could probably find a market for anything we could produce. How does a small business person in my constituency find a Hong Kong business partner? Is there a forum in which that can be done? Is there a meeting place? Is there a place where people can get to know each other and say, “Yes, I make wooden chairs; I don't make a million a year, but I make a few thousand”; and “Yes, there's somebody in China that can buy a few thousand chairs“?
Dr. Lui Ming-wah: Yes, you ask about the venues you could use. TDC, the Trade Development Council, is one of the venues you can try.
Also, there are several trade organizations in Hong Kong. For example, I was vice-chairman of the Chinese Manufacturers' Association of Hong Kong and Dr. Wong is with the Chinese General Chamber of Commerce, Hong Kong. All those chambers or associations have membership lists. I would suggest your company write to those places and ask them to match them with the appropriate company.
Mr. Brent St. Denis: At the Hong Kong end, they will actually proactively try to match. I guess it's also in your interest, too, to promote....
Dr. Philip Wong Yu-hong: What we would do is give you a list of companies in that business. Let's say you're interested in exporting shoes into China, for instance. Then we would give you a list of companies that are dealing in shoes, and then you have to go an approach them yourselves. We don't recommend, as a policy; we don't say this is the number one choice, that's number two, etc.
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Mr. Brent St. Denis: You do your own research and make your own relationships.
Given the currency differences between China and Canada, and the value of products, because many products come here that are very low price at retail, we shake our heads and ask, how can they make this and sell it here at this price? For instance, a watch; we cannot make a watch in Canada and sell it in Canada for ten dollars, but you can buy many watches for ten dollars.
So how realistic is it for a small business person in Canada, as wonderful as the idea is, to try to get into China? Can we make a chair here and land it in China and make a profit?
Dr. Lui Ming-wah: It all depends on what chair you make. It depends on the quality and design, yes, and the value.
Mr. Brent St. Denis: So maybe even China would have a market for a wooden chair--and I use that as an example--that might be more pricey than the plastic chair or stacking chai. So there is a market for upscale products?
Mr. Tommy Cheung Yu-yan: If I could just give you a little hint, recently China opened up letting their citizens come to Hong Kong without quotas, and now we see a lot of tourists coming in with 20,000, 30,000, even 100,000 Renminbi to Hong Kong to shop. They don't come to us to shop for the cheap products; they can get them at home. So for your chairs, I don't think you have to worry about selling upscale, quality merchandise to China as long as you make sure that, say, a wooden chair would stand up to the heat or humidity in different parts of China. There would be a market, and I think you don't want to outdo them with cheap chairs. You want to outdo them with one with the craftsmanship, with the nice wood, and all that.
Probably you have it and we don't have it in China. That's basically how you want to tackle the problem.
The Chair: Thank you.
Mr. McTeague.
Mr. Dan McTeague: I wanted, first of all, to point out to Dr. Wong that tariffs under the WTO are dropping, and it would be an advantage obviously to Canadians to take advantage of that. We are also cognizant that much of our Canadian business, and indeed both small businesses and larger businesses, tend to be entities that have more of a global nature.
But I was interested in the concerns that were raised in the syllabus here with respects to air pollution in Hong Kong. I'm going to go on the assumption--and I could be perhaps incorrect--that you were burning fossil fuels as a means of providing, among other things, electricity. Is that correct? Are you burning fossil fuels--oil, gasoline--to create energy to create electricity?
Witnesses: Yes.
Mr. Dan McTeague: One thing that has struck us in North America, and this is part and parcel in fact.... I have some of the largest nuclear reactors in my riding. They've been there about 35 years, almost as long as I've been alive. Our Ontario power generation unit has been very involved with a group known as the Zero Emission Coal Alliance, ZECA. I'm not sure if those of your government have been involved with this.
The greatest concern is that not just the emission of NOx/SOx but also, more importantly, carbon dioxide may eventually poison most of the world. We're cognizant of the fact that China is increasingly building its manufacturing infrastructure on the basis of the burning of coal. Already the U.S. department and others have been very heavily involved in creating solutions in which there'd be zero emission. Perhaps one of the things you may want to do is to consider at least formal understanding or alliance with this group, given its importance.
We have a similar pollution problem here in Canada in many urban areas. Our government has moved to, for instance, reduce sulphur in gasoline as well as trying to.... We are still having an ongoing debate--I see Mr. Rajotte is not here--on the question of the Kyoto commitment.
But specific to your energy questions, I think there's a lot of options on the greening of energy that are available here in Canada and we do have an advantage over many of our trading partners. It's an area of expertise that we have developed and we offer that to you.
The Chair: I know that time is running out, but if there's a quick question, maybe we can squeeze it in.
Mr. Fred Li Wah-ming: The question is correct, because in 2008, six years from now, the regulation of the two power companies will be terminated. So the government is now thinking about what will happen in the future. The power companies tend to use more natural gas, and that's good. From an environmental perspective, natural gas is better than burning coal. Of course it's not the best one, but there is a tendency to burn more natural gas. But after 2008 there is a big question mark about the kind of energy, the best resources, and how we regulate the two power companies. The government is interested in knowing, so we have an energy adviser now.
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Mr. Dan McTeague: My final comment is that coal produces more efficient energy than any other type of medium available. In North America we have, of course, experienced a rather difficult market with regard to natural gas. We're thinking about conversion, but it's extremely expensive. I think coal tends to remain one of those, unless we go to nuclear or other types. Perhaps this is something your group may want to take some advice on. It's not necessarily that we have to throw out coal but that coal has opportunities.
I know that in other parts of the world there may not be the same consideration for the environment. Yet there are some solutions out there, and they would put you on the technological leading edge in terms of ensuring that you don't choke yourselves to death in that kind of environment.
The Chair: Doctor, I wouldn't want you to get mad at me for carrying on too long with the meeting. Some of us will be joining you for lunch. So at this time I'll wrap up by saying thank you for being with us today. I will leave my card with you, which has the website for Strategis, as mentioned by Mr. McTeague. Many people around the world use it to get information. If there's any other assistance you would like, we're just a phone call away.
I've been to Hong Kong many times since 1972, so I've enjoyed your country a lot.
Dr. Lui Ming-wah: Thank you very much, Mr. Chairman. On behalf of the group, I thank you once again for having us here. I think the discussion has been very helpful and stimulating for future thought.
We have a small token of appreciation.
The Chair: Thank you.
The meeting is adjourned.