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FAIT Committee Report

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GOVERNMENT RESPONSE TO THE 12th REPORT OF THE STANDING COMMITTEE ON FOREIGN AFFAIRS AND INTERNATIONAL TRADE

REINVIGORATING ECONOMIC RELATIONS BETWEEN CANADA AND ASIA-PACIFIC









Introduction


Introduction TABLE OF CONTENTS

    The Government would like to thank the members of the Subcommittee on International Trade, Trade Disputes and Investment of the Standing Committee on Foreign Affairs and International Trade for their excellent work leading to their report entitled Reinvigorating Economic Relations Between Canada and Asia-Pacific.

    The Asia-Pacific region is home to over half of the world’s population, and includes several of the world’s largest economies. Japan ranks only behind the US as the second largest, with China likely to replace her in this position in the very near future. India, with a population of over one billion, has just begun an economic growth spurt that will likely result in her joining the top ranks of the world's economies in the near future. A regional grouping, the Association of Southeast Asian Nations (ASEAN), which includes dynamos like Malaysia, Thailand and Singapore, is profiting from its location in the geographic centre of the region, to generate dramatic economic growth of its own. Individual economies like the Republic of Korea, Taiwan, and Australia are adding their own dynamism to the mix, helping to make the Asia-Pacific region the single most promising place in the world for trade and investment for the coming decades.

    On the domestic front, one particularly noteworthy development in recent years, which has substantial implications for our trade with the Asia-Pacific, is the fact that over 50 percent of immigration to Canada comes from this region. Many of these new Canadians maintain important connections, including business links, with their countries of origin. World-wide immigration trends are likely to influence future trade flows, and while the US and Europe are primarily receiving immigrants from Latin America and the Mediterranean respectively, Canada is clearly becoming increasingly tied to Asia-Pacific.

    Given the tremendous business opportunities that exist in the region, the Government agrees fully with the Standing Committee that co-ordinated action must be taken to ensure that Canadian companies are making an appropriate level of effort, and that wherever possible, all impediments to Canadian initiatives in the region are removed or mitigated. The Government has been aware for some time that Canada’s share of trade and investment in Asia-Pacific is shrinking for a variety of reasons, many of them beyond our control and not necessarily cause for concern. For example, the phenomenal growth of intra-regional trade is a major factor in Canada’s declining share of trade, but this growth is in itself a very positive development which ultimately creates greater opportunities for all. In dollar terms, Canada’s overall two-way trade with the region has actually been increasing steadily, and Canadian investment in the region has doubled over the past 5-6 years. Nonetheless, Canada’s apparently weaker performance compared to our competitors in the region deserves attention.

    The Government is pleased to note that work has already begun and is currently underway in most of the areas of need identified in the Report, and we are pleased to add the Report recommendations to our consideration of these improvements. The recent appointment of a Minister of State for New and Emerging Markets was very much in response to the perceived need to address opportunities in the dynamic, emerging markets of the Asia-Pacific region, particularly two markets already identified as priorities, China and India.

    Some of the Report’s recommendation have policy or funding implications which cannot be fully answered in this time of overall Government review, particularly in the trade policy and budgetary areas, but the views of the Standing Committee will be factored into these analyses.

    Canada’s economic relations with Asia-Pacific are of great importance for the future prosperity of Canada, and concerted effort is warranted to ensure that opportunities are fully realised. The Government therefore appreciates the careful work the Committee has undertaken to study this matter, and formulate the broad range of recommendations included in its report.

Recommendation 1 TABLE OF CONTENTS

That in light of the tremendous economic opportunities in Asia-Pacific, as well as the importance of trade growth to maintaining Canada’s standard of living, the federal government make the expansion of economic ties with Asia-Pacific its number one policy priority for increased trade and investment with countries outside of the NAFTA area.

    Canada is a global player, and must be active in global markets, but there is no denying that the Asia-Pacific region is the most economically-dynamic part of the world, and rates special attention. Given the size and rapid growth of the Asia-Pacific region, we are placing a high priority on strengthening our trade and investment relationships in the area, through dialogue with bilateral partners, the negotiation of foreign investment protection agreements with key regional partners, and our active participation in regional fora such as Asia-Pacific Economic Cooperation (APEC). Moreover, fostering an effective multilateral trading system through the World Trade Organization (WTO) is the cornerstone of Canada’s trade policy and the foundation of Canada’s relations with all our trading partners, including those in Asia-Pacific. Through the WTO, we are pursuing broad market liberalisation and strengthened rules that govern international trade and investment, which in turn contribute to our objective of expanding economic ties and increasing Canadian access to Asian markets. In addition, three of the Department of Foreign Affairs and International Trade’s nine non-NAFTA priority countries (China, Japan, India) are located in the Asia-Pacific.

Recommendation 2 TABLE OF CONTENTS

That, although it has already identified China, Japan and India as its priority markets in Asia-Pacific, the Canadian government ensure that opportunities to improve economic ties with other countries in the region are not missed. These opportunities are particularly evident in South Korea and the leading members of the ASEAN community - Thailand, Singapore and Malaysia - among others.

    While the Government has identified three priority markets in Asia for special attention, concerted efforts are made to maintain and expand our trade and investment relationships with other important regional markets, including the Republic of Korea and the ASEAN countries named in the report. The Government maintains a full complement of staff working out of our embassies in the region, as well as in Ottawa, and has several initiatives directly targeting these markets. For example, there is the Canada-South Korea Special Partnership Working Group which institutionalises a regular program of high-level discussions on trade issues of mutual concern. Our participation in APEC is also a useful tool for building trade policy links with several Asian countries, including Thailand, which hosted last year, and Korea, which will host next year. In Southeast Asia, we are working closely with Canadian Chambers of Commerce in the region to promote Canadian business. Also, together with the Canadian Manufacturers and Exporters we are producing an e-bulletin specifically on business opportunities for Canadian companies in Southeast Asia. At the Ministerial level these markets also receive significant focussed attention. Full-scale Team Canada Missions went to South Korea, the Philippines, and Thailand in 1997, and Malaysia in 1996. More recently, Canada and South Korea exchanged visits of Trade Ministers, with the Korean Minister visiting Canada in October 2003 and Canada’s Minister for International Trade visiting Korea in November 2003. Furthermore, in January 2004, the newly-appointed Minister of Agriculture made one of his first overseas trips to Korea.

Recommendation 3 TABLE OF CONTENTS

That when working to enhance trade and investment ties with Asia-Pacific, the federal government not only focus on encouraging Canadian exports and outbound investment, but also look for ways to attract more foreign direct investment into Canada from the region. In particular, more should be done to encourage investment from emerging economies.

    The foreign direct investment promotion focal point for the Government is Investment Partnerships Canada (IPC). IPC coordinates investment campaigns targeted at key industry sectors and geographic markets including from emerging markets such as Hong Kong/China, India and Taiwan. Together with its public and private sector partners, IPC works to improve Canada’s investment climate by eliminating investment barriers and promoting Canada’s image abroad as an investment location of choice. In the Government reorganisation of December 2003, IPC was made part of the new Department of International Trade in order to further integrate our trade and investment strategies. At the same time, a new Minister of State for New and Emerging Markets was appointed to establish a special focus on emerging markets. Inward investment from emerging economies will be part of the Minister of State's mandate.

    In order to meet its objectives of attracting and retaining strategic foreign direct investment (FDI) including from emerging markets, IPC has developed Activity Plans for each market. The major components of these Activity Plans vary across markets but generally include target identification, domestic outcalls, hosting incoming and outgoing missions, and servicing incoming enquiries.

    In addition, IPC produces promotional tools, supports signature events, and conducts cost comparative analyses promoting Canada as an investment destination. It also helps municipalities directly through financial support for their own strategic targeting of foreign investors.

Recommendation 4 TABLE OF CONTENTS

Because a sustained effort is needed in order to yield meaningful results, the federal government should not give Asia-Pacific intermittent attention as in the past, but commit itself to a long-term strategy for expanding trade and investment with the region.

    As outlined in the Sub-Committee's report, the Asia-Pacific region is of unquestioned relevance to Canadians on a variety of fronts, and relations with the region are growing steadily. The Government has developed a strategic approach to the region which is partly reflected in the identification of three priority countries, as well as a wide range of specific initiatives targeting emerging markets in the area. The China Trade Action Plan and the South Asia Trade Action Plan are both examples of highly-detailed strategies. In recent years our increasingly high profile role in APEC is also evidence of Canada’s strategy for the region. Separate from government initiatives, it might also be noted that links to the region through immigration, inward investment from countries like China and India, and international education, are creating a self-sustaining level of commitment for Canadians to the region and in the region to Canada. We support the recommendation that a long term strategy for expanding trade and investment with the region is of high importance, and recognise that this strategy should be regularly updated to reflect changing realities.

Recommendation 5 TABLE OF CONTENTS

That the Government of Canada negotiate with Japan, and any other country where one is needed, a Social Security Agreement that eliminates the need for companies to contribute to social security programs in both countries when benefits can only be collected in one.

    The Government, in response to requests from Canadian business interests abroad, is seeking to conclude social security agreements with foreign governments that eliminate the need for Canadians posted abroad and their employers to contribute to the social security programs in two countries for the same work.

    In the case of Japan, the Canadian Chamber of Commerce in Japan (CCCJ) has raised such a request with the Government of Canada. In response, Canada has held unofficial preparatory meetings with Japan, the last of which, in October 2003, was to exchange information on the Canadian and Japanese pension systems. Additional meetings are expected in 2004. While Japan has responded favourably to our request for the conclusion of a social security agreement, we have not yet secured dates for the commencement of formal negotiations. We continue to press Japan for an early resolution.

Recommendation 6 TABLE OF CONTENTS

That the federal government seek out and negotiate free trade agreements on an ongoing basis with any countries with which Canada shares a free trade vision and respect for human rights. Steps should be taken to ensure that the government has a sufficient number of well-trained negotiators to carry out this mandate.

    As a trade-oriented and globally integrated economy, Canada benefits from a healthy, open, transparent, rules-based international trading system, both at the multilateral and regional levels. The World Trade Organization (WTO) is the cornerstone of Canadian trade policy and the foundation for Canada's relations with all of our trading partners, including those in the Asia-Pacific. A strong multilateral trading system holds the greatest potential for Canada to benefit from broad trade and investment market opening. Bilateral and regional free trade agreements (FTAs) can complement and reinforce multilateral liberalization by generating political momentum or refining elements of the trade regime, and can serve to accelerate liberalization and address specific bilateral issues. However, an FTA is only one means of achieving these objectives. In the Asia-Pacific region, we are active in strengthening our trade and investment relationships and promoting cooperation - whether, for example, through the negotiation of an FTA, with side agreements on environment and labour cooperation (as currently with Singapore), or other agreements (e.g. investment protection); the use of bilateral dialogue instruments; or the participation in regional fora such as the Asia Pacific Economic Cooperation forum (APEC). As to possible new FTAs, we continue to monitor regional developments carefully with a view to determining whether or not these or other mechanisms will best advance and protect Canadian trade and other interests including respect for human rights. If it is agreed to proceed in this regard with new partners, we will seek new or reallocate existing resources to enable Canada to carry out any new commitments.

Recommendation 7 TABLE OF CONTENTS

That Canada adopt a trade negotiating strategy in which Parliamentarians play a more active role. Parliamentarians should be consulted when the basic framework of the Canadian position in future trade negotiations is determined. Officials in charge of negotiations would be bound to stay within this broad framework and through the process of negotiations would provide regular updates on progress and challenges to interested and/or concerned Parliamentarians or Parliamentary Committees. Finally, and beginning with the Canada-Singapore free trade negotiations, Parliamentarians should be consulted before any tentative agreement is signed.

    Canadians' ability to communicate directly with elected officials is the key to informed debate on public policy. The Government thus supports the representative and deliberative role that Members of Parliament and the relevant Parliamentary Committees can play in consultations and engagement on Canada's international trade agenda. The Action Plan for Democratic Reform announced on February 4, 2004, outlines specific measures to strengthen the capacity of Members and of House Committees to influence and shape policy and legislation at every step of the process.

    The Action Plan will enhance longstanding practices and procedures for ensuring that Parliamentarians express their own views and those of their constituents. For example, the Minister of International Trade invited the Standing Committee for Foreign Affairs and International Trade (SCFAIT) to do work on the WTO and FTAA which resulted in the May 2002 SCFAIT report "Building an Effective New Round of WTO Negotiations: Key Issues for Canada" and the June 2002 SCFAIT report "Strengthening Canada's Economic Links with the Americas". These reports provided useful and valuable contributions to the Government as it was about to enter a critical stage in those negotiations. Ministers, supported by their Parliamentary Secretaries, and with the assistance of their staff and departmental officials, will increasingly seek the support of Parliamentarians on priorities and issues in their portfolio. The Government would therefore encourage interested Parliamentarians to work with the Minister of International Trade to make full use of existing consultative mechanisms, in particular, Parliamentary Committees, to enhance their contribution in the process of citizen engagement. The Government has made a commitment to provide Committees with additional resources for research in the preparation of their reports, and will continue to ensure that access to information and briefings on the issues are at hand.

    Canadian Parliamentarians are a potent force in encouraging discussion on the direction of Canada's multilateral, regional and bilateral trade negotiations and agreements through their active involvement in various inter-parliamentary networks and associations. The Government looks forward to benefitting further from the expertise acquired by Canadian Parliamentarians through their involvement in parliamentary diplomacy initiatives, typified by their participation as members of the Canadian Governmental Delegation to the WTO and FTAA Ministerials in Fall 2003, as well as their involvement in public symposia sponsored by the WTO, the OECD, and other fora.

    Parliamentarians also play a critical role in promoting greater transparency and citizen engagement in identifying Canada's trade priorities, and in articulating domestic and international concerns by and for their constituents. Teams of Parliamentarians will be established and given a direct mandate to consult with Canadians, particularly youth. Once the implementing legislation is adopted by Parliament enabling the Government to ratify a trade agreement, Parliamentarians will be in a position to build greater awareness of the benefits of trade for all Canadians.

    Furthermore, the role of Parliamentary Secretaries has been expanded recently to enhance the relations between Ministers and Parliamentarians. They will play an active role in policy development and will be assigned specific responsibilities by the Prime Minister on key policy issues. To reinforce their expanded role, they have been sworn in as Privy Councillors so they can be invited to Cabinet and Cabinet Committee discussions as appropriate. They will play a pivotal role in representing the concerns of Parliamentarians to their Minister and within government more broadly.

Recommendation 8 TABLE OF CONTENTS

That, given the importance of trade and investment in stimulating economic growth, and the need for a stable legal and regulatory environment to attract investment, the Government of Canada provide increased support to least developed countries for trade-related technical, policy and legal reforms.

    The Government is committed to assist least developed countries to secure benefits from increasing integration into the global economy. Canada’s support to least developed countries is premised on the need to consider trade and investment-related assistance in the context of countries' overall development and poverty reduction plans. Assistance is provided through bilateral as well as a variety of multilateral channels.

    A key multilateral conduit of Canadian assistance is the Integrated Framework, which has been formed by a number of donor countries and six participating agencies (the WTO, World Bank, UNCTAD, UNDP, International Trade Centre and International Monetary Fund). Contributions of $2 million place Canada among the top donors. The Integrated Framework is intended to ensure a demand-driven approach to Trade related Technical Assistance and Capacity Building (TRTA/CB), co-ordinate delivery of TRTA/CB, and encourage better collaboration among the donors.

    Integrated Framework Initiatives in Cambodia are indicative of the types of assistance being provided in the areas of trade-related technical, policy and legal reforms. The IMF has provided assistance in drafting an Insolvency Law. An International Trade Centre survey provided market intelligence to suppliers of specific agricultural products in Cambodia and analyzed the existing constraints in import sectors. UNCTAD has been the lead on training for trade negotiations and WTO accession. And in response to the World Bank’s Diagnostic Study, the Canadian International Development Agency (CIDA) provided funding ($180,000) to the Cambodian Ministry of Commerce for establishing a Commercial Court and Commercial Arbitration Tribunal, as per requirements for accession to the WTO.

    Furthermore, CIDA recently initiated a $9 million project to build the capacity of Asian countries to negotiate accession to the WTO and implement their WTO commitments over the period 2004-2009. Of the six eligible developing countries, two are least developed, non-APEC members, Cambodia and Lao PDR. CIDA also is exploring two significant trade-related capacity development initiatives with Bangladesh. These should be well advanced by early 2004.

    In addition, Canada is an active provider of trade-related technical assistance and capacity-building in APEC, and co-chairs APEC's WTO Capacity Building Group, which promotes donor coordination and information-sharing on TRTA/CB.

    It should also be noted that the Government maintains a Trade Facilitation Office in Ottawa which offers direct assistance to exporters from developing countries in accessing the Canadian market.

Recommendation 9 TABLE OF CONTENTS

That in cases where issues such as agriculture protection prevents a comprehensive free trade agreement from being negotiated, Canada should instead pursue alternative economic co-operation agreements that promote trade or pursue sectoral agreements within the WTO. Free trade in services is an example of such an agreement.

    The multilateral trading system, embodied in World Trade Organization (WTO) agreements, remains the cornerstone of Canada's international trade policy. We also have an active regional agenda that complements our multilateral objectives as we believe there are gains to be made through reductions in barriers to trade and investment at this level. In accordance with the particular circumstances and issues in each of our regional and bilateral economic relationships, Canada's regional trade policy seeks the most appropriate and effective mechanisms to advance Canadian objectives. Mechanisms can range from free trade agreements (FTAs), to other forms of arrangements and memoranda of understandings (e.g. investment protection, mutual recognition, economic cooperation, etc.), to institutionalized dialogue mechanisms (e.g. bilateral economic committees, APEC, etc.). Regardless of the instrument chosen, Canada's regional and bilateral efforts are consistent with WTO rules and reinforce our multilateral objectives. Our current regional negotiations agenda involves a number of FTAs: Free Trade Area of the Americas (FTAA), Singapore, the Central American Four (El Salvador, Honduras, Guatemala, Nicaragua), and the European Free Trade Association (EFTA) countries. We are also working with the European Union on the design of a new Trade and Investment Enhancement Agreement, which will not be a traditional free trade agreement based on the elimination of tariffs. In addition, specifically in the Asia-Pacific region, we continue to work on APEC’s Trade Facilitation Action Plan and improving transparency standards, and, as outlined in Canada’s International Market Access Priorities - 2004, we continue to pursue targetted initiatives with individual countries to address our main market access issues.

Recommendation 10 TABLE OF CONTENTS

That to demonstrate its commitment to improving economic ties, as well as to cultivate a closer working relationship with Asia-Pacific, the federal government significantly increase the number of visits to key markets in the region by ministers, parliamentarians and senior government officials. Furthermore, these official visits should be more consistent, strategic and focused on achieving specific policy objectives.

    The Government recognises the importance of maintaining a steady display of high level interest in the region through frequent and targeted visits by ministers, parliamentarians, and senior government officials. Of the nine large-scale Team Canada Missions over the past ten years, seven of them were in the Asia-Pacific. There are also frequent exchanges of parliamentary delegations with the region, several of which are institutionalised such as the Canada-Japan Parliamentary Association. At the Deputy Minister-level, new formal consultations are being organised to be held with counterparts from China on an annual basis. In the case of India, in October 2003 a range of high-level bilateral meetings have been formalized which will allow for consultations on an annual basis between Foreign Ministers, Deputy Ministers, and at the ADM-level as well. There is a firm intention to maintain and, whenever possible, to augment the flow of high level Canadian visitors to the region. Also, recognising the merits of greater co-ordination and targeting of these missions, the Department of Foreign Affairs and International Trade has recently instituted a system for more efficiently planning and executing visits to the Asia-Pacific region.

Recommendation 11 TABLE OF CONTENTS

That the federal government invite willing provinces to jointly develop a national strategy on international education to more aggressively promote Canada as a study destination for international students.

    The Government works closely with the provinces to publicise the excellence of Canadian educational institutions, services and products and to promote Canada as a study destination. There are regular consultations with the Council of Ministers of Education (CMEC) on international activities at which both levels of government exchange information on their respective strategies to promote national and provincial interests in the global education environment and to attract foreign students to Canadian educational institutions.

    The Department of Foreign Affairs and International Trade hosts a semi-annual national education marketing roundtable with participation from provincial ministries of education, provincial education marketing agencies, national education associations and other federal government departments to more effectively and collaboratively market Canada as an attractive study destination offering leading edge education and learning services and products through its world class education institutions. This forum provides an effective means to establish a common approach and synergies. The Government is also actively supporting the programs of implementation of those provinces which have developed international promotion and marketing strategies.

    The Education Marketing Advisory Board, which advises the Minister for International Trade, is a representative high level body with experts drawn from all provinces, including national education associations and provincial and federal officials as observers.

    Citizenship and Immigration Canada (CIC) is working closely with provincial partners on a number of pilot projects designed to test new approaches to making Canada a destination of choice for foreign students, and offering them opportunities to gain practical work experience and consider Canada as a permanent place of residence. These pilot projects include priority processing for student permits (Memorandum of Understanding signed with Alberta and under negotiation with British Columbia), off-campus employment for foreign students (MOU signed with Manitoba and under negotiation with New Brunswick and Quebec) and authorization of a second year of employment for foreign student graduates of publicly funded institutions (Memorandum of Understanding signed with Alberta and New Brunswick). If the pilot projects are successful and resources permit, national implementation may be considered.

    Provinces are actively supportive of those federal initiatives which benefit provincial educational institutions in the international arena. These include the Canadian Education Centre Network (CECN) which was established by the Department of Foreign Affairs and International Trade (DFAIT) and the Canadian International Development Agency (CIDA) specifically to promote Canada as a study destination, and to which DFAIT and CIDA have provided funding support. The CECN promotes the education services offered by its 300 Canadian clients through the nineteen offices it operates overseas.

Recommendation 12 TABLE OF CONTENTS

That the federal government work with the provinces to develop a certification program for education institutions to protect Canada’s integrity and reputation and to prevent immigration scams and abuses.

    The Federal Government and the provinces and territories recognize the importance of ensuring that Canada’s integrity and reputation in the education sector is maintained. While ensuring quality standards of post-secondary institutions in Canada is primarily a provincial issue, both levels of government are working together to address the issue.

    The Department of Foreign Affairs and International Trade (DFAIT) liaises and consults with provincial ministries of education and works closely with the Canadian Education Centres Network, associations representing educational institutions, and other authorities, to respond to enquiries from missions abroad and, through them, to provide accurate information to foreign education authorities and students.

    On December 13, 2003 the government published draft regulations in the Canada Gazette which, if they are implemented as planned in April 2004, will implement a new regime for fee charging immigration representatives. Effective April 2004 any individual who wishes to represent an immigration client before CIC or the Immigration and Refugee Board will have to be a member in good standing of either the Canadian Society of Immigration Consultants (CSIC) or a provincial or territorial law society. CSIC, which is a new independent self-regulating body for immigration consultants, is developing a mandatory code of conduct, training plan and complaints and discipline mechanism that will enhance the consumer protection provided to immigration clients including prospective foreign students.

    There are several ways education institutions are assessed in Canada, including designation, certification and accreditation:

      Designation. Since the inception of the Canada Student Loans Program (CSLP) the Government of Canada has delegated the authority to the provinces to designate post secondary educational institutions that offer programs leading towards a degree, diploma or certificate as eligible to accept for enrolment students who are in receipt of financial assistance through the CSLP.

      The Department of Human Resources and Skills Development is responsible within the federal government for managing the Designation Master List which includes all Canadian and international post-secondary education institutions that meet provincial designation criteria according to an assessment process on quality of education and ability to provide educational services. This list of institutions could be shared with other countries seeking assurance of bona fides. With respect to private education institutions this is often a two step process as most provinces require the institution to be accredited or to have met all requirements under respective private vocational acts before becoming designated.

      Under the responsibility of Council of Ministers of Education of Canada the Canadian Information Centre on International Credentials (CICIC) is developing lists of recognized Canadian institutions as a full member of the European National Information Centres whose 53 members include Australia, New Zealand and the USA. Member countries have the obligation through a UNESCO convention to provide information on bona fide institutions. Discussions are underway with China regarding provisions of information on bona fide institutions in each country, similar to the bilateral arrangements China has signed with several countries.

      Certification. Under the current Income Tax Act, educational institutions must apply and be approved for certification so that they may issue a Tuition and Education Tax Certificate (T2202A) to enrolled students.

      Under the authority of the Income Tax Act (Sections 118.5 and 118.6) the Department of Human Resources and Skills Development is responsible for determining the eligibility of a private educational institution offering courses - other than those designed for university credits - that are specifically designed to furnish a person with skills for, or to improve a person's skills in, a recognized occupation. Authority for all decisions related to income tax remains the mandate of the Minister of Revenue.

      Accreditation. Provinces play a key role in the accreditation process in which specific institutions or programs, (generally professional programs), are examined either by provincial governments or by self-governing professional bodies with respect to the quality of education provided to students.

      Some schools are unregulated in that they are not designated, certified, or accredited because they offer training that does not lead directly to employment (for example, language schools, driving instruction for non-commercial vehicles, health and fitness, and tax preparation) and because students are not eligible for student loans. These programs are non-vocational in nature, and businesses offering them are generally not required to register under a province’s private career colleges (or private vocational schools) act.

Recommendation 13 TABLE OF CONTENTS

That, in an effort to more effectively promote Canadian institutions in Asia-Pacific, as well as to improve linkages between Canadian alumni in the region, the Canadian government, in collaboration with the provinces and the institutions themselves, encourage the Canadian Education Centre Network to work closely with, and strengthen, Canadian alumni associations abroad. The necessary financial support to perform this function should be provided.

    The Government fully endorses the recommendation to strengthen Canadian alumni associations abroad. Several departments are already taking steps to establish alumni associations among graduates of their scholarship and exchange programs abroad. Canadian embassies and high commissions keep contact with many alumni and actively support officials from universities and alumni associations who visit the countries to which they are accredited. The government is seeking ways of expanding these contacts and making better use of alumni of Canadian universities in the Asia Pacific region since these are excellent contacts and business partners. The suggestion that the Canadian Education Centre Network (CECN) be involved in strengthening alumni associations in those countries where they have offices will be explored further.

Recommendation 14 TABLE OF CONTENTS

That, without compromising the safety and security of Canadians, the federal government ensure that legitimate travel to Canada is not unnecessarily restricted.

    The Government fully agrees that legitimate travel to Canada should not be unnecessarily restricted, and works continually with foreign governments, and internally, to improve our services without compromising the security of Canadians.

    The decision to facilitate the travel of Chinese tourists to Canada by approving Canada as an approved destination for Chinese tourists rests with the government of China and the issue is, therefore, beyond the control of the government of Canada. However we are working on trying to obtain this status, and are hopeful of doing so in the very near future. Applicants for temporary resident (visitor) visas in India have a number of ways in which they may submit their applications. First, they may present their applications in person at the Canadian High Commission (CHC) in New Delhi and receive a decision on that same day. Second, if they have proven track records of travel they, or a third party, may submit their applications in a drop box at the High Commission and receive a decision the next day. This method is commonly used by travellers whose travel agents submit the applications on their behalf. Third, if they prefer not to travel to New Delhi clients may submit their applications by mail and receive a decision in two weeks. The CHC in New Delhi processes in excess of 30,000 temporary resident (visitor) visas per year by these various methods. The visa section in New Delhi also liaises closely with the trade section of the High Commission in order to ensure an appropriate degree of facilitation of legitimate Indian businesspersons’ travel to Canada.

    The visa section at the Canadian Embassy in Bangkok, Thailand normally processes all applicants for temporary resident (visitor) visas on the day on which they present themselves. There are a few occasions during the high season when the number of applicant exceeds the capacity of the visa section to process them on that day. This is an unusual occurrence and the numbers involved are small. The level of client service offered by the visa section in Bangkok has not been a source of complaints or representations, and there is no numerical limitation to the number of visas that can be issued.

Recommendation 15 TABLE OF CONTENTS

That the federal government examine ways to further remove impediments to establishing commercial air travel connections between Canada and key markets in Asia-Pacific.

    During 2003-2004 period the Government held successful bilateral air transport negotiations with Hong Kong and Vietnam. Both agreements provide for improved access to other markets in the region through code-sharing provisions that allow Canadian carriers to market services on the flights of other airlines. Officials continue to examine markets where Canada could expect to be successful in negotiating either access for direct flights or enhanced code-sharing provisions.

    The management of existing air transport agreements with Asian economies remains a high priority for Canada. During 2003-2004 Canadian officials, including the Canadian Embassies abroad, have been active in efforts to remove barriers posed by airport slot restrictions in Japan and business tax issues in the People’s Republic of China. Close co-operation between transport and health authorities throughout the region also served to mitigate the negative economic consequences of SARS on the air transport industry.

    With respect to India, Canadian negotiators engaged in extensive negotiations with the Russian Federation to pursue the shortest, most efficient route for Canadian airlines to India through Russian airspace. As a result, Air Canada now is able to fly non-stop from Toronto to New Delhi.

Recommendation 16 TABLE OF CONTENTS

That when issuing travel advisories in Asia-Pacific, the Government of Canada distinguish between essential and non-essential travel. At the same time, given the large size of many countries in the region, advisories should be as specific to particular locations as possible without jeopardizing the safety of Canadians in the process.

    The Government offers assistance to Canadians who are living or travelling abroad or who plan to do so through the Consular Affairs Bureau of the Department of Foreign Affairs and International Trade. The Travel Information Program provides a broad range of information concerning conditions in other countries, as well as advice to help Canadians prepare for international travel. This includes information on safety and security conditions, health questions, and entry requirements.

    All of our travel advice follows the same set of standards, regardless of which region of the world it concerns. The wording "essential" and "non-essential" leaves too much room for interpretation: while some may see business, education, or humanitarian grounds as the only "essential" reasons to travel, others interpret "essential" travel as something as simple as a family visit. That is why the major distinction in our “Travel Warnings” is between “Canadians” and “Canadian tourists.” “Canadians” includes all citizens, whether they travel for business, education, humanitarian concerns, or pleasure. “Canadian tourists” refers to travellers who are visiting a country for vacation, cultural, or other non-business, educational, or humanitarian reasons.

    Whenever possible, our "Travel Warnings" refer to specified regions, rather than encompassing the whole country.

Recommendation 17 TABLE OF CONTENTS

That, as part of a broader strategy to promote long-term trade and investment with Asia-Pacific, new programs that encourage personal exchanges with the region be explored and existing ones expanded. In particular, the Canadian government should consider expanding its Working Holiday Program to include more Asia-Pacific countries and to allow more Canadian youth to participate.

    The Government regards contact between Canadians and people from the Asia-Pacific region as an important element of its international policy, and will seek to expand these contacts by all possible means. The Government's Youth Employment Strategy, which includes the Department of Foreign Affairs and International Trade’s Young Professionals International Initiative, CIDA's International Internship Program, Industry Canada's Net Corps, Canadian Heritage's Young Canada Works program and Environment Canada's International Environmental Youth Corp program, has been renewed until 2008. These programs continue to offer excellent opportunities for Canadian graduates under thirty years of age to gain international work experience and develop advanced international employability skills in the Asia-Pacific region.

    In 2003, the large and growing Working Holiday Program also provided numerous opportunities for exchange between Canada and Asia-Pacific. Fifty percent of the exchanges under the Working Holiday Program (WHP) have occurred in the Asia-Pacific region. In recent years the quotas for Japan and Australia have more than doubled. In 2004, Korea's quota will be increased from the current 200 to 500 reciprocally, New Zealand will more than double with an increase from 800 to 2,000 for the same period and Australia will increase to 8000. An aggressive trans-Canada advertising campaign has been launched in major markets to increase the awareness of Canadian youth about the program and its opportunities. We will continue to seek opportunities for reciprocal Working Holiday Programs.

    In February 2004, the Government further demonstrated its commitment to involving Canadian youth more extensively in personal exchange programs abroad through the announcement of the creation of a Canada Corps. The details are yet to be finalised, but there is every expectation that exchanges with Asia-Pacific will figure prominently in this program.

Recommendation 18 TABLE OF CONTENTS

That, the Government of Canada review the mandate of the Asia Pacific Foundation of Canada and ensure that through stable funding it is an effective tool in delivering the information and services that it provides. While conducting this review, the government should also review the effectiveness of other networks for business such as the Canadian Chamber of Commerce.

    The Government fully agrees that Canadians, and particularly Canadian businesses, need timely, accurate and comprehensive market information about Asia-Pacific. Our trade commissioners in over thirty offices spread throughout the Asia-Pacific region give this function their highest priority attention, and have improved their service standards in recent years with the implementation of the “New Approach at Work” and the “Virtual Trade Commissioner” web service. In fulfilling this function, officials both abroad and in Ottawa work closely with non-governmental organisations to disseminate commercial intelligence to the Canadian business community. The Asia Pacific Foundation of Canada (APFC) is one of several of these organisations, which also include chambers of commerce, Asian ethnic business associations, and country-specific organisations such as the Canada-China Business Council and the Canada-India Business Council. In response to concerns raised by the Internal Audit Division of the Department of Foreign Affairs and International Trade and echoed by the Office of the Auditor General, the Government has been working to reshape its relationship with the Asia Pacific Foundation. Twenty years after the founding of the APFC under an Act of Parliament, it is appropriate to review the mandate and the funding of this organisation for which Parliament had only guaranteed funding for the first five years. The Government is considering a range of results-oriented options to improve the delivery of information to the Canadian business community and establish stronger Canadian links with the Asia-Pacific region, including working through, and with, other business networks such as chambers of commerce.

Recommendation 19 TABLE OF CONTENTS

That the federal government work in conjunction with other countries to harmonize statistical methodologies in the collection of international trade data.

    The methodology for the collection, classification, and reporting of international trade data is already quite well agreed upon amongst countries. This agreed-upon international system is known as the Harmonized System and is common amongst virtually all countries. Thus the problem is not one of harmonizing statistical methodologies per se, but of reducing the discrepancies that continue to exist between the international trade data of different countries.

    There are several reasons for these differences, many related to diligence in import data gathering and a few related to methodology. The Government is working through Statistics Canada to address the underlying issues. For example, a process of merchandise trade reconciliation with key trading partners has been underway for several years, and special attention has been paid to Canada's major trading partners in Asia - China, Japan, and Korea. Statistics Canada also engages in a data exchange with their US counterparts, our largest trading partner, so that we use each others' imports data in place of export data. Certainly, better enforcement of Canadian requirements for filing export documentation would go a long way in further narrowing the problem. However, given that under-reporting can arise for perfectly legitimate reasons, such as re-exporting, even when all export documentation is filed, enforcement alone will not solve the problem. Canadian statisticians are making progress, but are a long way off from resolving the problems of under-reporting that are shared by all international trade-gathering statistical agencies around the world.

Recommendation 20 TABLE OF CONTENTS

That, given the evidence that many Canadian companies are not sufficiently knowledgeable about the challenges of exporting and investing in Asia-Pacific markets, the Canadian government improve the effectiveness of its Team Canada Inc export-preparedness service. Specifically, it should determine if prospective exporters are aware of, and are using, this service, and whether or not it adequately prepares Canadian businesses for the challenges of exporting to overseas markets.

    The Trade Commissioner Service is supported in its unique role of providing on-the-ground services to Canadian companies in foreign markets by Team Canada Inc, a network of 20 federal departments and agencies. TCI was specifically established to help prepare Canadian companies for the challenges of doing business internationally. This entails the provision of counselling services and a wide range of customized tools and training. TCI handled almost 16,000 enquiries from companies through its 1-888 Export Information Service in 2002, bringing its five-year cumulative total to 76,000. More than 300,000 visits to its ExportSource.ca website were registered and it delivered more than 1,000 workshops, seminars and other outreach activities to some 27,000 participants across Canada. TCI published 179 custom market reports and briefs for its 15,000 online clients. In addition, over 500 missions, trade fairs and other commercial events were organized for 6,000 Canadian companies by TCI partners. Awareness of TCI’s exporter preparation services, therefore, is significant and growing, and is being promoted by the organization’s affiliates on an ongoing basis.

    Preparing new exporters will remain a constant challenge for TCI as companies become active internationally for the first time, or seek to expand to difficult markets such as those in Asia-Pacific. It should be noted that many firms choose consciously or otherwise not to take advantage of readily available in-Canada government services prior to entering foreign markets. TCI strives to align its exporter preparation efforts with client need and demand, and is continually looking at ways to improve service effectiveness. Through its network of offices and affiliates across the country - particularly International Trade Centres and Regional Trade Networks operating in each province, TCI will continue to reach out and offer market entry support and counselling services to these clients. The newly-created Department of International Trade (a key TCI member) intends to focus particular attention on exporter preparation service delivery in the future.

Recommendation 21 TABLE OF CONTENTS

That, in the interests of improving export-readiness and removing the obstacles to trade and investment in Asia-Pacific, the Government of Canada work with businesses that have demonstrated success in the region to establish criteria by which to evaluate the business plans and export-preparedness of Canadian SMEs looking to the Asia-Pacific market. Contingent upon meeting these criteria, SMEs would be provided with financial assistance to help offset the cost of travel to begin to put that plan into action.

    Further to the assistance provided by Team Canada Inc as noted in the response to recommendation 20, the Canadian Government continues to offer financial assistance through the Program for Export Market Development (PEMD) and the Canadian Agriculture and Food International Program (CAFI). This assistance is contingent on an approved ‘market development strategy’ (that is, a business plan) which is assessed by processing officers according to standard benchmark criteria. The criteria reflect those elements essential to successfully entering a foreign market, as gleaned from the experience of many seasoned exporters. The financial risk of exploring new markets is shared equally between the company and the Government under the PEMD and CAFI programs. Successful applicants also receive at times considerable and personalized in-market counselling from Trade Commissioner Service staff to guide their approach to the target country.

Recommendation 22 TABLE OF CONTENTS

That the Canadian government, through the Trade Commissioner Services overseas, work with Canadian business associations operating in key Asia-Pacific markets to set up a mentorship program that would allow Canadian firms already established in those markets to share their knowledge and experience with new entrants in the region.

    The Government believes the concept of mentorship is an excellent one. While there is currently no ‘official’ program that supports mentorship, the function already takes place successfully by way of numerous voluntary, no-cost and informal introductions made by trade commissioners at missions abroad and in Canada. As indicated, many bilateral business associations and chambers of commerce are more than willing to engage in the mentorship process, something that trade commissioners encourage. The Trade Commissioner Service's intranet website, Horizons, offers ‘best practice’ advice to personnel in the field, and promoting mentorship, whenever possible, will be highlighted as one of these best practices. Mentorship has also been identified as perhaps one of the greatest benefits SMEs derive from participating in Team Canada missions. These missions are typically composed of numerous exporters that forge close relationships with more seasoned Canadian practitioners, learning valuable ‘how-to’ lessons in the process.

Recommendation 23 TABLE OF CONTENTS

That the federal government open three small business incubation facilities in Asia-Pacific - in Japan, Hong Kong and Singapore. These facilities would provide incoming Canadian small businesses with temporary use of office space and access to basic business services in order to ease their entry into the region.

    The Government has examined programs of this nature in the past, and has determined that the provision of such facilities is not currently a priority for Canadian companies doing business in the Asia-Pacific region. After extensive consultation with the Canadian business community over an extended period of time, the Trade Commissioner Service has developed and implemented a set of six core services which relate most closely to client expectations/demands. These value-added services include: 1) assessing market prospects for their products/services, 2) identifying key contacts, 3) providing information/intelligence on local business partners, 4) providing practical advice on planning visits to the market, 5) providing face-to-face- briefings in the field and 6) providing advice to troubleshoot critical business challenges. At the same time, all missions maintain validated lists of additional service providers who, for a fee, arrange meetings, logistics and other services including office and display space which exporters might require. By segmenting service provision in this way, trade commissioners concentrate their time, effort and financial resources on the higher value-added services confirmed as of greatest importance to Canadian exporters. Specific examples of how the Trade Commissioner Service delivers its core services to small businesses include promoting and recruiting SMEs for trade missions, outreach to Canadian companies in Canada, and informing companies of opportunities through the Program for Export Market Development, the Canadian Agriculture and Food International Program, the International Business Opportunities Center, and the Virtual Trade Commissioner.

Recommendation 24 TABLE OF CONTENTS

That, as part of a long-term strategy to build Canada’s economic relationship with Asia-Pacific, as well as to exhibit Canadian technology and expertise, the federal government more effectively encourage Canadian small businesses to participate in trade shows and exhibitions in Asia-Pacific and provide increased financial assistance for SMEs to attend those events.

Recommendation 25

That, to improve trade, investment and Canada’s image in Asia-Pacific, the Government of Canada encourage a significantly greater number of joint trade missions to the region involving the participation of businesses along with federal, provincial and/or territorial government leaders. Instead of broad-based delegations such as Team Canada missions, smaller missions focused on specific sectors should be favoured.

    The Government does not dedicate program resources to underwrite the specific costs of company participation in promotional events of this sort, with the exception of some programs, including PEMD and CAFI (funds available to eligible SMEs to offset accepted costs associated with international trade show participation) and the Brand Canada Program (monies spread over four years and focused on a select group of ‘where-the-world shops’ fairs). Indeed, the only generic source of international business development program funding available from the Government is the Client Service Fund, which at $8.7 million per year and declining, serves as a minimal level of seed money for all initiatives undertaken by 135 trade offices abroad. The value of company participation in sector-specific international trade fairs is, however, fully recognized as being an important channel for national image enhancement, for establishing new business contacts, for assessing the competition, and for sharpening market development strategies. All Team Canada Inc partners are actively engaged in recommending attendance at appropriate trade fairs to their business clients. The choice of shows is very wide, and ultimately companies must decide for themselves which are the most appropriate and cost-effective in which to participate. The same would apply to corporate involvement in non-Team Canada government-sponsored trade missions which, as a general rule, are focused on specific sectors to maximize results. It is anticipated that these types of missions, often involving provincial participation, will become a preferred vehicle for minister-led promotional activity in the future.

Recommendation 26 TABLE OF CONTENTS

That, in recognition of the critical role played by Canada’s Trade Commissioner Service in promoting international trade and investment, and the importance of trade and investment to Canada’s standard of living, the Canadian government substantially increase its funding of the Trade Commissioner Service in order to raise the number of trade officers operating abroad, particularly the number of sectoral specialists. The increase in resources should be concentrated in the Asia-Pacific region with the goal of Asia-Pacific accounting for 50% of all TCS expenditures abroad.

    Client surveys indicate that the Trade Commissioner Service is fulfilling in a superior manner its mandate of serving Canadian companies abroad. However, we are constantly working to improve upon this performance by, among other initiatives, ensuring that our human resource base is most effectively managed. Where the TCS deploys its personnel internationally is currently under intense scrutiny, the objective being to align valuable/expensive staff resources most accurately with Canadian commercial interests in priority markets throughout the world. At this time, the analysis suggests that we are not under-resourced in the Asia-Pacific region relative to other areas where clients expect to be served. The number of trade officers posted abroad compared to at headquarters is also examined on a continual basis in order to strike the best balance between costs and needs. In addition to this, substantial funding has been devoted to staff training in priority sectors and marketing and research skills. Electronic aids have been introduced to increase the efficiency and effectiveness of staff, and new state-of-the-art Client Relations Management tools will soon be available to accelerate and further professionalize the way clients are served by the Trade Commissioner Service. Sectoral expertise is sought in the staff recruitment process with a view to concentrating such expertise where it will prove of greatest value; this is often done in concert with other government departments which have by definition particular capabilities, such as Agriculture-Agrifood Canada (AAFC), Canadian Heritage and Natural Resources Canada. A limited number of new specialist positions have been created by the latter departments, for placement in missions abroad in Asia-Pacific. Given that a funding and policy review is currently underway, it would be inappropriate for the Government to make specific plans to increase the Trade Commissioner Services’s funding base at this time.

Recommendation 27 TABLE OF CONTENTS

That the Government of Canada extend the length of term of international postings for its trade officers to a period of five years.

    The Government recognizes that extending the length of international postings for trade officers would have significant benefits. Rotating officials less frequently would enable us to maintain our presence with various contacts in target markets and develop better cooperation with Canadian companies interested in those markets. Less frequent changes would also make employees’ efforts to gain in-depth knowledge of difficult languages more worthwhile, and would maximize returns on the financial resources that the Department of Foreign Affairs and International Trade has invested in those efforts. The costs associated with frequent moves would also be reduced. It must be noted, however, that the extension of postings would not be without of problems. In terms of workforce management, postings of five years instead of two to four years would result in fewer available international postings and, thus, a greater number of rotational employees that would have to be stationed at headquarters between two postings. For the officers, a five-year posting is a very long commitment that might, in some cases, slow down the progress of their career, unless provisions are made for the level and responsibilities of the position to develop during the five-year period. If the length of international postings for trade officers were to be extended to five years, an exception would likely have to be made for new recruits in light of the probationary and training components of the development program, and also because longer postings could slow officers’ progress in the program and limit the Department’s ability to meet its commitment to place all new officers within the first three years after they have joined. The final point to consider is the hardship level of the posts concerned. For example, it would be relatively simple to change the length of a posting in an A post (hardship level 0), such as Tokyo, from four to five years, but much more difficult to convince officers and their families to spend five years in posts with high hardship levels (level IV or V), such as Beijing, Manila or New Delhi, where the current length of the posting is two years (with possibility of extension). Higher allowances and a range of other measures would likely have to be put in place to compensate better for hardship conditions (e.g. health and security risks) and, among other things, the negative impact of foreign postings on spouses’ careers. It should also be noted that, whenever possible, officers are given second, and sometimes even third postings, back to the same region, usually at a higher level of responsibility, in order to take advantage of the local and language knowledge they had acquired earlier in their careers.