CIIT Committee Report

Supplementary Report

New Democratic Party of Canada

The New Democratic Party (NDP) appreciates the efforts of the Standing Committee on International Trade (Committee), staff, analysts, and witnesses who participated in the study of the ways in which the Government of Canada can help Canada’s small and medium-sized firms to pursue international trade opportunities.

The NDP supports small and medium-sized enterprises (SMEs) and recognizes their importance in our communities. They provide 90% of jobs in the private sector, contribute more than 50% of Canada’s Gross Domestic Product, and they have created over 95% of the new jobs in Canada over the last decade. SMEs are the leaders of human-resource innovation and often emulated by larger employers. A countless number of Canadians employed by SMEs receive traditional benefits that compare with those of bigger companies and organizations—support for long-term savings, career development, flexible health plans, and parental leave. Moreover, SMEs are invested in community-building. Three-quarters of small firms make financial donations to charities or other non-profit activities and about the same proportion donate goods and services. About 60% sponsor local sports teams, and half promote local charities and donate their own time.

While SMEs are thriving within Canada, we know that they have not reached their full potential due to their inability to access foreign markets and negotiated trade agreements. Throughout this study, the committee however heard from witnesses that that these firms are more “sensitive” to trade barriers than are their larger counterparts and it was noted that regulatory standards pose difficulty or “[l]ack … transparency”, they differ across countries, and SMEs face “costly” certification procedures and “cumbersome” customs processes when trying to establish lines of trade. It was often noted that SMEs have difficulties accessing financing, information, skills and technology, which reduces their international competitiveness.

One of the key overriding messages however that New Democrats felt important to highlight, is that overall, past trade deals have not benefitted Canada’s SMEs. This was clearly stated by Jocelyn Bamford, the Vice-President of Automatic Coating Limited and Founder of Coalition of Concerned Manufactures and Businesses of Ontario, when she said, “You can negotiate all the trade deals you like, but if we're not competitive, we're not going to be able to compete with those trade deals, and it will just be a vehicle for other countries dumping their product into ours”.

Matthew Wilson, the Senior Vice-President, Policy and Government Relations for the Canadian Manufacturers and Exporters expanded on this when he said, “Canada's export performance has been near the bottom in the world. Average annual export growth has been about 2.5%. However, once you remove crude oil exports, Canada's export performance has been at or below inflation for almost 20 straight years. Meanwhile, global trade has expanded at a rate of over 6% a year. Our closest competitors are expanding much closer to global averages. U.S. export growth has been 4% annually and Germany is nearly at 6%. Since 2000, actually only Japan has had a worse export performance across the G7. This is despite signing FTAs with most major markets around the world. Clearly we need a different approach besides just signing free trade agreements.”

New Democrats believe that the Government of Canada must strengthen its exports foundation and focus on building and improving our existing infrastructure domestically, while taking advantage of already existing free trade agreements. We believe that the current government is in an extraordinary rush to sign as many trade agreements as possible, without having comprehensibly analyzed the national cost-benefit, without studying the overall impact on women, indigenous people, our environment or on working people. It is clear that the government has not adequately funded the systems that could support SMEs in their desire to expand globally and they have not focussed on what will truly benefit smaller groups/companies in Canada. Instead, free trade agreements are negotiated solely to benefit the traditional multi-national corporations who already profit a great deal from trade agreements.

Many witnesses pointed to the already existing trade commissioners, CanExport, Export Development Canada (EDC) and many regional export organizations throughout Canada that could be bolstered to help SMEs expand their exporting practices.  Mr. Wilson was smart to note that, “we must scale up SMEs by developing stronger support programs to encourage domestic investment and expand international growth opportunities”.

New Democrats believe we must fill the resource gap for SMEs. This means additional funding for the expansion of the trade commissioner service, and the CanExport program; in addition, the creation of a mentorship program, and supports for companies to train staff on how to access these resources and deal with international trade agreements and international partners. This need was also emphasized by Caroline Tompkins, President and Chief Executive Office or the Forum for International Trade Training (FITT) when she stated,  “[f]rom our experience, regardless of the number of trade agreements we have, if business does not have trade-capable people—the right workforce—they will not be able to take full advantage of the trade agreements or the government trade programs that are available to them. Those individuals who are FITT-trained know not only what needs to be done but how to do it. Therefore, the SMEs they work for are better equipped to take advantage of trade agreements and government services”.

A perfect example of a group working for its SME-type members to expand their trading relationships globally is the Canadian Association of Moldmakers. In their testimony to the committee, witnesses Jonathan Azzopardi and Timothy Galbraith explained how the government can promote their members and their industry through product innovation and capital expenditure cost recovery programs. They, and other witnesses, including Rakesh Naidu, the President and Chief Executive Officer for the Windsor-Essex Regional Chamber of Commerce, emphasized a need for the government to help SMEs grow through funding scientific research and experimental development and said that Canadian products are some of the best in the world, but in order to be leaders and innovators, “we need government support”. Mr. Azzopardi also stated, “[a]ccelerated depreciation is also very important. Because our industry is so heavily dependent on capital expenditures, the company I manage reinvests about 30% of annual revenue. Most companies reinvest between 10% and 30% of their annual sales in their business. Accelerated depreciation is huge. It actually has a twofold benefit. It helps us to be able to reinvest in our business, but it also generates activity within the economy”.

Both Mr. Azzopardi and Mr. Naidu also spoke of the limitations of the government’s Strategic Innovation Fund program stating that most SMEs are simply too small to take advantage of this government program.

In conclusion, the NDP believes the supports of Canadian small and medium-sized enterprises are of great significance. In fact, that was the reason, in 2015 the NDP put forward a motion at the Standing Committee for International Trade (CIIT) requesting a study of this exact subject. In 2015 the CIIT reported to the House of Commons on “Connecting Canadians Companies to International Markets: The Global Markets Action Plan and Small and Medium-Sized Enterprises.”

The NDP must express our disappointment that this very similar study and report was at the Standing Committee on International Trade only four years ago and despite the excellent work done on this report, the time and effort put in by witnesses and the government funds allocated to this study, the current government failed to either read the report or act upon any of the recommendations. While this is a consistent position for the current government - to re-study issues they already have studied in previous Parliaments - it does very little to actually provide the help and solutions needed by Canadian SMEs. The NDP would therefore like to re-submit the study from 2015 to our supplementary report. The link to this study can be found here: https://www.ourcommons.ca/Committees/en/CIIT/StudyActivity?studyActivityId=8326593.

NDP Recommendations

1. That prior to the conclusion or signing of any future trade agreements, the Government of Canada commission an independent study of the agreement's expected costs and benefits, a jobs assessment, ensure that gender-based analysis is applied and that a gender impact assessment is undertaken.
2. That the Government of Canada prioritize SMEs when negotiating free trade agreements.
3. That the Government of Canada address the resource gap for SMEs additional funding for the expansion of the trade commissioner service, and the CanExport program; in addition, the creation of a mentorship program, and supports for companies to train staff on how to access these resources and deal with international trade agreements and international partners.
4. That the Government of Canada provide support companies that deal with accelerated depreciation with funding for research and development.