Proceedings of the Standing Senate Committee on Foreign Affairs and International Trade
Evidence - Meeting of April 15, 2008
OTTAWA, Tuesday, April 15, 2008
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 5:30 p.m. to study the rise of China, India and Russia in the global economy and the implications for Canadian policy.
Senator Consiglio Di Nino ( Chair ) in the chair.
[ English ]
The Chair: Colleagues, I would like to welcome to the meeting of the Standing Senate Committee on Foreign Affairs and International Trade not only our members but our guests. This committee is currently examining the emerging economic influence of China, India and Russia and Canada's policy response.
Appearing before the committee, from the Department of Foreign Affairs and International Trade Canada is Ken Sunquist, Assistant Deputy Minister, Global Operations and Chief Trade Commissioner; Peter McGovern, Director General, Bilateral Commercial Relations: Asia and Americas Global Operations; and Gordon Houlden, Director General, East Asia Bureau, Bilateral Relations.
I hope to pay you folks for your time because you sound important and knowledgeable. We welcome you here and we look forward, as I said to a couple of you privately, to your wisdom and advice on this very important undertaking.
We will begin with opening remarks by Mr. Ken Sunquist, after which I will invite committee members to ask questions. We look forward to your answers.
Ken Sunquist, Assistant Deputy Minister, Global Operations and Chief Trade Commissioner, Foreign Affairs and International Trade Canada: It is a real pleasure to be here with people who know a lot about the subject matter. I am pleased to be here with two of my colleagues, one who handles more of the political side of the issues and one who handles more of the trade side of the issues. Hopefully we can engage in a good dialogue. Not only will you, as you said, hopefully learn some things, but from our perspective we hope to get your input as we move forward in an effort to better understand where you are coming from and what we can do to help you.
I have a couple of colleagues behind me who will answer if there are detailed questions on Russia or India. Between us, we will try to answer any questions you ask, but if we cannot we will get back to you on them.
It is a pleasure to be here to discuss China, India and Russia's emergence as pivotal players in global commerce, and the steps being taken by the Government of Canada, specifically the Department of Foreign Affairs and International Trade Canada, to capitalize on the tremendous trade and investment opportunities in these countries. As you know, the Government of Canada has identified India and China among its key priorities for both the foreign policy and international trade fronts.
Committee members will also recall that in 2006 the government launched a strategic long-term economic plan called Advantage Canada. It outlines a blueprint for achieving economic growth by creating Canadian competitive advantages that will boost our productivity and equip us to succeed in the changing global economy. The Global Commerce Strategy, led by the Minister of International Trade, David Emerson, with the close cooperation and support of other departments and agencies, forms the international commercial component of Advantage Canada.
As part of the Global Commerce Strategy, the government is looking to expand its efforts and commercial footprint in China, India and Russia so as to benefit and assist Canadian companies to invest, innovate and succeed in these fiercely competitive markets. Expansion will likely include additional resources and points of service to meet the growing needs of Canadians in capitalizing on the many commercial opportunities.
I want to say at the outset that the U.S. remains our number one trade and political partner, but China, India and Russia will greatly contribute to Canada's future prosperity and jobs for Canadians.
Let me take a moment to go country by country, which is perhaps the easiest way to situate our discussion. I will start with China and give an overview of the some of the relationships there.
Canada and China share important economic and people-to-people ties that significantly predate our 37 years of official diplomatic relations. I was just talking to several members of the committee, remembering the days of people who went to China as missionaries and established people-to-people relationships. Chinese is now Canada's third most spoken language, after English and French. China is also currently the largest source of migrants to Canada. There are approximately 1 million Canadians of Chinese origin, and we welcome approximately 35,000 Chinese students at Canadian educational institutions every year.
Canada and China enjoy a significant bilateral engagement across a variety of policy areas. Recognizing the growing impact of China on Canada's security and prosperity, Canada is committed to a strong and forward-looking relationship with China. Minister Emerson, other federal ministers and a number of provincial premiers and ministers have visited China in the recent past. They have discussed the full range of Canadian economic and political issues with their interlocutors.
China is now considered to be fourth largest economy in the world, or, if you use purchasing power parity, the second largest economy. It has the world's largest foreign exchange reserves and an annual economic growth averaging 9.8 per cent since it first set out to reform its economy in 1979. China's growth over the past 30 years can be attributed to a number of factors, including adoption of market principles, rapid productivity growth led by transformations in the Chinese labour force, the opening of its economy to trade and investment, and accession to the World Trade Organization.
In 2007, China's GDP growth totalled 11.4 per cent, and a similar rate of growth is expected this year. Trade alone accounts for more than two thirds of China's GDP, while 30 years ago it was less than 10 percent. Thus, understanding and capitalizing on China's international commercial power is crucial for Canada to ensure that Canadian companies not only survive in an era of global value chains and increased competition but that Canadians thrive.
Though China's meteoric rise is exceptional, I would stress the need to look beyond the numbers to understand the underlying reality. The growth in trade is no small part as a result of restructuring of manufacturing operations across East Asia as economies such as Japan, Taiwan and Hong Kong have moved up the value chain. China has been able to take advantage of its abundant labour supply to drive labour intensive processing and assembly work. China has become the location of choice for the final assembly of manufactured goods. Much of the value added to these products is done outside of China for intellectual property reasons, but China remains an integral part of global value chains. China is no longer just a market to import from or sell to. It is also a location that produces highly educated professionals, a location in which to conduct intensive R&D activities, and a location through which our companies can achieve lower costs and realize economies of scale.
International trade has become more sophisticated and has evolved into a more complex, integrative model. In fact, our two-way investment ties with China are becoming a critical element of our relationship. The latest statistics we have are for 2006. Statistics Canada estimated that total Chinese foreign direct investment into Canada at about $1.3 billion and Canadian direct investment into China at $1.6 billion.
Foreign Affairs and International Trade Canada, guided by Advantage Canada and through the Global Commerce Strategy, and in close cooperation with other government departments, has developed a China market plan that focuses on an integrative trade model that takes into account all elements of commercial activity between our countries, including trade market access, promotion, two-way investment, science and technology partnerships, and innovation collaboration. The implementation of the multi-year market plan will hopefully result in increased Canadian exports to $12 billion annually by 2010, increased Chinese foreign direct investment into Canada and Canadian direct investment into China to about $10.5 billion by 2010, and increased market share for Canadian companies in selected priority sectors. This is exactly the type of approach Canada must undertake to realize the full benefit of China's rise.
The Global Commerce Strategy also calls for the strengthening of Canada's commercial presence in China. The government will be expanding Canada's on-the-ground presence by adding to our existing resources as well as opening new points of service for Canadian companies through the Canadian Trade Commissioner Service.
Canada continues to pursue the early conclusion of negotiations toward a foreign investment promotion and protection agreement, called FIPA, leveraging the one year-old Canada-China science and technology agreement, working with China to facilitate two-way investment under our existing Investment Promotion MOU, and seeking further avenues of cooperation with China on Canada's Asia-Pacific Gateway and Corridor Initiative.
It is necessary to point out that China's integration into the world economy has benefited Canada in the form of increased trade and two-way investment. It has also had other positive effects, such as a source of cheaper products for Canadian consumers, an important sourcing and centre of global value chains for Canadian companies, a driver of higher commodity prices, a source and location for investment, and a potential partner in innovation partnerships.
My department is working to ensure that we level the playing field for Canadian companies in China and position Canada to take advantage of the opportunities in China in a way that will benefit Canadians and further Canadian prosperity.
Let me now turn briefly to India, which is another Asian economic giant. With its rapidly growing economy, immense market and large pool of qualified professionals, India is a vital partner for Canada's prosperity agenda. With trade of about $3.7 billion in 2007, our bilateral merchandise trade reached record levels: Canadian exports to India increased 5.2 per cent and Canadian imports from India rose by about 3.2 percent.
Two-way investment figures are also growing, although they still remain lower than desired. It is believed, however, that official foreign direct investment figures may significantly underestimate the true scope of investment flows due to the challenges associated with tracking foreign direct investment through other jurisdictions. It is estimated that investment in Canada by Indian companies was $11 billion in 2007.
Negotiations for a foreign investment protection agreement were concluded in mid-2007, and it is anticipated that the agreement will be signed sometime this year. The agreement also sends a positive signal to both Indian and Canadian investors and strengthens our commercial relationship.
Following a June 2007 visit by Indian Minister of Commerce Shri Kamal Nath, a free trade agreement feasibility study was launched jointly by the Confederation of Indian Industry and the Canadian Council of Chief Executives. We expect the report on this study to be released shortly.
From Canada's perspective, two factors are driving India's importance in the global economy. First, as an opportunity, India has the potential to become the third largest global economy by the middle of this century. Its growing middle class, GDP per capita, population and associated infrastructure requirements will drive domestic demand for resources, manufacturing goods and services. Second, India has the potential to become a regional hub of manufacturing. It could be the next low-cost manufacturing centre after China and a key link in evolving global value chains.
In tandem with this move to low-cost manufacturing, India also continues to move toward a knowledge-based economy. Its strengths in sectors such as information and communications technologies make it a key partner for science and technology, as demonstrated by the Canada-India science and technology agreement that has been in place since 2005-06.
The Government of Canada has developed an India market plan that will help guide Canada's growing commercial engagements in that country, recognizing that Canada, in general, has lagged behind other global competitors who are very active in India. Our multi-year plan will encourage more Canadian companies to pursue opportunities in India and will build knowledge of Canada's commercial capabilities and strengths by positioning Canada as a centre of excellence for talent, innovation, investment, value-added production and trade. Also, it will increase our capacity to influence Indian trade investment and economic policies.
The market plan sets out ambitious targets for growth, including an increase of Canadian exports to a level of about $2 billion annually by 2010, increase in Indian foreign direct investment into Canada and Canadian direct investment into India to $1 billion by 2010, and an increase in market share for Canadian companies in selected priority sectors.
While there are significant trade investment opportunities in the Indian market, Canadian companies face a number of challenges, which fall under two broad categories. The first is business development challenges, including the lack of Indian knowledge of Canadian capabilities, the strength of competition already active in the Indian market and the lack of strategic market intelligence and access to financing and capital for Canadian companies. The second category is policy and access challenges, including security of market access, restrictive import regulations, limitations imposed on foreign service providers, intellectual property rights enforcement and, occasionally, irregularities in contracting procedures. We will be doing quite a bit more in this area with India in an effort to pursue fairly substantial results in the near term.
Finally, let me provide a brief overview of the opportunities the Russian economy represents by virtues of its size and growth, and review Canada's successes and challenges in seizing its share of this expanding market.
Russia is now the world's tenth largest economy and has enjoyed growth rates between 6 and 8 per cent annually since the year 2000. Stemming from considerable energy and resource reserves, this growth is expected to remain constant over the next five years. Per capita incomes are rising rapidly, a growing middle class has developed — now estimated at 20 per cent of the total population — and consumerism is soaring.
Russia has set it sights on becoming a leading global economic power and is steadily moving toward a greater integration in the global economy. For example, it is committed to becoming a member of the World Trade Organization and the Organisation for Economic Co-operation and Development. It is making progress on harmonizing its laws and regulations with the international norms; it has expanded and strengthened its economic interests in the republics of the former Soviet Union; and it has cemented its stature as a global player by leveraging the reliance of other countries on its considerable energy and resource reserves.
Reflecting Russia's economic growth, Canadian exports to Russia have increased on average by 38 per cent per year since 2000 and the value of those exports now exceeds $1.2 billion. From 2000 to 20027, Russia has moved from the fortieth to the twentieth largest rank as a destination for Canadian merchandise exports. Among Canada's main exports are machinery and equipment for the oil and gas and agriculture sectors, transportation equipment, meat, fish and seafood.
Modernization needs in Russia have also created opportunities for Canadian suppliers in infrastructure and equipment. We especially salute the efforts of Agriculture and Agri-food Canada for pursuing such opportunities. In fact, agriculture is one of the fastest growing sectors across all three of the countries I am talking about.
As Russia will be organizing the Winter Games in 2014, Canadian expertise in preparing for Vancouver 2010 is already being sought. New opportunities for exports, principally in the services and construction sectors, are emerging. Canadian commercial activity in Russia has reached a sufficient level for Scotiabank to open an office in Moscow last November.
However, Canadian companies have not been as visible or active as their American, European and Asian competitors in reaping the considerable benefits of today's booming Russia. What are the explanations for this?
First, there seems to a problem of perception and awareness that all three of these countries share regarding their knowledge of Canada. As well, there is a general underestimation among Canada's business community of the strength and commercial potential of the Russian economy. Perception problems are also found on the side of the Russian business toward Canada. Improving the image of Canada as a source for Russian buyers and a destination for investors poses a considerable challenge.
We are looking to upgrade our foreign investment protection agreement with Russia.
Export Development Canada also contributes to the risk management needs of Canadian companies in Russia, which is one of their booming markets.
The bilateral economic relationship continues to expand. However, managing our political relations remains a more complex task, as a result, in part, of Russia's growing assertiveness on the international stage. Recent Russian positions that have aroused concern for Canada and its G8 partners include opposition to Kosovo independence, NATO enlargement and new missile defence sites in Eastern Europe.
While views diverge in the global political sphere, bilaterally we maintain a steady and open dialogue with Russia on a wide range of issues including security, counterterrorism, federalism, multiculturalism and governance, which serves to deepen the ties. Russia's stable and high economic growth is a positive development for Canada. Our Canadian Trade Commissioner Service is focused on helping to narrow this gap, and in all three countries we are expanding the numbers.
Thank you for inviting us to appear before the committee to discuss China, India and Russia's increasing prominence. The question period will be a chance to talk more about policy development and initiatives being undertaken by the Canadian government to help Canadian companies take advantage of the enormous commercial potential of these opportunities.
The Chair: I was wondering if you could give me some information on the trade relations between China and Canada. You did not provide us with any numbers. What are the export/import numbers?
Mr. Sunquist: They have $3 trillion GDP, a GDP growth rate of 11.4 per cent, foreign exchange reserves of $1.5 trillion, and an inflation rate of about 4.8 per cent. Their main exports are electrical and other machinery, woven apparel, and medical and optical instruments. The main imports are almost the same: electrical and other machinery.
This is the big issue: Canadian imports from China are about $38 billion, with an increase year on year of about 11 per cent. Canadian exports are running around $9.3 billion, with an increase of about 21 per cent year on year.
Roughly speaking, that is $38 billion of imports from China and $10 billion of Canadian exports. They have a growth of 11 per cent while ours is 21 per cent.
The Chair: They must have better business people or at least a stronger sales force than we have. That is a large differential. You are saying that we have something like a $30 billion trade deficit with China; is that correct?
Mr. Sunquist: The question would not be who is a better business person. The question might be who is more aggressive. I think the Chinese have moved aggressively to markets worldwide. They have recognized for some time that their growth and prosperity was built on the external market. Consumerism is gradually taking place in China, and that is where the growth of the future will be.
On the other hand, Canadian companies, particularly small- and medium-sized companies, look to the U.S. market first. You can claim it is a luxury that no one else has. From the Canadian Trade Commissioner Service, we know we have about 20,000 to 22,000 Canadian companies every year come across the border. We know that we are down to about 3,000 that come to China. We know there are 6,000 going into Europe. We can track where Canadian companies are active by monitoring who is dealing with our Canadian Trade Commissioner Service.
I think we need a perception on the Canadian side of the opportunities that may be there. I am not saying that everyone should be there with respect to China. Every business should have a China strategy. For example, look over your shoulder if you are living in Moose Jaw or Sherbrooke because the Chinese will be competing in your home market. They will be competing in your current markets, such as the U.S., and there will be competition in the Chinese market. You do not need to be in China, but every Canadian company must have a Chinese strategy.
Peter McGovern, Director General, Bilateral Commercial Relations: Asia and Americas Global Operations, Foreign Affairs and International Trade Canada: One of the interesting dimensions of Chinese exports is this: What are they being used for? We know from studies in the United States that nearly one half of the $300 billion worth of Chinese exports to the United States is captured by interfirm trade. I will give you an example of such trade: Moffatt has a factory in China and exports to Moffatt in the U.S. where they assemble the parts to make the range that is sold at Sears.
An element of trade with China is making firms competitive in terms of vision or global value chains. I would suspect that although we have not done studies on our Canadian imports from China, an element of that is similar. We know anecdotally that some furniture companies in Quebec are sending maple wood to China where some of it is worked and then shipped back and assembled into furniture. That allows those companies to remain competitive and to sell to the U.S. market. That is the kind of complexity that you find today in a globalized world.
The Chair: Those comments provide a good preface to questions.
Senator Dawson: Mr. Sunquist, you said that much of the value added to these products is done outside of China for intellectual property reasons, among others. Can you elaborate on that?
Second, in terms of foreign direct investment in Canada, in which sectors are the Chinese interested and in which Chinese sectors are we interested?
Third, you said that DFAIT is working to ensure that we have a level playing field for Canadian companies. Can you give me an example of where there are not level playing fields and what we are doing to level those playing fields?
Mr. Sunquist: Mr. McGovern and I will answer those questions. I should mention that Mr. McGovern is responsible for Asia and the Americas on our trade side, and Mr. Houlden is responsible for North Asia on the political side. Mr. Houlden has most recently been posted to China and Taiwan, and I have had a posting there. It is a fascinating place to do business and to live.
The issues that you raise are quite interesting. In terms of the intellectual property issue, for a long time we believed that Chinese institutions were seeking the best of our technology. Some would call it reverse engineering and others would call it adoption of our standards. Be that as it may, it has caused a huge problem for many of our companies for a long time. However, the Chinese have come up the value chain. For example, they now build IBM laptops, so for the first time they have something they need to protect as well. We are seeing real issues in Chinese courts as there is a need to protect their intellectual property.
Canadian, American and European companies were always concerned that they would lose their intellectual property to their product. Software was the worst, but it was true for manufacturing products as well. We have tried to address the issue through, for example, CIDA-funded training for judges on a wide variety of things. We have used all of our political aid and trade levers to address the root causes of the problems. Intellectual property is clearly one that continues to worry many Canadian companies about how far and how fast China can go.
On the second question, I have asked Mr. McGovern to comment in more detail. Foreign investment into Canada and into China primarily started around Canadian interests in Chinese commodities such as mining and Chinese interests in Canadian oil, gas and minerals. Both sets have widened in part because it is difficult to do certain things in mining in each country. Canadian companies in China have rights to explore but not to exploit. They could get into a hassle of finding a gold deposit but not being able to do anything about it.
We have gone a lot further now. For example, Nortel has seven joint ventures in China. As well, Manulife , Sun Life and the Bank of Montreal are in China. There is a wide divergence of investment interests.
Mr. McGovern: It should be remembered that Chinese investment in Canada totals 0.3 of 1 per cent of the overall foreign investment stock in the country. The Chinese are just launching into investment strategies for Canada. Clearly, areas of interest pertain to natural resources, and oil and gas. In terms of our interest and market plan in China, Canada is looking at agriculture, information and communications technology, automotive, aerospace and bio-industries.
That is interesting because it represents a more sophisticated vision of where China is going in terms of simple investments, which you used to see with companies moving to low-cost production facilities. Interestingly enough, those low-cost production facilities are moving out of China and into such places as Vietnam. Global value chains are positioning themselves, which gives us an idea of the areas we are looking at.
Senator Dawson: The third question was about the level playing field.
Mr. Sunquist: I do not like the idea of a level playing field. I always like to have the advantage. Having said that, there are numerous issues. For instance, China is doing a number of bilateral free trade arrangements and there is, of course, the fact that many people can fly there now.
The best thing that we have done in trade policy in China during the last five years is air negotiations. Instead of having 15 flights a week, we have permission for up to 66 flights a week. What does that mean? Instead of just landing in Beijing and Shanghai, where all your competitors are, you can land in the other provinces, providing an opportunity to go beyond the coastal areas and do something different.
What are the available tools for us to work with? They could be parliamentary friendship groups, free trade agreements or trade missions to Chinese companies.
How are we building the 2010 Olympics? Premier Campbell is interested in being in China to get the right kickoff for the 2010 Olympics in his province.
How do you use those tools? I use the statement that a level playing field is the least acceptable, but how can we get ahead of that? We consider our advantage, look for the tools and use them.
I mentioned intellectual property. The fact that our people would look at training judges in Canadian values related to intellectual property is a real boon for companies farther down the field.
The Chair: There has been criticism of Canadian companies not being as aggressive as you suggested a few moments ago. Then, we talk about needing a level playing field.
One comment that I have heard in private discussions with companies is that the level playing field does not exist because the institutions to protect the investments are not as strong and the rule of law, the judiciary, banking rules and things of that nature are so different. Has that been a serious problem? I am not talking only about China. I am talking about Russia and India as well.
Mr. Sunquist: I would agree with you, senator, about all those countries. Why are we pushing foreign investment protection agreements with each of those three countries? It is simply to give our companies and provinces a bit more assurance that there is a legal regulatory basis for what they are doing.
I do not want to compare ours to other countries as being more aggressive or less aggressive. To use an example, Australia has double the investment in China that we have, and they receive downstream benefits from it. Our people-to-people ties in China go back 40 to 50 years, which is better than most, yet we have not found a means to take an advantage of that.
India is just opening up to the world in many ways. Larger Canadian companies did not go in, but some small entrepreneurs went in fast and are doing a good job. We did not get the big ones in there, and that is why we started working with the Canadian Council for Chief Executives to make sure that the CEOs looked at the opportunities that were there.
In some of these places, it is difficult when you are sitting there with the United States beside you, which offers a good long-term market, with a judicial system that people know and appreciate.
At the heart of most of the comments I have made here is an understanding and a perception of how we get the message out to the private sector, to the people of Canada, telling them about the opportunities in a place like India, for example. How do we do a better job of that? I am not sure we have.
The Chair: The other side of that coin is that some of the companies have said it is very difficult to compete with countries in some of these nations where, in effect, they have no laws to work with. They have no labour laws. They do not have the kinds of restrictions or the things needed to have in a more democratic country. Is that an issue as well?
Mr. Sunquist: Senator, I would put it the other way. We were joking at the beginning about the longer the title, the smaller the salary and the whole idea of being chief trade commissioner and having a service of about 1,000 people abroad. There has been much talk lately of Canadian social responsibility and values and ethics. By and large, when most Canadian companies go abroad, they export and bring with them Canadian values and ethics. I would suggest that Canadian companies have not been as successful in some markets because they have Canadian values and ethics, whereas some of our competitors are much more willing to go down a different path. I am pleased to be able to say that about Canadian companies by and large. You do not often see Canadian companies get into the problems that some of our competitors do. On the one hand, yes, it cuts down on some commercial successes, but on the other hand, I think we should applaud it.
Mr. McGovern: One of the important developments that is moving both China and India toward a greater adherence to international laws of commerce is that both of them are members of the World Trade Organization. China's adherence to the WTO is a very significant development. India is now one of the leading nations in the ongoing Doha Round of negotiations. The multilateral application of trade laws and regulations binds them to the international regimes that Canadian business people need in terms of the stability that is required to enter into a market and know that when you go in, you will be able to get fair treatment.
Gordon Houlden, Director General, East Asia Bureau, Bilateral Relations, Foreign Affairs and International Trade Canada: My colleagues have pointed out the WTO involvement, which has been significant not only in changing the face of Chinese industry but in bringing international norms into play.
It was very useful to some of the Chinese leadership as well, who used it as a domestic tool to force the modernization of Chinese industry, bringing those winds of competition. I know we think of the Chinese as a powerful exporter, but they are also an important importer as well, and WTO membership was absolutely crucial for China. The idea that they are subject to international arbitration and international rule-setting on a collective basis is positive. Of course, the record is not perfect, but we have means by which we can and have taken China to panels, and other countries have the same recourse to the same rules. That integration of China, not just through its products but through institutions, is important historically for China and for us.
Senator Johnson: I was going to talk about the image you mentioned, but you discussed that.
How many Canadian businesses are involved, either medium, small or large, in China, India and Russia? Do you have any idea of the numbers?
Mr. Sunquist: If you wish, I can provide your clerk with exact numbers and a breakdown.
Senator Johnson: If you would, yes.
Mr. Sunquist: For instance, we have about 2,500 or 3,000 Canadian companies interested in the Chinese market. I have to look at how many of them are actually doing ongoing business. I have those figures. India is substantially less, and Russia is around India's level. Senator, I will give you the exact figures.
The interesting thing there is that while SMEs started the wave, the big companies are now involved in just about all of those places in an investment way.
Senator Johnson: Do you have any information on the kind of enterprises they tend to go into, being cautious Canadians?
Mr. Sunquist: To recap China, I would say that you have seen the large financial services — Manulife, Scotiabank, Bank of Montreal, Sun Life — coming in and doing a very good job. The Chinese like them because they have a reputation and a credibility. The mining companies are also big players.
The mass of the companies are small to medium sized. China is not always the market I like to tell SMEs to go to because it is expensive. You do not do business the first time you are there. You do it by building up a personal relationship. That is difficult for SMEs with a smaller pocketbook.
Senator Johnson: Given that, are any public-private partnerships currently in place to encourage Canadians to invest in the international marketplace?
Mr. Sunquist: Not that I am aware of, but I could be wrong. I do not believe there are any.
Senator Johnson: That is interesting. The small- and medium-sized businesses could benefit from this.
To what extent is there any deterrence to doing business in China and India, such as corruption or the government or problems with regulations and rules and not wanting us there?
Mr. Sunquist: In both China and India, regulatory issues are number one for new companies coming to the market. In India, I would say it is a holdover from protectionist days, and from the China perspective, it is just a case of regulations being better than no regulations. It was a political system that believed you had regulations for everything.
One of the fastest growing aspects of our Canadian Trade Commissioner Service in both of those countries is regulatory issues and trying to overcome them as we find new companies wanting to come into the marketplace. It is pervasive.
We had a small Canadian company whose competition was Kentucky Fried Chicken. They had to get a chicken farm and become the largest chicken producer in the Shanghai area. They wanted to have the distribution. They were caught at every step along the way because there were regulations. China would not accept the CSA, the Canadian system of safety and compliance. They would not accept Canadian Food Inspection Agency issues. This very small company had to fight every one of those. They had a great idea and a big view. The idea was that the Chinese would be in the market for junk food. How else do you put it? They were right.
Senator Johnson: That is a bad thing to promote.
Mr. Sunquist: China was moving from an age of rice to an age of protein and food products. They were looking at faster food because the pace of life was faster. This Canadian company rode the wave, but they had many problems around those sorts of issues, which is not unique.
The first wave is regulatory. The second wave is probably financing and getting Canadian financial institutions to provide ongoing credit for companies seeking working capital to be in a market.
The issue is all about getting to know the Chinese companies because 10 or 15 years ago most of the Chinese companies that you could partner with were state-owned enterprises, and they was not necessarily the best partners.
I joke that I left China in 2008. When people say, “Well, you are a China expert,” I respond that if you are out of the country for six months, you are out of the loop because China is changing so rapidly. Today, the joint venture partners that we seek to put our companies with are not state-owned enterprises. They may be for the large projects, but not the medium-sized companies.
Senator Johnson: Given that you just left, how successful would you say the diplomats are in dealing with these issues in these countries?
Mr. Sunquist: You are asking three diplomats.
Mr. McGovern: I would say they are highly successful.
Senator Johnson: I thought we would lighten it up a bit.
Mr. Sunquist: I think the issue is one of getting all of government together; a team approach to doing a lot of these things.
Our problems are the silos. If agri-food is one of the fastest growing sectors, it is a case of Agriculture and Agri-food Canada, DFAIT and maybe the provinces having to do a lot more in support of it.
We are finding that in the last few years is it is not necessarily just a federal minister who will lead a trade mission; we are seeing provincial premiers and provincial ministers. We are seeing much more of a ”whole of government” or “whole of Canada” approach.
A few years ago, five provincial premiers visited China in a four-month period. The doors are open for the first premier and the second one. However, who is going to see the fifth one? There is no one to see you because they have seen everyone else. How do we get people to do things as part of a much more collegial relationship?
To use another example, when the Chinese were looking at investing in Canada, they looked at the interprovincial barriers to trade in Canada as being a major issue. The Chinese can tell you better than most people in Canada about the Alberta-B.C. proposals. They are looking at where they can invest. They want to invest in Canada, but if they — or any nation, really — cannot do things, they will withhold.
We wonder why some of our FDI issues are playing to more of a problem. It is some of our federal-provincial issues.
On our end — as diplomats, as trade commissioners, as the federal government — much of the issue revolves around how we deal with that federal-provincial-territorial network. I just hosted an FPT meeting of assistant deputy ministers. Minister Emerson just hosted an FPT meeting with all the ministers of trade. They took a look at these difficult markets from the point of view of doing what is realistic.
The Chair: I will ask our witnesses to be briefer. We have numerous senators wishing to ask questions.
Senator Johnson: I did not get to the environment.
The Chair: We will get to the environment later.
Senator Grafstein: Welcome, witnesses. I am delighted to have you here. All of you have important experience in these markets. I even liked Mr. Sunquist's reference to the fact that Canada's ties to China significantly predate the 37 years of diplomatic resolution. At the people-to-people level, we have had an active relationship with China for 130 years.
I am glad you touched on the two myths of Canada. We are a trading nation; we are not a trading nation. We trade with the United States and if you subtract the United States, we are not a trading nation. The other myth is that we have a free market in Canada, which we do not. Thank you for all that.
We do not have one marketplace in Canada. We have a free trade agreement with the United States, but it is easier for us to trade with the United States, in some instances, than it is to trade with the provinces.
Let me ask you three separate questions about each of these markets. First, can you tell us what the Canadian government investment is in trade commissioners in China, Russia and India compared to the United States? How many do we have?
Mr. Sunquist: I can give you the trade commissioner. I will have to give you the information on what the Americans, the British and the Australians have. I will follow that up with a detailed response.
We are currently running at about 60-some officers in China, which would be a smaller number than the Americans or the Australians.
Senator Grafstein: How many trade offices? I know you have 60 people, but how many different offices you have?
Mr. Sunquist: I misunderstood. I was talking about total numbers.
We have offices in Beijing , Shanghai, Guangzhou, Chongqing and Hong Kong. We are taking a look at what our footprint should be.
The Australians have about 17. The Americans have about the same as that. The French and the British have slightly less, but more than us.
Senator Grafstein: What about Japan?
Mr. Sunquist: Japan is just about everywhere, but they do it through a different process.
Senator Grafstein: Could you please give us the numbers for India and Russia?
Mr. Sunquist: We have offices in New Delhi , Mumbai and Chandigarh, which are larger offices. Chennai and Bangalore are our smaller offices. In comparison to all our competition, we are much smaller.
Senator Grafstein: What about Russia?
Mr. Sunquist: We are in one office only. I think the Americans and the British are in about four or five each.
Senator Grafstein: You would not agree, then, if we made a recommendation that if we want to trade with these countries, we have to dramatically and significantly improve our trade commissioner services in each of these areas.
Mr. Sunquist: I would not disagree with you, but that is probably government policy.
Senator Grafstein: The second thing I would like to talk about is state corporations. We have a problem with state corporations investing in Canada. We think it is not a level playing field. Give us your approach to state corporations within each of these three markets and how we can deal with them there. What happens when they come over here and use their state corporations? Please give us the department's policy because I am confused by it.
Mr. Sunquist: That is a fair question. I think Minister Emerson was quite clear on this one. We do not have a problem with state-owned enterprises, per se, as long as they operate in a transparent manner and are not instruments of the foreign policy of another government.
I think Minister Prentice has made the same kind of comments in terms of the Investment Canada Act in terms of what would be reviewable and what would not be. In fact, we are looking for investment from the private sector and from the public sector, provided it is in Canada's best interests.
Minister Emerson was trying to be quite clear because there has been considerable press in China and some in Russia as to what that meant.
Senator Grafstein: Is it fair to say, Mr. Sunquist — and I am not trying to put words in your mouth — that it is case by case; we really do not have an overarching policy as it relates to these three markets?
Mr. Sunquist: I think the overarching policy is that we welcome investment into Canada. If the project is large enough to attract our attention, it would be reviewable if, for some reason, we did not think it would meet Canada's best interests.
Mr. Houlden: I would make one comment about the role of China and state enterprises. China took a very different approach than the Soviet Union did in its economic reform. It decided to leave intact the state enterprises which were employers of tens of millions of people. They feared the consequences of a dismantling process.
What they have done, instead, is allow a rapid growth of the private sector. You now have in China, surprisingly, very large, genuinely private corporations alongside the state enterprises. In total economic activity, they now dwarf the state enterprises overall.
China is a bit complex in that this is no longer an economy dominated by the state.
Mr. McGovern: In the visits that Minister Emerson has made to Beijing, when he talks about state-owned enterprise, he also uses a yardstick. For instance, if a firm is listed on the Shanghai Stock Exchange as a state-owned enterprise and has accountability provisions similar to those that pertain to a firm here as well as a governance structure that is accountable to the shareholders of that particular exchange, then as a rule of thumb he feels that this meets the criteria that would allow a company to invest in Canada.
The minister's principal concerns are issues of governance, accountability and transparency, and the security provision mentioned by Mr. Sunquist that state-owned enterprise is not an arm of the Chinese government trying to get into areas of sensitivity.
Quite a number of firms meet the standard that the minister has identified. He has made the point frequently that we would welcome their interest in investing in Canada.
Senator Downe: I am concerned. State-owned enterprises, by their very nature and the reason they were restructured, were to advance the policy interests of the host country. The difference between corporations that are privately owned is they are responsible to the shareholder for return on investment. I am concerned that the government thinks, as I heard you explain it, if these corporations are trading on their local stock exchange, it is acceptable. It would seem to me that the government would have to be concerned about the policy objectives of these enterprises. I note the government recently made a decision rejecting foreign ownership. In this case it was the United States, not China, India or Russia. I would hope that the government would consider these state-owned enterprises as a policy tool for the host government and not an opportunity for this country.
Mr. Sunquist: I think the minister would agree with all of your comments. In fact, as Mr. McGovern said, this would be a first step in qualifying that company to be here. I believe it was Mr. Houlden who said that the role of state-owned enterprises is decreasing exponentially in China, where they are becoming more and more privatized. State-owned enterprises act differently today than they did 10 years ago.
On your point about the case-by-case approach, if I said the overall policy is that Canada is open for business, it is true but it has to be in Canada's interests. Where it is clearly a state-owned enterprise, someone will have to take a second or third look.
Senator Grafstein: Given our limited resources, market penetration is almost like taking a 22-calibre rifle as opposed to an atomic bomb to try to blast into these marketplaces. What have you found to be the best techniques to penetrate the respective marketplaces of each of these vastly different countries. For example, is it the institutional relationships, the twinning of cities or the marriage of institutions that we have in Canada?
I am familiar with what the Australians and the Japanese do in these marketplaces, but I do not know what our approach is from an institutional standpoint. How best can Canadian businesses penetrate these marketplaces?
Mr. Sunquist: Over the long term, the best thing we do is education marketing — having young people from India, Russia and China study in Canada. They become your best advocate and best salespeople. They understand Canada and are proud of their time spent here. That goes hand in hand with your comment about what kind of institutional arrangements we have. The twinning of cities provides an entry to the policy discussions. That applies in Russia and China. Many people do not recognize, at least in the India and China model, the person-to-person aspect of contacts.
Dealing with ministers on a continuing basis, such as at WTO, APEC or bilateral meetings, helps to build common causes. There are tools to develop a better relationship with people that will allow you to become involved in projects. It is more than just the commercialism aspect. If you want to be seen to be a player on your foreign policy side or on your trade side, it does not matter; you have to be seen to be part of the group.
I do not think that does justice to your question, but we support city twinning, provincial twinning and institution building. I mentioned before to the chair that parliamentary delegations are terribly important in both the China and the Russia examples. It is a way of doing business for them that they think should be done. They like to know who develops the policy and what their feelings are.
[ Translation ]
Senator Corbin: I would like to know what is preventing Russia from quickly becoming a member of the World Trade Organization.
[ English ]
Mr. Sunquist: I could answer that question in two or three ways. Canada has reached agreement with Russia on WTO accession. Russia has not reached agreement with all other parties, including the United States. There is a time delay. We would like to see accession sooner rather than later. As Mr. Houlden was saying, I believe that the countries within the WTO are committing themselves to a certain judicial trade norm. We think it would be important to have Russia as part of that group. That is about as short as I can be.
Senator Corbin: That is the stumbling block. We have 35,000 young Chinese men and women studying in Canada.
Mr. Sunquist: We have more than that because that is the number that come every year.
Senator Corbin: That is the figure you pulled out. It gives us an idea of the magnitude.
[ Translation ]
Is there a similar exchange with Russian students? You mentioned the fact that Canada is poorly known and badly understood by the Russians. Early, we mentioned a number of initiatives that could improve Canada's image. More than 35,000 Chinese students come to study here and then go back to their country. They have a profound impact on Canada's image in China. So what are we doing along those lines in Russia?
[ English ]
Mr. Sunquist: The answer involves how it is perceived that one gets ahead. In China or India, studying at foreign institutions was a leapfrog and you did not have to work through the system. You gained outside experience so you were promoted more quickly. In Russia, it was historically a little bit better to have stayed in the country for your training, so it did not do the same amount of good.
However, I think that situation is changing. The student population numbers are still low for Russia in comparison to China and India. I am not sure if we have those figures with us.
[ Translation ]
Senator Corbin: One of the factors is the fact that Russia has good universities and training schools. So they have no need to look to foreign institutions to the extent that China or India does.
[ English ]
Mr. Sunquist: No. China graduates about 350,000 engineers per year. If only 1 per cent of that number are the equivalent of an MIT or McGill graduate, the number is still greater than the total number of engineers who graduate in all of Canada.
The top level schools in India and China are world class. They are as good as anything we have and sometimes a little bit better.
The question then is, if you have good schools in India, China, or Russia, why come to Canada? It is because you learn a different culture and different languages. I had one posting in Indonesia, and the Indonesians who came to Canada all went to Concordia because that is the university they knew about, and they went there for years and years. There are some strange connections. For years, people from Singapore went to McMaster University. There is no rationale one way or the other. For India or China, there has been large-scale student interest in Canada, and in Russia there has been less.
[ Translation]
Senator Corbin: You did not talk to us about the Arctic. But it is becoming a major geo-political issue, especially for circumpolar countries. Using a submarine, Russia planted a Russian flag at the North Pole. The magnetic pole is moving away from Canada and towards Russia at a speed of 50 kilometers a year, but you are not able to do anything about the matter.
With regard to areas of cooperation between Canada and Russia, are there currently any activities and programs that would help to promote better relations between our two countries such as ventures in industry, or potential ones on the ocean floor, for example?
[ English ]
Mr. Houlden: I am not an expert on Russia. This does not answer your direct question, but the countries that will potentially benefit the most from another trade route or another maritime route include those burgeoning Asian economies. It shaves tremendous amounts of travelling time for goods out of Japan, China and Asia generally, and so they are keenly interested in that issue. Shipping goods from Yokohama to Rotterdam could be cut to a third or more, and the savings would have economic benefits particularly for exchanges between Europe and Asia. These are being watched closely. It is a geostrategic situation. I cover East Asia, not Russia, so I will pass on that part of the answer.
Mr. Sunquist: Our government has a real interest in the Arctic. With Russia as part of our international economic commission, it was a separate issue in the last go-round with the visit of the Prime Minister. We have had numerous discussions about the Arctic bridge. We talked about cooperation and icebreaking issues. There is an Arctic working group in place between our two countries. This is an area of intense cooperation. It gets into our science and technology issues and cooperation. There is quite a bit of scope to do more, and it is one of our real priority areas with Russia. There is also the whole northern approach to settlements, so there is city involvement as well.
The Chair: My question is directed to Mr. Houlden because he is involved more in political relations. The relationship between Canada and China — but also India — on controversial issues that deal with what we would normally refer to as freedoms and values is very topical right now given the Olympics, Tibet and Sudan. Can you give us your opinion on how that works and how it impacts commercial relationships?
Mr. Houlden: You have opened up a complex set of issues. China is almost a quarter of the Earth's population. The society that governs the Chinese, the government they have, their values and our influence upon them, which is sometimes limited, are extraordinarily important questions for the future of the planet. We have deep concerns about human rights practices in China, and they include freedom of expression, arbitrary detention, abuse by police authority and freedom of speech. I could list a wide range of other issues, but basically they fall under the heading of free political expression and association.
I would note that the evolution of China over the last 30 years has been extraordinary. There has been a range of improvements in the life of the Chinese that may seem at times trivial to Canadians but are significant for the Chinese, going from the commune system whereby people were rooted to one place and had no right of choice regarding their profession, sometimes extending to what kind of clothes they could wear. The range of information available to them was extraordinarily limited. I am not suggesting China has become equivalent to Western nations in terms of human rights practices, but there have been extraordinary improvements.
The critical question is the interplay between commerce, business and human rights. I would submit that the opening of China, the changing of the face of China, has been in part accomplished by the movement of outsiders into China, the movement of ideas associated with them and the rather free movement of the Chinese by comparison to the past. It is now possible for an ordinary person who has sufficient funds to buy an airplane ticket to travel abroad and expose themselves to a whole other set of different realities, and this is possible because of economic development.
In general, as in many countries, the development of commercial ties and the promotion of trade with China has improved the status of the Chinese in terms of their own rights. By itself, it is probably not sufficient, but it has in general been positive.
The Chair: I appreciate that.
Senator Mahovlich: How many Chinese companies control Canadian companies? I know the Americans have bought some of our larger corporations, and I do not know if we have a limit on that. Is there a limit to how many companies the Chinese can buy?
Mr. Sunquist: There is not a limit in that sense. There are dollar values as to when an investment is recorded and reviewed. You ask a good question. We can do some research and, through the clerk, provide an answer on the number of Canadian companies that would be controlled by the Chinese. I use the word “control” as opposed to “own” because it could be different. We will see if we can come up with a figure for you. It is a small number. I know there are a few in the oil and gas industry that we looked at in Alberta, and a few distribution companies in B.C. and other places. It is not negligible, but I do not believe it is large.
Senator Mahovlich: Is India looking at us?
Mr. Sunquist: India has more investment here than China does. Canada is the second largest out-sourcing destination in the world, partly because of the U.S. and AT&T and all these Canadian call centres. The Indians have been smart in buying into those kinds of companies, so they are continuing their out-sourcing to Canada.
Senator Mahovlich: I have a problem with the phone up at my cottage, and I am talking to a person from Bangladesh.
Mr. Sunquist: Bangalore. I had the same guy. I am still on hold.
Mr. McGovern: The general Indian strategy for investment in Canada is acquisition and takeovers. Recently, there was a very large takeover of Algoma Steel by an Indian group called the Essar Group.
Additionally, the Tata Group , the largest company in India, bought Teleglobe a few years ago. Their strategy toward Canada is different than the Chinese strategy where actual household-name firms have been bought by Indian companies.
Senator De Bané: Mr. Sunquist, rather than asking you questions, I would like to share with you some of my thoughts.
I have taken note that you are one of our outstanding officials. You have been the recipient of many awards by the public service, by the minister and by the department for the excellent work that you have done.
I would like to share with you my concerns, my fears and my pessimism.
In 1970, the small island of Taiwan, not bigger than Prince Edward Island, sold nothing to Canada. Then they started up. A few years later, they had a $4 billion surplus.
Then I saw a city like Hong Kong becoming the world's centre and the top producer in several categories. It is a city of 6 million people. If all of China is in the process of becoming one enormous Hong Kong, where will that leave us?
The last time I talked with our ambassador in Beijing, he said Chinese businessmen who have businesses on the coast find that the wages are too high. Five-thousand dollars a year is too high. They are moving their plants inland where people earn $300 a year. He said that competitive advantage will last about 50 years.
We live in a country that has the richest market in the world as its closest neighbour. That has created a tendency to say that it is so much easier to deal with our neighbour. It is the biggest market on Earth, has the same commercial law, the same customs and the same way of doing business. What is the idea of going into an area like China?
I say to myself that China accounts for 25 per cent of humankind. If we take China and India together, they must account for close to 40 per cent of the Earth's population. They have everything they need to succeed: They are hard working, they are technologically oriented and they are tradespeople.
I have seen what small cities and islands have achieved. If all of it becomes a big Hong Kong, I wonder if we can find a way of doing something.
Perhaps you can share with us the views of some of our former heads of missions in Beijing who have decided to remain there and to work for certain businesses. I know that you are a member of the Canada China Business Council.
Mr. Sunquist: If you look at what is happening in the world and who is succeeding right now, you could be pessimistic. On the other hand, Canadians of my generation were told that the “hewers of wood” and “drawers of water” were in the past and that the knowledge industry would be the future; yet here we are today, enjoying a good lifestyle and quality of life.
You can see where it is coming from in Western Canada; it goes back to commodities. There is nothing wrong with that because it is also a means to build our knowledge and service industries. Canada is and Canadians are doing many things right.
We can push businesses a little bit harder. Trade commissioners can give them the market intelligence to make decisions. We cannot make sales for them. We can give them information as to where they could go, what the opportunities could be and who the connections, contacts and networks might be.
Mr. Houlden's last position abroad was as Director of Office in Taiwan so he understands — all of us understand — the entrepreneurial spirit that is there. In Asia, Vietnam, Hong Kong, Taiwan and greater China are doing extremely well, better than anyone else. What can we learn from that?
At the simple level, we do a lot of benchmarking, looking at what they are doing right. More importantly, how can we help Canadians do better in that area? It is a combination of all these things.
I am not pessimistic. I think our success is going up, but it is not rising as fast as it needs to in the absolute sense. I am worried that many of our competitors are doing better than us. That is the cause for concern on my part. How can Australia do better than us? How can Germany do better than us? That is our competition. It is not the U.S. necessarily.
I understand where you are coming from and I sympathize with your point of view. After spending years in Asia, that is my concern. Asia is blooming around an entrepreneurial spirit. This goes back to the chair's comments earlier about who we are seeing on our doorsteps here. Tata buys Land Rover and Jaguar and also produces the cheapest cars in the world. How do we cooperate with them in India and work with others? I think we are on the right track, but it has to be pushed.
Mr. Houlden: They have their own challenges, such as feeding their population. They have learned to walk in terms of their economy. They are not running yet. Feeding and clothing China is a huge challenge. They face internal tensions from the disparity. Their environmental challenges are monumental. That is why the immigration flow is still towards us.
They are also generating global growth. In 2007, 17 per cent of world economic growth came from the United States — slower growth, but a bigger economy — and 17 per cent from China. In 2008, it is likely that Chinese growth will generate more global wealth in trade than the United States. That creates opportunities as well.
As tens of millions, if not hundreds of millions, of Chinese move up the scale toward middle-class consumption levels, you will find, just as in Taiwan, that they are interested in the goods and quality items that we produce. Niches will open up for us. Their very success poses a challenge to us in certain areas, but it also generates opportunity. A poor China is not an attractive export market.
Mr. Sunquist: I will give a demonstration of the Hong Kong issue you raised. Fifteen years ago Hong Kong had 250,000 manufacturing establishments. Today, they are under 1,000. Manufacturers have shifted to South China. However, no one will argue that Hong Kong is less well off today. They have jumped. What are the policy implications and where should we be going? That is why we welcome your comments and the outcome of your deliberations. Hong Kong has gone from a huge manufacturing base to a service base; they are doing better than ever. They are using China to do it. That is the challenge we have.
Senator Downe: Given the importance of trade, has your budget been increased or have resources been reallocated?
Mr. Sunquist: Our budget has been static for some time. It is mainly reallocation of resources internally and reallocations within DFAIT for priority countries, not just for markets in the commercial sense. It is a static budget process.
Over the last couple of years on the trade side, we have had the Global Commerce Strategy, which adds about $50 million a year. It allow us to do more things in more places, but it has to be strategically placed.
Senator Downe: Is global commerce $30 million or $50 million per year? I thought it was $60 million over two years.
Mr. Sunquist: The question is whether you move to accrual accounting and how you do it.
Senator Downe: We will be here all night.
Mr. Sunquist: It is $50 million a year.
Senator Downe: My concern is that if you are reallocating resources, you are taking trade people from mature markets where you have well-developed trade to markets where you hope to have that success. If you do not have additional funding, you could lose the markets that you are moving out of. That is a discussion we can have with the minister.
The Chair: That is a very good point.
Senator Smith: I want to invite your views on the correlation between business and trade opportunities and the entire immigration issue. It is intriguing that in the past year India replaced China as number one. I was very lucky to go to China in 1975 and was there several times in the 1970s, 1980s and 1990s and saw it during these different periods. In the last few years, I have been travelling much more to India.
One thing that seems to help trade is connecting with the people who came over here 30 years ago. I travel there a couple of times a year and, driving around Mumbai, I see insurance signs everywhere showing the tie between Lombard and ICIC Bank. It is quite incredible.
I am aware of current government initiatives on immigration that would take more emphasis off family reunification and shift to an emphasis on job skills. I am not trying to be partisan here. On a per capita basis, our level of immigration is three times that of the United States. I have the sense that there are incredible opportunities because so many of these impressive people want to come here. IIT graduates — a school that is far more difficult to get into than Harvard, MIT or the Wharton School — just blow you away. I invite comments on the interconnection of immigration levels of these countries — India and China are now number one and number two — and business and trade opportunities.
Mr. Sunquist: The largest constraint to growth and prosperity in Canada today is labour mobility. I could spend all my time on trade investment promotion, but if companies cannot find labour in B.C. or in Alberta, they will not come. Labour mobility and immigration are key to Canada's future prosperity. I say that from a DFAIT perspective because it is another government department, but they are doing things on that as well.
This goes back to my earlier comment on education marketing. Getting foreigners to come to Canada is important in the sense that if they go back to their home countries, they become our best friends. However, if they stay here, they are usually a real benefit to Canadian society, which speaks to your point about who is productive in society. I could not agree with you more: The government has much to do on this issue.
The B.C. government has come out with a unique figure. There are about 650,000 students in B.C. between kindergarten and Grade 12. By the time the child in kindergarten graduates, there will be a need for 1 million jobs in B.C., meaning that you are 350,000 jobs short before you even start. That is a constraint to growth and prosperity and the kind of issue that faces the labour policy.
Mr. McGovern: Senator Smith, one of the major dimensions of our trade policy as we go forward with an integrative trade vision is the issue of human capital and the skill sets that we will require to remain competitive, such as scientists with MBAs. It is incumbent on us to address these kinds of issues as we go forward. We might be moving to a time when we will recruit individuals with the skills that we need as part of a vision of commerce in 30 years to remain competitive in a globalized world. We might have to recruit to fill spaces in industries to remain competitive just as we did many years ago with the CPR to get the railroad built and settle the prairies.
Mr. Houlden: The greater pools of potential migrants are all in Asia, where two thirds of the population of the world is located. As an Asia hand, I look at those pools of talent. It is true that China is generating a tremendous number of engineers. Its society is Confucian based and puts great value in education.
The amount of tertiary spaces open in China are modest indeed. In terms of human capital, post-secondary students who have a great capacity to succeed in Canadian universities are available in large numbers. That is a fertile recruitment area. Many of the engineers coming out of top flight universities in China can fit well into slots in Canadian industry. However much we expand our own domestic production through universities, we will fall short of the numbers that Mr. Sunquist pointed out. The large pools of skilled labour are in Asia. There is a natural attraction for us. Those numbers are certainly available.
The Chair: I thank our witnesses for appearing this afternoon to share their wisdom.
The committee adjourned. |
