[Recorded by Electronic Apparatus]
Thursday, April 10, 1997
[English]
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The Chairman (Mr. Bill Graham (Rosedale, Lib.)): I'd like to call this meeting to order.
Good morning, Minister, and thank you for coming before the committee. I'm informed there is a possibility that a vote could commence in the next ten to fifteen minutes, and that the bell will be a half-hour bell. If we can go ahead, Minister, we can keep an eye on the time, let you get through your statement, and perhaps get in some questions. We'd appreciate it.
We're glad to see you here this morning. Having read The Globe and Mail, we thought you might be on your way to MERCOSUR, but it may have to wait for a bit.
Hon. Arthur C. Eggleton (Minister for International Trade): Thank you very much, Mr. Chairman. I'm happy to be here. Of course, I come here to hear your advice and recommendations, as well as to give you some information on what I'm doing.
In view of what you said about the timing, my presentation could eat up all of that time. Would you like to just go to questions and answers?
The Chairman: We'd agreed that it would be helpful if you could tell us about the international business development strategy. Given the parliamentary timetable, there might be very little time on estimates, so some of the members might have questions about the departmental estimates as well. Could you perhaps give us a fairly short presentation on the business development strategy?
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Mr. Eggleton: I'll try to do that as I go, but I'm joined by Bernard Giroux and Ron Halpin, who can also stay and answer more of your questions. I think they already gave a brief on the departmental estimates the other day. As you know, there are two components to the department, foreign affairs and international trade. I'm here to talk about the international trade aspect of things.
I would like to address three issues, if I may. The first is the report on Canada's international business development, which I tabled in the House last month. Second, I would like to discuss the importance of small and medium-sized companies in both job creation and our expanding trade operations around the world. Finally, I would like to address the main estimates and outline how our department plans to contribute to the government's overall budgetary goal.
First the report on our international business development. Members of the committee may recall that the Auditor General report of November 1996 recommended, among other things, that I as minister provide Parliament with a review of the government's progress in meeting its international business development goals. The report tabled in the House last month responds to that recommendation and is a first step towards meeting the broader objectives identified by the Auditor General. It is my hope that the report on our international business development will become an annual report card to this committee and to Parliament on what we are doing in this vital area of our economic prosperity and job growth. We are working to put measurable goals, performance measurements, in place so you can help us in tracking it year after year.
Well, I've said it's vital, but just how vital is international trade to our economic prosperity?
[Translation]
You probably expect me, as Minister of International Trade, to emphasize the importance of trade for our economic health and perhaps even to overstate its importance. In my opinion, it would be hard to exaggerate the importance of trade for Canadians.
[English]
because at least one out of every three Canadians depends on trade for their livelihood. Trade in goods and services is now up over 40% of our economy. We're more trade dependent than any other country in the G-7. We just came back from the United States. We're three times more trade dependent per capita than they are, twice as much as the Japanese.
Let me state at the outset that the success we have achieved in this area is not something for which I or the government can take all the credit. We can set the conditions, set the atmosphere, but it's Canadians, men and women from every region and province, who with hard work and daring have taken on the world and won new markets.
This is not to say government doesn't have a role and responsibilities in helping promote international trade. It certainly does. I will be speaking directly to some of the initiatives we have undertaken in just a moment, but I want to give credit where credit is due and make it clear that the record trade surpluses we have been compiling over the past decade, year after year after year, are directly attributable to the efforts of individual Canadians.
The numbers are really outstanding. Our trade surplus has skyrocketed. In 1992 it was $6 billion. Last year it was $34 billion.
Not coincidentally, between 1993 and 1996 Canadians created close to 700,000 new jobs, and we know that for every $1 billion of exports 11,000 jobs are created or sustained here in Canada. Canada is projected to have the highest employment growth of all the G-7 countries this year, and it is due in no small measure to our export efforts.
That's what Canadians can do when markets are opened up to them. That's what Canadians can do when they compete on the international stage against the best in the world. That's the type of growth we are determined to sustain by seeking out new markets and new opportunities for Canadians.
In many ways international trade has become the classic case of understanding the proper role for government. Sometimes the role of government is to get out of the way. Sometimes it's to point the way. In this case it is to join hands with the private sector and clear the way.
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Let me give you a specific example. When we signed free trade agreements this year, such as those with Chile or Israel, we obtained access for Canadian businesses. Access is important. We have companies that have won contracts for delivery of products after June 2, when our free trade agreement goes into effect in Chile. They won those contracts because there's an 11% differential on the duty. They have an advantage immediately over some other countries that don't have fast-track authority, of course.
Just getting access to a market doesn't mean you will be successful. Business still needs to step forward and seize the opportunities governments create. We can sign the free trade agreements, but it's up to the businesses to sign the contracts. It's quite clearly a partnership, and no partner would send an associate out into a highly competitive environment without first arming him or her with all the information and assistance that could possibly be provided. We've worked so hard in recent years to create supportive infrastructure for Canadian businesses to prepare and enable them to compete, and compete successfully, in the tough, ever more competitive international marketplace.
Let me touch briefly on some of the programs and policies we've put in place. A complete description of numerous programs is contained in the document, ``Achievements of the International Business Development Program (1997)'', which I believe you already have.
First, I will give some context. The development of international trade operates at a number of levels. As I just mentioned, there is the big-picture issue of obtaining access and ensuring that our companies will have clear rules under which they can operate. To address those issues, we're working through such forums as the World Trade Organization to promote the principle of freer trade globally, to ensure that trade is governed by clear and consistent rules and not by the bully tactics of some countries. Everybody is operating under the same regime.
To cite just one example of the progress in this area, Canada was a full participant in the negotiations of the WTO-sponsored information technology agreement. That was the big success in the past year, in terms of further market access. With that successful conclusion, Canadian telecommunication companies now have clear rules for trade and investment, as well as access to markets in 69 countries. They will benefit substantially.
We're also working to obtain access to major world markets through free trade agreements with individual countries, as we've done in the case of Israel and Chile. Our focus is now on the broader, regional economic forums like APEC, the action plan we've signed with the European Union, and the free trade area of the Americas agreement, which is to bring a free trade agreement by 2005. Only governments can do these things, and this government is doing them.
So that's the first level of the big picture, as I've described it. But access is only half the battle. A company first needs to know what's involved in getting started in the export business and where to turn to meet this need for basic information. We've established 12 Canada business service centres across the country. That's for business, whether it's domestic or international. But we tie our trade centre operations into that as well, so we can facilitate the concept of one-stop shopping. The companies can attain information about all parts of the federal entities involved, as well as provincial entities. In some cases, municipal and private sector services also plug in.
Later this year we will launch the export source tool kit, which is an on-line service that will bring together a wide range of export-related information within a single Internet site - again, one-stop shopping. This new initiative will bring key information about getting started or expanding exporting into the reach of anyone with a computer and a modem. Both the Canada business centres and the export source tool kit Internet access are aimed primarily at small and medium-sized businesses. That's where they need the information. The big players know what to do, by and large. We help them as well. They create a lot of contracts. They even bring a lot of small and medium-sized businesses with them in subcontracts, which is very important. But the information is needed by the SMEs. This will be done with low or no-cost access and information targeted to their specific needs.
Once a company has decided it's prepared to export, the next thing it needs to know are the opportunities for its particular good or service. As members of this committee know, there is nothing more encouraging to a company than finding out that somewhere, someone wants to buy the product or service you have to sell.
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One of the key resources available to Canadian companies is access to our vast network of trade commissioners. More than 245 trade commissioners in over 125 posts across the globe are working literally around the clock to identify opportunities for Canadian businesses. They don't necessarily have to contact them directly. They can contact them right in their local communities through the business service centres. They don't need to make long distance calls; we can do that. These trade commissioners know the local conditions. They understand the local business culture. They know the key players and are an invaluable source of information.
How do the trade commissioners learn about Canadian companies so they can match them with opportunities in other lands? They do that through a database we've established called WIN Export. Registration on this database is open to any Canadian company. They'll have the essential information there and be able to do the matchmaking.
One of the more innovative programs we've created is something we call the GO teams or the global opportunity teams. These are teams that trade commissioners assign to specific areas to capitalize on trade opportunities arising from new developments, whether they're free trade agreements, changing market conditions, or the fact we've just been there with a big Team Canada mission and made a big splash. We have to do follow-up, and as these opportunities present themselves, we dispatch these GO teams to take advantage of the situations. We can move them around to where the needs are so they can work with the local ongoing trade commission operation to help take advantage of new opportunities.
Currently, we have officers deployed in the six emerging markets of Israel and Chile - where we signed the free trade agreements - Brazil, Thailand, the Philippines, and Korea, which were the destinations of the last Team Canada mission.
[Translation]
Funding is another key issue for all companies, particularly small businesses. There are many programs and organizations providing information and assistance in this field but I will only mention two.
[English]
The Program for Export Market Development, known as PEMD, provides funding to assist businesses expanding into export markets, and it's working well. We have to get the opinions of program users about any of these things to make sure they continue to fit and be relevant, and over 90% of program users, many of whom are small and medium-sized enterprises - in fact that's where our focus is now - have stated that PEMD assistance contributed to their international sales successes. Of course, as it contributes to their successes, they pay us money back.
The second source of assistance I'll mention is the Export Development Corporation. Its financing is vital. EDC provides a wide range of risk and financial management services, and almost 85% of EDC's clientele is small and medium-sized enterprises. Last year, EDC served over 3,000 customers and reached an overall business volume of $22 billion.
These are some of the things and part of the approach we have employed over the past few years to assist Canadian companies establish a foothold in international markets. We also believe if all three levels of government teamed up with the private sector - the Team Canada concept - we could achieve more together than we ever could separately. That was the thinking behind our Team Canada trade missions until now. Our mission earlier this year produced contracts of over $2 billion, which add to a total that's now close to $25 billion for the Team Canada missions.
One of the great spin-off benefits from these trade missions has been the relationships established among the various businesses that have participated. Even among themselves on the plane going over they were making all sorts of alliances, arrangements, and deals before we even landed. Many have found opportunities for joint ventures, partnerships, and closer ties with both Canadians and those they've met and been matched with in those foreign countries. Some have found it easier to enter new markets by combining forces with other companies, and a real synergy has developed among many of them.
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The Team Canada approach also reflects one of the recommendations of this committee's report on Canadian SMEs in the world economy; that is, to reduce overlap and duplication between various levels of government. The cooperation achieved through the trade missions minimizes such duplication and fosters a greater sense of collaboration.
Let me turn briefly to the second area I want to touch on today: the role of SMEs and the creation of jobs and expansion of trade for Canadians. I know this committee's strong views about the importance of these dynamic enterprises to the economic strength of our country. As you have already noticed in my remarks this morning, it's a view we share.
We have targeted small and medium-sized enterprises for special attention and assistance for two main reasons. First, they are one of the most dynamic and innovative elements of our economy, responding quickly to changing needs and conditions, and this adaptability is particularly well suited to international trade, where one often has to be nimble in order to be successful. Secondly, trade is such a powerful job creator.
We have set ourselves the goal of doubling the number of Canadian companies exporting by the year 2000. If we are to reach that target, we will need to engage more small and medium-sized enterprises to achieve that goal. There are simply not a lot of large ones left to fill the gap, so we obviously have to gear our programs for them. We also share the view of this committee that providing smaller companies with accurate and timely information about market opportunities, as well as assisting them both to get started and to expand their exporting, is both a necessary and proper role for the federal government to play.
That is why, for example, we're hosting a special forum, to be held here in Ottawa in September, aimed at informing SMEs of the opportunities in APEC. Forum and exposition is part of our Canadian year of the Asia Pacific. It is also why we place such emphasis on market intelligence, making it available to companies that would previously have no way of gaining access to this kind of information. That's why we have launched new initiatives such as country action plans, which outline the government's business strategy in our priority markets.
Finally, let me turn very briefly, Mr. Chairman, to the third area of discussion, the main estimates. In 1997-98 the department will continue to share in the government's deficit reduction efforts by cutting nearly $49 million from our budget. Of this, $37 million is being cut as a result of program review decisions announced in the 1995 federal budget, and about $11 million will be cut pursuant to commitments made in previous budgets.
While those cuts will mostly affect corporate services such as property management, informatics and personnel, $20 million will come from mission operations worldwide. These cuts to our missions are significant and will place additional demands on our staff around the globe, but I'm pleased to report that the cuts can be realized without having to close a single mission anywhere in the world. That's good news for Canadian companies.
In terms of the overall budget, our department will spend nearly $223 million on international business development in 1997-98. This is about $5 million less, reflecting the program review exercise I mentioned a moment ago. As a percentage of total departmental spending, however, the amount spent on international business development will increase by about half a percent. We didn't take as much of a cut as other parts of the budget of the department. This will leave the proportion of our total budget spent on international business development at about 17%, a proportion that will remain pretty well consistent through 1999-2000.
In terms of staff resources dedicated to international business development, we will commit approximately the same proportion in 1997-98 as we did the previous year. We're going to move them around and have more flexibility to use them in the areas where we have the greatest growth potential.
Mr. Chairman and members, I don't want to overstay my welcome, particularly given the crowded time here with the vote coming up. Let me just say that I believe the initiatives we have undertaken have placed us on the right road. But there's still a long way to go; there's still vast potential untapped. There are still many more companies that could and should be exporting. The performance measurements we'll be introducing will help in that process by assuring Canadians that they are receiving the best value for their dollar and, by assisting us, provide all the programs that are necessary - but only the programs that are necessary.
The future for international trade could not be brighter. New markets are opening up, old barriers are falling down, and the free movement of goods, services, people, and ideas is becoming unstoppable. In this new environment, Canada has already established itself as a pre-eminent trading power. But we must not become complacent or rest on our laurels. The competition is keen; the landscape is ever changing.
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We must continue to seek wider access and more comprehensive rules, we must continue to encourage our companies to treat the world as their marketplace, and we must continue to put in place the framework that will enable small and medium-sized enterprises to do just that. If we can do all those things, if we can do them well, the future of our international business development will be very bright indeed.
Thank you very much.
The Chairman: Thank you, Minister.
My understanding is you have a meeting with the Lebanese Prime Minister at 11 a.m., or shortly after, so we have 20 minutes.
Normally our tradition is to have ten-minute rounds, but if we could keep it closer to five minutes, I would appreciate it, members.
[Translation]
Mr. Benoît Sauvageau (Terrebonne, B.Q.): First of all, Mr. Eggleton, I'd like to thank you for your quick and thorough presentation of the government's achievements; you ran out of time, I'm sure, or you would have talked about the other actions or lack of action of the government. At the outset I intend to ask three questions. As always seems to be the case when we meet you, we are pressed for time. If you have time to answer my questions, I'll be happy to hear your answer. Otherwise, we expect to receive, as is the custom, a written reply in the coming days or weeks even if an election call is soon announced. I hope that you will have the time to answer these questions.
You talk about an international trade strategy for SMEs and for Canada in general. Do you not feel rather uncomfortable, or as if your hands were bound, when you see that the Government of Canada - we made a section 31 declaration to deplore the first anniversary of the Helms-Burton Act - is not undertaking any vigorous action, even after the prime minister's visit to Washington, to demonstrate our disapproval of the Helms-Burton Act? Why are we waiting to do what we've been entitled to do since last July, that is call a panel before NAFTA to deal with this situation and at the same time talk about an international trade development strategy? I find the whole situation rather unsettling.
I'd also like to remind you that during the discussions on the Canada-Israel Free Trade Agreement, the Bloc Québécois, although not opposed to the agreement, pointed out that the timing may not have been right. Do you agree with us today that the timing was perhaps poor, that Canada was perhaps too eager to sign the agreement and the present situation in this part of the world demonstrates that we were right and that you should have waited, as we suggested?
Second, the Auditor General notes that your department spends $375 million every year without our knowing exactly where the money is spent or how efficiently. In your report you say that starting next year you will attempt to keep better track of these expenditures. We do not know what the future will hold and we do not know if your objective studies will provide good results, but we do have good information about the past. Why did you wait four years when the Auditor General has been asking you for 10 years to make these changes and the Committee on Foreign Affairs and International Trade already tabled a report noting that there was indeed duplication and problems relating to this matter?
As for my third question, you say that you hope to double our exports by the year 2000 but nowhere is there any reference to your concern about defending human rights. You talk about several countries where human rights are not respected and with which you would like to sign agreements and conduct business.
I'm thinking for example of several member countries of APEC. In your strategy aimed at doubling our exports, do you intend to make regular reference to the importance of respecting human rights and insist that these countries sign human rights conventions? Thank you.
[English]
Mr. Eggleton: Thank you for your comments and questions.
The matter of Helms-Burton was raised. It has been raised continually during visits and meetings with our counterparts in the United States.
Two weeks ago I was at a NAFTA commission meeting in Washington. I had a bilateral meeting with the United States trade representative, and we talked about it further. It was mentioned in this current visit on a number of times by the President, the Prime Minister, myself, and my counterpart. We are at a position where we agree to disagree. And we have made known our strong opposition to this legislation and the kind of precedent we feel it sets. We've made it known numerous times in numerous forums, including this past visit to Washington.
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The matter is now before the World Trade Organization. A panel has been named and it is proceeding. The European Union would like to try to negotiate a settlement with it. I am assured that anything that gets negotiated would apply to other countries in the world, but... I'm hopeful but not too optimistic about those negotiations, simply because they're negotiating with the administration and the administration has its hands tied on this legislation. The legislation is very specific and gives the President very little room to manoeuvre. The one area of manoeuvrability that he has had is these six-month deferrals, but I know that's not adequate to address the complaints we have about these bills.
We won't be satisfied until the legislation is amended with respect to titles III and IV, or until it is ended, but I don't see that, given what we hear from Washington as being achievable in the short run.
But we will continue in our efforts, and I think the World Trade Organization is the most appropriate body to have this matter before. We have a lot more company in terms of other countries. It's the entire world organization dealing with this matter, as opposed to just NAFTA.
I don't rule out the possibility of going to NAFTA, but at this point we're watching the WTO process and we will participate in that WTO process. It was launched by the Europeans, but we're there as a participant, as a third party. We will be giving testimony and we will be making it clear that we want this WTO panel to address the issue.
Also, it's easier to address this issue at the WTO panel because of the way the structure works in the World Trade Organization. Notwithstanding the U.S. protest that this issue should not be dealt with for national security reasons, and notwithstanding their refusal to participate, a panel was named, whereas under NAFTA we must have both sides naming panellists - an equal number of Americans and Canadians - so it would be a more difficult process to get that moving, given the difference in the structure at NAFTA.
With respect to your comments about Israel and your suggestion that maybe the timing was poorly chosen, I don't think the timing is poorly chosen at all. There have been conflicts and difficulties in the Middle East for a great number of years, so one could argue that no time is the right time. There's always some conflict going on, and of course the current situation has become very difficult with respect to the peace process proceeding.
But there are a couple of things I want to say about that, one of which is in the context of helping the Middle East. Remember, we've also offered this to the people in the area under the Palestinian Authority. In the West Bank under the Palestinian Authority, unemployment is 30%. In Gaza it's 55%. When I did my trade mission to Israel, I also went over into the West Bank, to Ramallah, and met with the Minister of Trade and talked with business people in the area of the Palestinian Authority. I think we have good opportunities to be able to help them as well, but we couldn't do it unless we had a free trade agreement with Israel, simply because it's within the same customs territory.
I think we're now in a better position to assist them as well. Helping in terms of the jobs is what is going to lead to peace and security in that region. Having a job to go to in the daytime in order to be able to put the bread and butter on the table for your family at night is going to be a big factor in helping bring about peace and stability.
So I think the timing is right.
There's another reason as well. Canadian firms were disadvantaged because of the free trade agreement with Europe and the free trade agreement with the United States. Companies told me they were exporting half-finished products into the United States to get them finished so they could send them from the United States into Israel in order to take advantage of the U.S. free trade agreement. That meant a loss of jobs in our country.
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I think this is a good solid piece of work. What's happening is unfortunate. We support the peace process strongly, but there have always been difficulties and conflicts.
With respect to the Auditor General's report, you asked why it took us so long in some of these areas. When we came into office we launched the Team Canada concept, and that's clearly designed to end overlap and duplication. We had a good Team Canada visit, the biggest one we ever had, to Korea, Thailand, and the Philippines. And it was a very cooperative effort. All the premiers were there, except for the Premier of Prince Edward Island, and they were full participants. We all recognize that cutting down overlap and duplication and working together pays off. Premier Bouchard was part of that, and I think was well recognized and a very welcome participant in the Team Canada effort.
In terms of value for taxpayers' dollars, that's a very important part. In this regard, we are responding to the report of the Auditor General that just came out last year, in which he said that we should have performance measurements and that I should come to this committee more often, and I'm willing to do that. I feel very strongly about performance measurements. I used to be in the Treasury Board and I used to promote the concept of measurable goals and performance measurements. And I do want to do that within our own department.
Finally, with respect to doubling our exports and how that relates to human rights, I don't see advancing human rights as being at all inconsistent with our trade advancements. I think I've said to you before that we will continue to raise human rights issues on a bilateral basis.
More importantly, we will work on a multilateral basis, because by ourselves we don't have the economic strength and clout to make changes. If we work with other countries, I think we can achieve more.
We work on both of those fronts. I must say that it goes hand in hand with trying to increase exports and job opportunities and trying to increase the economic health of the countries we are dealing with. That is what is going to create better human rights in those countries, along with more economic prosperity and job opportunities for their own people.
The Chairman: Thank you.
Mr. Penson.
Mr. Charlie Penson (Peace River, Ref.): Thank you, Mr. Chairman.
Welcome, Minister, to our committee. I too am sorry that we don't have more time this morning, but I think I would like to approach this in much the same way as my colleague. If you don't have time to answer my questions, a written reply will suffice.
I think all Canadians can be happy that Canadian exports have grown over the last several years. I think it is definitely an achievement that we can be proud of in Canada. We are reliant on exports, as you said earlier in your presentation, and I think we can also be happy with the trade surplus we've developed.
I do have a couple of concerns. I have a concern about the fact that the trade surplus is essentially just with the United States. I'm concerned that we're not really developing any trade surpluses with any of the developing countries, the fast-growing countries in the Asia-Pacific region. I think more work needs to be done there.
With respect to achievements on international development programs mentioned in your presentation, I noticed, and I'm happy to see, that the Trade Commissioner Service outreach program has really started to take effect. I think it's important that our trade commissioners are reaching out to our business people in smaller communities and letting them know what opportunities exist for their products. I think that was badly needed, and I want to compliment you on that.
I know that when we did our SME hearings at this committee one concern I heard quite a bit about was that the high cost of doing business in Canada was still an impediment for small and medium-sized companies, and also, I think, for our large companies. In order to be competitive in the world marketplace we have to continue to work on that.
There are some questions I will leave with you, but if you have time to answer, please do so, by all means.
Mr. Minister, do you find it puzzling that Canada's exports to China, Hong Kong, India, Pakistan, Chile, Argentina, and Uruguay have dropped off following recent Team Canada missions?
My second question is in regard to softwood lumber. What can you tell us? Are they going to be under a supply management type of arrangement for a long time to come? If that's the future for our industry, the forest industry, which was one of our purest market industries in Canada, I'm wondering where you see that going in the future.
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My third question has to do with the role of the Export Development Corporation mandate in domestic insurance and financing. I think you would know some concern has been raised by business people who think those opportunities are being taken away from them or there's competition from EDC where it may not be necessary. I would like to know if you think that's a legitimate role for EDC to be involved domestically in insurance and financing.
Fourth, my understanding is that the three ministers of the NAFTA commission have met fairly recently. Could you tell us if any progress has been made on the subsidies and anti-dumping code? I know this was a very important issue for your government as it went into the 1993 election campaign; the signing of NAFTA. Can you tell us where that is at and if you are satisfied with the way those developments have happened, whether we no longer need a subsidies code with the United States, or what you're looking at in the future in trade law and how that's going to affect Canada if we can't achieve the goals you set out in 1993 in the red book?
Mr. Eggleton: I'm happy and anxious to answer all these questions, but I'm just looking at my watch. I could provide them in writing. I would rather talk with you about them, but the time is almost up.
The Chairman: We have only four minutes. Why don't you maybe take a cut at one? I had Mr. Cullen and Mr. English on, but I think they will understand if we don't get to them.
Did you perhaps want to add on a question that would be along the lines of Mr. Penson's? Then the minister could address them both at once.
Mr. John English (Kitchener, Lib.): I'll make it very quick. First I would like to thank the minister and his department for the work they've done in our area. The minister has visited my region and has been most helpful to exporters in that area.
The Chairman: We get him into Toronto occasionally too.
Mr. John English: I know you do. We treat him very well in our area.
My question was somewhat different. In this report you comment that a study suggested that attracting $1 billion of FDI - foreign direct investment - into Canada results in up to 45,000 jobs over a five-year period. I know you have some investment officers, but a study recently appeared and it suggested that in 1980 Canada's total of global FDI was approximately 11% and we've dropped to 5%, even though the United States has remained the same. In light of that roughly 6% difference, and in light of the statistics you present in this document, that has cost us enormous numbers of jobs.
In the period of the early 1980s we had a foreign investment review agency that actually scrutinized investment to make sure it was of benefit to Canada, and it perhaps limited it. Today we don't have that kind of limitation. Could you simply reflect on why that drop has occurred and what your department is doing to try to correct that?
The Chairman: Do you want to tag on? Please be very brief.
Mr. Roy Cullen (Etobicoke North, Lib.): Thank you, Mr. Chairman. First I'll thank the minister for being here and congratulate him and his department for the role they have played in our superb export and trade performance.
I have two quick questions. First, the multilateral investment agreement has been in the media lately. I wonder if the minister could comment on the linkage... If we're able to conclude a satisfactory agreement and be part of a satisfactory MIA agreement, what does that do to trade for Canada? Are there some positive impacts on trade for Canada?
Secondly, I hear a lot of good things about PEMD. From time to time I also hear it's a bit slow, cumbersome, and bureaucratic. I wonder if the minister has any plans to streamline that program.
Mr. Eggleton: Okay, I've made note of those. I'm sorry about the time.
The Chairman: We have a couple of minutes, so if you want to address...
Mr. Eggleton: I'll see what I can run over here in a hurry.
About the trade surplus with the U.S.A. and trade surpluses with other countries, it's actually proportionate to our trade, when you look at it. We had $34 billion in trade surplus last year. Of that, $28 billion was with the United States, $6 billion with the rest of the world, and that's about the proportion of trade. Over 80% of our trade is with the United States.
A lot of the markets we're trading into are developing markets, and it takes some time to put ourselves in a position where we might end up with a greater surplus. Companies are making a lot of investments in these markets. Trade follows investment, and I think we'll see more opportunities as time goes by.
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About the cost of doing business, one of the great advantages we have in getting foreign direct investment is information that came out of a recent report of KPMG. The report compared a number of cities in the United States and a number of cities in Canada and found in all these cases there was in fact a cost advantage in Canada, all things considered: energy costs, health care costs, costs relevant to real estate. In a wide range of factors it found in total about a 6% or 7% advantage for Canada, if I recall the number correctly.
So when I'm out there selling Canada as an investment destination I say Canada is a gateway to NAFTA. You can set up shop in Canada and you can get total access to the United States under the free trade agreement, the NAFTA agreements we have, and you can do it cheaper in Canada. We're also nice people.
Mr. Charlie Penson: We don't have total access for forestry, though.
Mr. Eggleton: Let me talk about lumber. I think I've said before I prefer to have an open free market flow on lumber. I said the deal we got was the best deal in a bad situation. I prefer the free market. Some Americans must be preferring the free market now, because the price of lumber has gone up substantially in the United States and the consumers and the home builders are feeling that. But where were they when the mills were putting all the pressure on the United States government to do this kind of thing, such that we ended up with a five-year deal?
Lumber has been an issue on and off for probably a hundred years. In this arrangement it's a five-year... We're now into the second year. I think it's working fairly well, all things considered. We've been flexible in trying to ensure we keep close to the normal market practices, and we've had some record levels. In fact, lumber companies can afford to export even with the $50 fees or the$100 fees. The lumber prices have gone up so much they have opportunities to export with those fees and still make money.
After the five years I hope we go to a free market situation. I don't like these managed trade situations. But remember, the industry said they wanted predictability. They wanted to have access to those markets without this constant problem. Since the rules have changed in the United States we didn't have the ability to attack it under NAFTA as we had previously, so they wanted this. They have worked with us all the way in the formulation of how the lumber quotas are disbursed and I'm hearing that by and large they are happy with it. But I would like to see us go to a free flow once this five-year agreement is up.
About the EDC, the EDC operates on a full-recovery basis. It doesn't subsidize. It has fees for its services, its financing or its risk insurance. It did $22 billion worth of business last year. It made a $112 million surplus, which it's plowing back in to do more financing for operations around the world.
About the NAFTA commission, yes, a report will be coming out on the working group on trade remedies, which deals with issues such as countervail, anti-dumping, and subsidies. They will be making some improvements in the administrative process, particularly as it relates to panel disputes, and that's very valuable, because we want to have a streamlined process, we want to have a fair process. They are coming out with some improvements relative to that.
But that's not all we're after, not by any means. We will continue to dialogue with them and press for further trade remedy reforms. I raised that with both the United States trade representative and the secretary of commerce in Washington in the last couple of days. I cited the fact that our automotive sector, which is an integrated cross-border sector, works quite well; couldn't we have it in steel and sugar and some of these other things? Couldn't we have better operations with those and get out of this nasty business of trade remedy threats and have more predictability for our companies?
This is going to take a while. It's a long-term objective for us. There isn't a lot of will to break down the use of trade remedy reforms in the United States. But I'm going to keep pressing it at the NAFTA commission and in bilateral meetings.
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I might add, in terms of subsidies, that we did get a subsidies code in the Uruguay Round in the WTO. So if there are some things we can't get in NAFTA, we'll go after them in the WTO.
The multilateral agreement on -
The Chairman: You're of course in charge of your own agenda, but it is now 11:05 a.m., so I'm getting the high signs from the officials that perhaps you're keeping the Prime Minister of Lebanon waiting.
Mr. Eggleton: Yes, okay. I'm sorry I wasn't able to answer.
The Chairman: We would appreciate it if -
Mr. Eggleton: I'll put it in writing, or I'll talk to them.
The Chairman: We would appreciate it if you could include a written...
[Translation]
Mr. Sauvageau had a supplementary question. Perhaps a written answer could be provided.
Mr. Benoît Sauvageau: You would like me to write down my question relating to Helms-Burton and the expected failure of the United States to comply with the WTO matter? I'll hand in a written question, Mr. Chair.
The Chairman: Thank you.
[English]
Thank you very much, Minister, for coming here.
Mr. Eggleton: If you want me back another time, I'm happy to do that.
The Chairman: We'll see you on April 24.
Mr. Eggleton: Oh, you are having me back. Thank you.
The Chairman: Don't leave town for MERCOSUR yet, then.
Mr. Eggleton: Thank you very much.
The Chairman: Thanks for coming. Merci beaucoup.
We'll now go in camera so we can complete the items on the agenda. I hope members won't leave; we have to keep a quorum. I'm sure we can get through this agenda in five minutes at the most if we move quickly.
[Proceedings continue in camera]