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CHAPTER FIVE
DEFINING AN APPROPRIATE ROLE
FOR GOVERNMENT IN INTERNATIONAL
BUSINESS DEVELOPMENT

A number of suggestions were made by witnesses about "gaps" particularly gaps in market information and intelligence available to SMEs and gaps in access to sufficient financing and credit insurance. While traditional financial institutions are working with agencies such as EDC and CCC to provide new, low risk products aimed at SME exporters, the Committee was also impressed by some of the new alternatives. NORTHSTAR Trade Finance Inc., for example, focusses its products specifically on the SME exporter. St. Stanislaus St. Casimir's Polish Parishes Credit Union Ltd. is developing a fund to assist SME exporters interested in doing business in Eastern Europe, especially Poland. It relies on its partner in the Pol-Can Bank, the Roman Catholic Church, for credit ratings. The Baltic Business Council is also in the process of putting together a fund intended to assist Canadian SMEs with their business operations in Latvia, Lithuania and Estonia. The Hongkong Bank of Canada, although not a "new alternative", has focussed its commercial activities principally on the SME market and, where exports are concerned, the use of documentary credits to facilitate trade, a niche apparently not commonly utilized by the major Canadian banks.

Witnesses also suggested that the competitive position of Canadian exporters would be enhanced through the reform of domestic regulations that increase their relative costs of production. There were also requests that programs be rationalized and duplication be reduced between levels of government, between departments within each level of government and between the private and public sectors. Suggestions were also made for improvements in program delivery and/or termination of programs. These suggestions varied by sector, target markets and corporate experience.

What became clear from the Committee's investigation of these issues is that these gaps exist in large part because of a lack of consensus about the respective roles for both government and the private sector in the development and delivery of Canada's main international business development activities. A number of consultative mechanisms between business and government have been established in order to determine what Canada's international business development objectives and priorities should be. These are useful and there have been some noticeable improvements in their effectiveness in recent years. However, these mechanisms have so far not gone a step further and generated a consensus about what should be expected of government and what should be the responsibility of the private sector in developing and implementing successful international business development strategies for Canadian SMEs. As a result, there tends to be more competition than cooperation between government and private sector services while the "gaps" in necessary programs and services remain unfilled. This lack of consensus, and the absence of defined specific roles and responsibilities for both government and the private sector, is demonstrated in the current debate over who should do what in the provision of market intelligence services and export finance for Canadian SMEs.

As an example of what is being done, the Committee supports current initiatives within DFAIT to define more clearly the kinds of market information/intelligence services that trade commissioners should provide. However, this list of services should also include those services that trade commissioners do not provide. One of the services that ought to be provided is a referral service to other sources of market information and intelligence. The Committee recognizes that the government has addressed this issue in some respects through Take a World View. . . Export Your Services initiative, an electronic self-help kit development by DFAIT and Industry Canada, and, on the finance side, through the Road Map for Exporting and Export Finance. This is also done electronically through the World Information Network for Exports (WIN Exports), which was established to help trade commissioners identify Canadian suppliers who are able to respond to sales opportunities, make appropriate contacts on behalf of Canadian companies, and then report back with advice to help them make informed decisions.

These are good initiatives, but they need to be further consolidated and streamlined. Profitting from the advent of the Internet and the information highway, the Committee has recommended that web sites be established at each post, which could then be cross-referenced to a larger databank that divides up business leads into geographic regions, industrial sectors, and kinds of services required. The posts could then download business leads on to the Net, leaving it to the business person and the service provider to follow up.

In its chapter on export financing, the Committee agrees that EDC should focus on gaps in what is not provided in the private sector and should concentrate resources on SMEs. The Committee, however, is concerned about the extent to which EDC and private sector financial services firms compete with each other and duplicate efforts. In a certain context, this competition should be encouraged. With the globalization of finance, EDC has to compete for customers not only with the Canadian-based firms but also, increasingly, foreign-based companies and foreign government-supported export development/finance organizations.

Critics of EDC have argued that the Corporation has an unfair competitive advantage because it does not pay taxes and can get access to credit at lower terms because of its links to the federal government. At the same time, the Committee heard from a number of witnesses about the limits to which the banks and other financial services firms are prepared to go to service small business because of the relatively high costs of doing so. In this case, therefore, EDC, because it is charged with certain public policy objectives, has to absorb costs that private sector firms do not have to face.

It is a complex and highly specialized task to determine precisely what EDC should and should not do and to explore what kinds of partnerships with private firms and nongovernmental organizations should be undertaken. It is also a situation that is constantly evolving. Ideally these questions should be regularly reviewed by some kind of working group consisting of EDC officials, bank and financial services representatives, and staff of trade associations who could assess how best to deliver new services for SMEs. Such a group could also explore ways to further reduce duplication of efforts, streamline activities, and eliminate bureaucratic red tape.

If it were possible for business and government to arrive at a consensus about their respective roles and responsibilities, it would become possible to address in a very concrete and effective way the kinds of improvements that need to be made to Canada's international business development activities. For example, there was a general consensus among SMEs and other witnesses who appeared before the Committee that there are too many programs and services offered by too many government departments and agencies, and too much activity relative to the level of service and assistance that is provided by government.

Provincial, and to a lesser degree, municipal representatives, argued both for greater coordination of activities and further devolution of federal international business development programming to the provincial and municipal levels. Former BC Trade President Oksana Exell was the most explicit, arguing that "there is a natural division of responsibilities in trade development between the two (federal and provincial) levels of government." She recommended that the provinces have prime responsibility to provide specialized advice and assistance to Canadian exporters. In the case of New Brunswick, streamlining and devolution has meant assigning different levels of government and different government programs with specific responsibilities and duties which do not overlap with one another. The municipalities emphasized how they are frequently the first contact local businesses make with government, and that there needs to be clearly defined roles and responsibilities for each level of government. Mayor of Toronto Barbara Hall also emphasized the need to have all levels of government represented in larger initiatives such as the Prime Minister's official Team Canada trade missions.

By defining appropriate roles for government, the private sector and the nongovernmental sector in international business development, and by being explicit about their respective roles and responsibilities, greater coordination and streamlining of activities could be achieved.

To assist in the process of developing such a Road Map and bibliography, it will be important for the principal stakeholders to conduct an independent review of the main issues that were examined during this study. The Committee approached the Office of the Auditor General and inquired whether it could review all of the federal government's international trade and business development programs and services. The Committee was informed that the Office is currently undertaking an audit of DFAIT trade promotion programs and plans to report in November 1996 on its findings, but that beyond this its resources were committed.

However, the Committee is concerned about repeated comments made during its hearings regarding duplication and overlapping among the various levels of government and the private sector. The Committee considers that it would not be appropriate for it to make recommendations as to how best the respective responsibilities should be rationalized. The Committee has concluded, therefore, that a more focussed review by the main stakeholders is required to bring about a better rationalization in respect of the availability and delivery of programs and services to SMEs.

HUMAN RIGHTS AMD TRADE: THE GOVERNMENT'S ROLE

In Chapter 3 of its Report, Canada's Foreign Policy: Principles and Priorities for the Future, the Special Joint Committee reviewing Canadian Foreign Policy tackled this important issue of the connection between trade relations and human rights. In a section of Chapter 3 entitled "Trade Linkages", the Special Committee wrote, "In the end, it is the very survival of our trading relationship that is at stake. For if countries do not respect the universal human rights of their citizens, there is reason to be uneasy about their respect for the rights of foreigners investing or trading with them."

On page 37 of the Report, the Special Committee made the following recommendation: "Accordingly the Committee, in agreement with the strongly-expressed values of Canadians, recommends that the Government of Canada should use whatever channels may be most effective to protest abuses of human rights, labour standards and/or environmental protection, whenever they occur, and should work closely wherever practical with other partners to bring about an amelioration of these situations in a manner compatible with the orderly evolution of a rules-based multilateral trading system. The use of trade sanctions in a multilateral context should be considered in appropriate circumstances."

Given the terms of the Uruguay Round agreements, which produced World Trade Organization (WTO), the industrialized nations should bear in mind their responsibility for promoting respect for the labour standards recognized by the International Labour Organization (ILO), defence of the environment and establishment of social standards. Globalization of markets and competitive drive have a tendency to pit the developed countries against one another in the race for new markets. This is short-sighted, and Canada should act as a leader within the WTO to ensure that the community of developed countries does not abdicate its social and environmental responsibilities.

While in Ottawa recently (April 11, 1996), the president of Amnesty International, Pierre Sané, said that the battle for respect for human rights must be a global one, or it is lost from the start. In effect, he said, two world views clash here: one, that making a connection between trade and respect for human rights is interference in the domestic policy of other countries, and the other, that trade involves human beings and should reflect the values and principles of the society carrying it out. With regard to this second world view, the president of Amnesty added that in an era of globalization, the question is, How can we ensure that trade is not limited to goods, information and money but also includes values?

When he addressed the United Nations Commission on Human Rights on April 3, Canada's Minister of Foreign Affairs said, "I want to outline some elements of an effective and attainable human rights agenda for the UN. First, we need to harness the energy of civil society. Governments cannot act alone in promoting and protecting human rights. Some business organizations and coalitions are already working on positive action toward labour standards and human rights. As one Canadian business leader put it, `this is not just the right thing to do... The simple truth is that [it is] good for business, and most business people recognize that.'"

Mr. Axworthy continued, "Concrete ways that business can promote human rights include voluntary codes of conduct, human resource strategies, and support for limiting government-subsidized investments to areas with satisfactory human rights records."

The Canadian government considers that it can influence through its commercial relations, the development of democracy and defence of human rights. It follows that the government must acquire the instruments or means for ensuring that the achievement of its objective is not left up to chance. The Standing Committee on Foreign Affairs considers that all Canadians active on the international stage (politicians, diplomats, trade commissioners, co-operants, CIDA personnel, business people) should view their activities within the framework of a code, or guidelines. This would ensure that the promotion of Canadian values, which was one of the key objectives in the foreign policy statement, does not remain a dead letter. To this end the government should take cognizance annually of the report of the United Nations Conference on Trade and Development (UNCTAD) so as to be able to assess progress in the evolution of the situation relating to human rights in countries with which Canada has trade relations.

In March, participants at a conference entitled "Globalization, Trade and Human Rights: The Canadian Business Perspective" reached a surprising consensus on action that government and the private sector could take in the current context. An article appearing in the April 8 number of the Canadian Exporters' Association bulletin Export News summed up the consensus in four points:

The Committee applauds this initiative and would like to encourage the Government of Canada to work with the sponsors of this Conference towards the establishment of elements of a voluntary code of conduct for Canadian businesses engaged in international trade. We believe such a code could be a step towards the incorporation of human rights considerations in the practice of international trade generally and would assist the government in advancing these values in international fora.

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