It's Your Turn
Consulting Canadians:
International Trade Canada: Emerging Markets—Will Canada
Meet the Challenge?
Report on roundtable consultations hosted by International
Trade Minister Jim Peterson
The following is a working document that encapsulates the key
elements of the roundtables, and does not necessarily represent
the views of the Government of Canada.
Introduction
Three roundtable consultations held on November 29, 30 and December
1, 2004 provided a useful venue for an open discussion—including
constructive disagreements—of the priorities required to direct
the formulation of an emerging markets strategy for Canada. The
exchanges reinforced the message that a multidimensional approach—incorporating
policy, promotion, branding, links to investment, science and technology,
commercialization, education and skills, and immigration—is
required for an effective and appropriate commercial engagement,
and that the strategy must balance a variety of interests and concerns.
Considerable optimism was expressed throughout the discussions,
in terms of the opportunities presented by emerging markets as well
as Canada’s capacity to meet the challenges.
All three participating groups (academic, business and civil society)
welcomed the opportunity to meet with International Trade Minister
Jim Peterson, Parliamentary Secretary Mark Eyking, Deputy Minister
Robert Fonberg, the Prime Minister’s Special Advisor on Asia
Pacific Sophia Leung and other trade officials, and to have a forum
in which their views on critical economic and development issues
could be heard. Discussions frequently extended beyond specific
questions pertaining to emerging markets, particularly to bilateral
and multilateral policy issues. It was suggested that a central
focus of Canadian trade promotion, investment and policy priorities
continue to be oriented toward deeper integration with the U.S.
economy.
The Academic Sector
Participants at the academic roundtable distinguished between trade
and investment within North America and trade and investment with
other regions of the world, which one person called a “fundamentally
different sort of business link.” The strategy must consider
a market’s size, its linkages to regional and global value
chains and its role in setting the regional agenda, as well as Canadian
capabilities and interests. “Businesses trade where it is
profitable for them to do so,” noted one participant. A strategy
must address the realities of trade and investment flows.
Canada, with its own strengths and reputation, needs to further
its own brand. Participants recommended developing further integration
of the North American economic space, with several cautions. They
advised that Canada should look through the lens of an integrated
North American economy, but should not to confine itself within
a North American bloc.
Participants identified Canadian strengths in emerging markets
in terms of services rather than merchandise exports, including
the knowledge economy, biotechnology, communications technology,
and intellectual capital.
Several suggestions were made to build on strengths in the knowledge
economy, from positioning the educational knowledge sector as a
trade advantage, to offering grants or incentives for Canadian students
to study abroad. Recommendations included encouraging international
students
to study in Canada, since their familiarity with Canada will benefit
trade relationships, and furthering the role of immigrant communities
in encouraging the direction and marketing of trade. There was a
call to increase Canadian scholarships for foreign students, to
allow them to apply for residence status, and to work off campus
while studying. However, one person disagreed that more needs to
be done to attract international students, noting that some universities
are already unable to accommodate all of the applications they receive.
Participants spoke of the need for both bilateralism and multilateralism,
with an emphasis on participation in the World Trade Organization
(WTO). Concern over Canada’s current strategic position in
the WTO was raised. It was recommended that Canada look to strengthen
its position with the objective of advancing our domestic interests
(i.e. identifying and leading like-minded country initiatives, such
as the Quad), including seeking opportunities for leadership in
the Doha Round.
On the issue of aid and trade, one academic advised the Canadian
International Development Agency (CIDA) to concentrate assistance
in eight or nine countries instead of the current 85 to 90. Canada’s
aid is spread too thin throughout too many countries, thereby lessening
the potential leveraging impact on broadening commercial relations
in specific countries.
In a discussion about the role of immigrants in developing Canada’s
trade, one academic participant said research shows that immigration
has a positive impact on trade only when one country has little
knowledge of the other. Between countries that have greater familiarity
with each other, immigration has a minimal effect on trade.
Another participant suggested that International Trade Canada (ITCan)
could play a key role in moving the government toward a whole-of-government
approach, noting that R&D, investment, immigration and trade
issues are often linked in developing markets. Another called for
effective use of the $13 billion innovation agenda, including a
proposal to create an organization to address humanitarian and commercial
benefits, in the context of the Prime Minister’s goal of 5
percent of Canada’s R&D investment being devoted to develop
assistance for less fortunate countries.
Further suggestions were made on the role of government: facilitate
trade and investment flows to help businesses grow and maintain
market access with key countries; negotiate foreign investment promotion
and protection agreements (FIPAs); and provide companies with one-stop
shopping on market intelligence, technology intelligence and financial
assistance. It was pointed out that in an increasingly globalized
economy, FIPAs or other safeguards may be critical, whereas free
trade agreements (FTAs) may not be.
The Business Sector
Participants from the business sector said the Doha Round of the
WTO must achieve meaningful results. Headway needs to be made on
a commodity-specific basis, as well as more generally, on tariff
issues and enforcement. Canada has won more disputes than it has
lost, but each one costs industry millions of dollars.
Business participants said that unless Canada also pursues bilateral
agreements, there is a risk that it will be marginalized. The U.S.
is brokering a number of bilateral agreements, creating competition
for Canada in countries with which Canada does not have an agreement.
For example, a U.S.-Japan tax treaty puts Canada at a competitive
disadvantage.
Business participants identified the “nuts and bolts issues”
of getting trade through borders, including transportation issues,
particularly between West Coast ports and road and rail infrastructure,
and the high costs in Canada of natural gas and electricity. Canada–U.S.
border issues and the strength of the Canadian dollar were also
identified as trade and investment obstacles.
Noting that human rights in emerging markets has been a source
of criticism for many retailers importing from these markets, a
business participant suggested that government and the private sector
promote Canadian brands and values. She called for Canada to work
with larger markets and support the human rights efforts of smaller
countries to ensure that they do not face excessive challenges when
importing into Canada. Another person recommended combining social
responsibility with trade.
Several participants expressed hope that these consultations with
the Minister would help to focus on target areas where Canada can
get the best return on investment and where Canada has the capacity
to compete in the extremely competitive global economy.
Several business representatives spoke of the importance of FIPAs.
One suggested that Canada already provides investment insurance
through Export Development Canada (EDC) to businesses even without
FIPAs. Another noted that the flow of investment in North America
is to the U.S. rather than to Canada, because the U.S. is more aggressive
in defending investments.
Business participants thanked ITCan for its openness in sharing
its work to involve other government departments. Specific ITCan-related
recommendations were to develop greater sector expertise among trade
commissioners similar to those at Industry Canada, and to make Trade
Commissioner Service posts more focused and strategic.
Further suggestions were made on the role of government: facilitate
trade and investment flows to help businesses grow and maintain
market access with key countries; negotiate foreign investment promotion
and protection agreements (FIPAs); and provide companies with one-stop
shopping on market intelligence, technology intelligence and financial
assistance. It was pointed out that in an increasingly globalized
economy, FIPAs or other safeguards may be critical, whereas free
trade agreements (FTAs) may not be.
Civil Society
Representatives from civil society expressed concern for the rights
of children, women and workers. Canadian standards for safe water,
sanitation and working conditions must be carried into emerging
markets. Canada must be viewed in both emerging and major markets
as a country whose trade policies are consistent with the Millennium
Development Goals, including human development, gender equity, education
and poverty reduction. One participant, however, pointed out that
Canada’s commitment to supporting development through trade
liberalization appears to be in question in regions such as Latin
America, given our domestic sensitivities on such issues as agriculture
and textiles.
Considerable attention was paid to ways of protecting human rights
in emerging markets. One civil society participant noted that only
governments—not trade rules—can discipline corporations.
He called voluntary human rights codes “a good first step
that lacks teeth.”
In response to an ITCan suggestion that the consumer has considerable
power to discipline firms, a participant said consumer power is
“frail and inconsistent,” particularly when the company
is not providing a consumer product. There was strong support for
a nationally determined and supported regulatory framework. The
WTO Trade Ministers meeting in Hong Kong, scheduled for December
13 – 18, 2005, will look at these matters; participants hope
that Canada will take an active role in these discussions.
Suggestions were made on ways to increase the capacity for consumers,
governments and civil society to monitor the behaviour of Canadian
companies working abroad, including a single point for lodging complaints
and a change in the textile-labelling act to make it possible to
know where a garment is made.
One civil society representative expressed a different point of
view. Some companies have increased the number of corporate social
responsibility (CSR) audits they undertake to demonstrate their
improvement over time, and then take a stock market hit when these
issues appear in the media.
Considerable attention was paid to the issue of dumping. One civil
society participant suggested that ITCan and CIDA work with developing
countries to help them establish their own safeguards and investigative
methods to defend against WTO challenges. Others called for the
development of a simplified mechanism to realize the existing countervailing
agreement on the costs and procedures of dumping. Smaller countries
tend to be “brow-beaten and threatened” with sanctions
if they plan to stand up to larger trading blocs for dumping. A
participant suggested that dumping be dealt with in the same manner
as dangerous goods: put the onus on exporters to prove that their
businesses will not harm the economy of the recipient country, instead
of requiring smaller countries to institute anti-dumping laws. Particular
concern was voiced about dumping of agricultural products in countries
where vulnerable populations rely on agriculture for their livelihood.
One participant disagreed, calling it “indisputable”
that a lack of international competitiveness would be detrimental
to a country in the end. He recommended a system that allows countries
to exchange/swap trade retaliation rights in the WTO, allowing small
countries to retaliate more effectively against the EU or the U.S.
Two concerns were noted about the Doha Round: the fate of the development
agenda and the participation of developing countries in decision
making. In response to a request for suggestions on defining “developing
country,” one participant expressly rejected a simplistic
approach such as income per capita criteria, noting that a country’s
economy can be composed of parts that are advanced and parts that
include the poorest of the poor.
Civil society participants stressed that capacity building must
take into account the particular political constraints and development
dilemmas of the country in question. One participant suggested that
different rules on intellectual property (IP) rights might be needed
in different countries to reflect levels of development. Another
suggested that Quebec’s experience in cooperatives could play
a constructive role in engagement with developing and emerging markets.
Common Themes
The term “emerging market” is a misnomer, according
to academic and business consultations. Any rapidly growing market—whether
geographic or sectoral—that Canada can access is an “emerging
opportunity”.
The enforcement of trade rules was mentioned in all three consultations,
with particular focus on a new accommodation with the U.S. in order
to deal with regulatory harmonization, border issues, security,
etc. There was also a proposal for civil society workshops on enforcement
of human rights stipulations, anti-dumping measures, and the ability
of smaller markets to stand up to larger markets.
In terms of policy tools, FIPAs were considered useful (if there
was confidence that these would provide protection and be enforceable
in emerging markets) but may be too narrow an instrument to deal
with the wider variety of issues germane to Canadian economic interests
(i.e. IP protection, regulatory harmonization) within and between
regions. Framework agreements may better address the wider set of
issues that Canadian firms face in these markets.
There is a need to increase the branding of Canada, according to
the academic and business consultations. Businesses find that not
enough is known about Canadian products and services. There were
also suggestions during the business and academic roundtables that
Canada should adopt a North American strategy vis-à-vis emerging
markets, that is, identify a North American relationship for emerging
markets, and craft the Canadian strategy that builds on our comparative
advantages within North America.
The Government has a role to help businesses understand cultural
differences, according to the business and academic consultations.
Academic participants specified that SMEs in particular need this
help, since they have fewer resources.
Canada should continue to move toward a whole-of-government response
to trade, noted the academic and business consultations. The point
was made that the emerging markets currently under consideration
have not “decoupled” political and trade linkages, and
that Canada’s approach should be appropriately tailored.
Points of Disagreement
The protection of IP rights was raised as a significant issue by
the academic and business consultations. The civil society session
suggested instead that different IP rights rules might be needed
in different countries to reflect levels of development.
While the civil society consultation called for Canadian values
and standards to be carried into emerging markets, the business
sector expressed concern that Canadian businesses would be held
to a higher standard than others, and that smaller firms would be
penalized if they could not meet these standards. The civil society
section also called for greater effort toward mandatory rather than
voluntary human rights standards.
There were differing opinions on the amount of attention that should
be given to bilateral as opposed to multilateral agreements, with
the academic consultation prioritizing multilateral and the business
consultation the bilateral. However, neither session called for
only one focus.
Best Practices
In the academic consultation, an innovative government aid agency
was praised for increasing research funds and appointing a chief
scientific advisor to build relationships with developing countries
looking for infrastructure assistance.
Canada was urged to “optimize our innovation investments
for international success” and the U.K. government’s
links between its science and trade strategies were cited as best
practices.
The importance of fostering education marketing and linkages between
Canada and emerging markets was recognized. The Australian approach,
which allows students to apply to immigrate after completion of
two years of study in country, was suggested as a model worthy of
consideration.
The linkages that now exist between universities, business schools
and technical colleges, and Canadian SMEs should be leveraged in
developing networks and initiating integrated approaches to emerging
markets.
In the business consultation, the Agriculture Institute of Management
in Saskatchewan was said to have developed an agri-food industry
program that is considered one of the best in developing the competitiveness
of the agricultural industry. It is business-driven and focused
around common business objectives. A business participant noted
that the most successful forest product companies originate in countries
that allow them to absorb risk and take advantage of opportunities.
There was mention of pursuing a North American trade policy agenda
with the U.S. in order to increase our visibility and bargaining
position.
Cambodia was praised as a breakout country that is seeking to introduce
fair labour standards and become a major garment exporter.
Participants
to Academic Roundtable (pdf)
Participants
to Business Roundtable (pdf)
Participants
to Civil Society Roundtable (pdf)
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