Continued
Rise of Asia-Pacific and its Meaning
Notes spoken
to by the Hon. David Kilgour,
Secretary
of State (Asia-Pacific) & MP for Edmonton
Southeast
before the
Sub-Committee on International Trade, Trade
Disputes and Investment
Parliament
Hill, Ottawa, February
5, 2003
Mr Chair
and colleagues: I’m delighted with
the Sub-Committee’s interest in this
complex topic. Knowing the quality of your
previous studies, particularly the one on
the WTO, I have no doubt that this process
will result in a series of useful recommendations.
Let me get
right to the point - the Asia-Pacific region
is incredibly important, not only to Canada
but to the world’s long term prosperity
and security. What happens in the Asia-Pacific
region matters to Canada. It matters because
Canada is home to millions of people who
trace their ancestry to the region, because
it holds enormous business opportunities,
and because it is increasingly a source
of investment in our country.
Our Hidden
Advantage
Canada’s
large, growing, and diverse Asian communities
have made indelible contributions to the
Canadian mosaic. There are over a million
Chinese-Canadians and similar numbers who
trace their roots to South Asia. With over
half of our new immigrants coming from the
Asia-Pacific region, our “Asianification”
will continue and have a growing impact.
Many of us
see this in our constituencies. The president
of my riding association, for example, was
born in Pakistan; the two vice-presidents
were born in India; the treasurer was born
in Vietnam. We need only look to fellow
members of parliament, cabinet colleagues,
our Governor General, celebrated writers
and artists and more to see Canada’s
Asian face.
Our former
colleague, Raymond Chan, who served as Secretary
of State (Asia-Pacific) from 1993 to 2000,
termed such people-to-people links “Canada’s
hidden advantage”; they build bridges
from Canada to all over Asia-Pacific. They
transport ideas, knowledge, culture, and
values in both directions; we are all better
as a result.
Canada is
thriving in part because of these human
bonds, but also because the Asia-Pacific
region is again vibrant economically.
Economic
Opportunities
Opportunities
for Canadians in Asia-Pacific are expanding
rapidly. The Asian economic crisis is over.
Current growth is unparalleled. Asia-Pacific
remains our second largest trading partner.
Since 1970, our exports there have grown
an average of eleven percent a year. For
over a decade, our trans-Pacific trade has
exceeded our trans-Atlantic trade. Investment
links in both directions have grown significantly.
Every part
of Canada benefits from our economic relations
with Asia-Pacific. Whether it be the provision
of advanced technology services, agricultural
products, and natural resources from Western
Canada, communications technology from Ontario,
hydro-electric management skills from Quebec,
or the marketing of navigational technology
and dried jellyfish from Atlantic Canada,
all Canadians benefit. Each of us has a
stake in this important relationship.
Asia-Pacific’s
market is getting bigger and more prosperous
all the time. Large middle income communities,
with substantial purchasing power, are emerging
-- we are literally talking about hundreds
of millions of new consumers.
While the
opportunities are extraordinary, our economic
relations are not without challenges. Our
trade volumes have recovered since the Asian
financial crisis, but there is vast room
for improvement in export performance. We
have lost market share to traditional rivals,
and we were probably not prepared enough
for the emergence of new, competitive players
within the region itself. Multilateral bodies
like ASEAN are exploring free trade agreements
with other major economies in Asia-Pacific;
we need to make an effort to make sure Canada
is not forgetten.
Part of the
reason for Canada’s current status
is also systemic: falling commodity prices,
reduced resource demand, and a slowdown
in Japan are all important factors. In my
year as Secretary of State (Asia-Pacific),
certain challenges have become apparent.
Foremost,
it is my impression that the majority of
Canadian business people are unaware of
Asia’s potential. Most of Asia-Pacific’s
opportunities remain relatively untapped
by Canadians.
As one would
expect, governments and business are focussed
on the North American market, but if recent
trade disputes have certainly taught that
diversification makes good business sense.
The attractions of doing business in Asia-Pacific
haven’t reached enough Canadians. Some
still feel burned by the Asian-flu; others
looked at the size of markets such as China,
expecting immediate returns on investment,
unprepared to settle in for the long haul.
Canada’s Asia Pacific Foundation recently
identified an “information gap”;
firms already in Asia with direct access
to their own sources of information are
confident enough of the business climate
to increase their holdings. Those that rely
on second-hand sources of information -
such as media or consultants based in Canada
- show little interest. In other words,
Canadian business needs more reliable information
to identify new opportunities, and prepare
to do business in unfamiliar markets.
On the other
side, the knowledge of Canada in Asia is
outdated. We enjoy a general positive image,
but Canada’s brand is suffering. The
roots of our problem lie in the widespread
perception that Canada is a travel destination
as opposed to a trading partner. Business
people in Asia-Pacific need to know that
Canada encompasses both realities.
Misconceptions
about Canada, in my experience, are in part
due to two factors. First, many of our traditional
business organizations which have focussed
on the Asia-Pacific region are
underperforming.
Canada’s “hidden advantage”
that I referred to earlier, in my opinion,
is sometimes still too hidden.
The second
factor is one that we are all too aware
of: resources. As it stands, we have an
incredible group of men and women, Canadians
and Asian nationals alike, promoting Canada’s
economic trade interests in Asia-Pacific.
Our Trade Commissioner Service (TCS) is
the envy of foreign business people all
over Asia-Pacific; there’s hardly a
country I’ve visited where Canadian
business people haven’t told me that
their successes are in part due to the information
and services our officers provided. TCS’s
new approach allows them to focus on core
value-added services and the innovative
use of new technologies, getting our officers
out from behind the desk and promoting Canadian
interests. But there are not enough of these
officers out there. I have just returned
from India, where we do not have enough
Canadian presence in Hyderabad, Bangalore,
or Chennai – three of India’s
most important high tech cities.
We know our
resources are limited, and as such we have
identified strategic partners in the region,
and priority sectors.
Strategic
Partners
The strategic
partners we’ve identified in Asia-Pacific
are: Japan, China and India. Despite Japan’s
economic slowdown, it is our second largest
trading partner, one of the world’s
most mature markets, and it’s population
sits on over $1.4 trillion in savings. India
and China currently hold one third of the
world’s population; within a generation,
the middle income communities in each could
be over half a billion people. Arguably,
the world’s future over the next 50
years will be shaped to a very considerable
degree by decisions made in Delhi, Tokyo
and Beijing.
In China,
our efforts are paying off in some areas.
Total exports, for instance, have risen
eighty-seven percent over the last decade.
It is now our fourth largest export market
(third if we include Hong Kong). A Canadian
manufacturing company in Suzhou, for example,
which I was fortunate to visit while I was
there, went from a few employees to over
1000 in just a few years, with plans to
reach 3000 by the end of next year. Canadian
firms are also investing in R&D. In
Guangzhou, for instance, there is Nortel's
centre at Zhongshan University, which has
grown from just a handful to about 200 staff
within a few years. With China’s recent
accession to the WTO and the subsequent
expectation of more transparent trade rules,
we can expect more success stories there.
While there
is still much progress to be made in our
relationship with India, we have seen a
steady increase in exports, investment flowing
both ways, and important joint ventures
in information technology, biotechnology
and the arts. Canadian companies are already
aware that the world’s largest film
industry is Bollywood, not Hollywood. Cutting
edge Indian companies such as Satyam Computer
Services, Infosys, and Kshema have already
invested in Canada. That said, these cases
are still the exception rather than the
rule. Out current trade figures with India
point to enormous potential: India is the
world’s 11th largest economy; Canada
the 8th. And yet, we are only the other’s
25th largest trading partner. As liberalization
in India continues, we hope better access
will see trade rise quickly.
Priority
Sectors
Besides focussing
on the key markets of Japan, China and India,
we are also looking to new sectors. Note
the increase of our trade in knowledge-based
products and services. With the rapidly
developing infrastructure in much of the
region, Canadian expertise in engineering,
project management, and environmental consulting
is much in demand.
Opportunities
have presented themselves in aviation products
and aircraft. This market is slow in much
of the world, yet Canada’s aircraft
exports to the region have grown almost
300 percent in five years.
Our insurance
sector is already a major player. Along
with other financial services, Canadian
companies in these sectors are poised to
take better advantage of Asia-Pacific’s
opportunities. Our biotechnology industry
is also attracting increased attention.
Cultural exports, including film, animation,
and literature are generating increased
sales.
The vast
need for new housing in much of the Asia-Pacific
region lends itself not only to lumber exports
but also to prefabricated units using a
wider range of Canadian material and skilled
labour. Who better to respond to these needs?
Our suppliers
have found niches in telecommunications
infrastructure, energy development and transportation
services. Canadian involvement in development
projects often translates into immediate
business opportunities for Canadian enterprises
as well as into longer term benefits for
Canada’s brand and market presence.
Our companies
have consistently won eight to ten percent
of Asian Development Bank contracts for
infrastructure development. CIDA’s
Industrial Co-operation Program has provided
opportunities for our companies to participate
in projects in the region, often forming
joint ventures and multiplying the benefits
both within Canada and the host country
well beyond the scope of the initial project.
An often
overlooked knowledge-based service we provide
to Asia-Pacific nationals is education.
Over half the foreign students currently
studying in Canada are from Asia-Pacific
and are estimated to bring over $2 billion
into our economy each year. Graduates of
Canadian universities are leaders in business
and government in their respective countries,
while often maintaining links they made
while studying here. Marketing Canadian
education will be a growing priority in
the coming years.
We continue
important institutional linkages. For example,
our active participation in APEC promotes
free and open trade in the region while
helping less developed members to reach
WTO goals, to take practical steps towards
eliminating red tape, and to enhance security.
It must
be remembered that investment flows both
ways across the Pacific. Direct investment
into Canada from the Asia-Pacific region
has increased eighty percent over the last
decade. Canadian investment into the region
is important not only to Canadian investors
but also in establishing long term, mutually
beneficial relationships.
Areas of
Study
Can we do
better? Absolutely. The Asia Pacific market
is large and complicated, and we cannot
do everything. We must focus our efforts
without compromising our values. How can
we do better? I identified some areas: improving
Asia-Pacific’s brand in Canada and
vice-versa; reinvigorating our traditional
business associations; improving our official
presence in Asia-Pacific’s most important
markets. We hope that the Sub-Committee
will be able to suggest others.
You can
engage a cross-section of Canadians to more
precisely define both the challenges and
opportunities we face in the Asia-Pacific
region. Travelling to Asia-Pacific’s
economic capitals will certainly help you
do this. Most importantly, it will hopefully
result in concrete recommendations that
will help us work in a more focussed manner.
In particular,
we look forward to specific recommendations
regarding how we can find the ways and means
to improve our performance in priority sectors
and services. How do you think we can better
provide Canadian companies with market intelligence
to attract them to the Asia Pacific market?
In what ways can Team Canada missions be
made even more effective? Are Free Trade
Agreements a viable option?
Our approaches
must go beyond traditional trade and investment
promotion. We must look strategically at
Asia-Pacific not only as the world’s
largest market in terms of population, the
fastest growing market overall by OECD standards,
and an increasingly important place for
Canadian companies to do business. We must
also look to the region as a source of knowledge
workers to maintain Canada’s momentum
in the new economy. We must realize that
technology transfers and development partnerships
can work both ways across the Pacific. In
short, we must look to the Asia-Pacific
region as a source of investment in innovation
for Canada’s future prosperity and
security.
For trade,
as we know, is inextricably linked to our
economic stability and to the world’s
larger sense of security. We also have to
visualize trade and investment as useful
tools of development. It is in everyone’s
interest for Canadians to be good corporate
citizens - to see beyond the bottom line.
Honest trade and honest investment empower
the lives of people everywhere. Both are
levers for creating good jobs, strengthening
the rule of law, promoting transparency,
and fostering good governance. Incidentally,
a judge friend of mine thinks that the rule
of law should be our most cherished export.
Consequently, our economic relationships
in Asia-Pacific – like anywhere else
in the world – must co-exist with our
priority of promoting human security.
Mr. Chairman,
we truly welcome the study that the Sub-Committee
has launched and look forward to working
closely with you over the coming months.
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