Canadian Chamber of Commerce CEO Perrin Beatty ‘Are we living up to our potential or are we stealing from our kids? I think we’ve been falling short’

| January 4, 2016 | 0 Comments
Photos by Jana Chytilova

Photos by Jana Chytilova

Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, was first elected to the House of Commons as a Progressive Conservative in 1972 at the age of 22. Seven years later, then-prime minister Joe Clark appointed him minister of state for the Treasury Board, making him the youngest person ever appointed to cabinet. He returned to opposition when Clark’s minority government was defeated, but in 1984, Brian Mulroney made him minister of national revenue and minister responsible for Canada Post. Later cabinet posts included solicitor general of Canada, defence minister, minister of national health and welfare, minister of communications (no longer a porfolio) and secretary of state for external affairs. Liberal prime minister Jean Chrétien appointed him CEO of the Canadian Broadcasting Corporation in 1995, a position he held for four years before becoming CEO of Canadian Manufacturers & Exporters. He took up his current position as CEO of the Canadian Chamber of Commerce  in 2007. Diplomat’s editor Jennifer Campbell sat down with him the week after the federal election.

Diplomat magazine: So, it’s been a few days since the election.
Perrin Beatty: Yes. The politicians’ door-knocking ended Monday and mine started Tuesday. We had our AGM and passed just shy of 50 resolutions the day before the election, so it certainly gave us our advocacy agenda. There’s lots to take to the new government.

DM: You’re a Conservative, correct?
PB: No. I was a Conservative. When I became president of CBC, it was important that, as it was the country’s largest news organization, I be completely free of any political taint. I gave up my membership to the [Conservative] party. Even my wife and my son don’t know how I vote.
DM: Apart from political affinity, then, what do you think of the results?
PB: Well, it was Canadians voting for a fresh start and what I was particularly pleased with is that it’s a majority government. So many of the issue s we face in Canada are long-term and structural and I served in Parliament both in majorities and in minorities [in government and in opposition.] In a majority Parliament, you think about ‘Where will Canada be four years from now?’ In a minority Parliament, you think about ‘where will I be four weeks from now?’
You tend to be driven, in a minority Parliament, by the headline du jour, by whoever is complaining most loudly about whatever the current issue is, as opposed to saying ‘What are the strategic decisions that we have to make as a country that will benefit us in the longer term?’ What we have is the stability, first of all, that the government is able to plan long-term and to attack some of these more important structural issues: trade, skills development, innovation, and a whole range of other areas where it’s not a matter of simply passing a bill or putting a new program in place. It also means, from the perspective of investors, that they have the confidence as to the rules of the game. The problem with a minority is investors, if they’re making a multi-million-dollar investment in Canada, want to know what the rules are going to be and if they’re subject to change. With a minority Parliament, you just don’t know. Having the stability that comes from a majority will reassure investors that they know the rules of the game.

‘A good deal of my time since 9/11 has been spent on insuring we have an open border with the U.S.’ (Photo: Jana Chytilova)

‘A good deal of my time since 9/11 has been spent on insuring we have an open border with the U.S.’ (Photo: Jana Chytilova)

DM: When it comes to the Canadian Chamber of Commerce, who are your members?
PB: Our members are local chambers and companies, as well as associations. There are really three different groups of members. We have 450 chambers of commerce and boards of trade from across the country, we have about 100 associations that belong — sectoral associations such as the Railway Association of Canada or the Canadian Association of Petroleum Producers, which gives us a window into the various sectors within the country — and then we have individual companies that belong. Most of the companies that people would have heard of are Air Canada, or GM or Suncor or Royal Bank, plus a number of small companies as well, such as entrepreneurial companies and startups. They pay to be members. That’s how we finance ourselves. In some countries, it’s mandatory to belong to the chamber of commerce; in Canada, it’s entirely voluntary.

‘We’re in a position where the Canadian government… can retaliate against U.S. products.’ (Photo: Jana Chytilova)

‘We’re in a position where the Canadian government… can retaliate against U.S. products.’ (Photo: Jana Chytilova)

DM: Regarding the Canadian Chamber of Commerce, an Ottawa businesswoman told me she could see joining because of an export-related service that you offer.
PB: Carnet! You’re the first journalist ever to ask me about carnet. That’s an achievement. Carnet is a passport for goods and it means that if CBC, for example, is going to cover the Olympics and they take all of their equipment into another country, they post a bond saying they’re not going to leave it and sell it while there. The Canadian Chamber issues these and provides a guarantee to the country that that company will bring those goods back out.

DM: Do you do that for anyone or is there a process?
PB: We’ll do it for any company that applies. If you’re going to a trade show, for example, and wanted to bring samples, but you weren’t planning to sell them, you might want a carnet to authorize that and guarantee that you’re going to bring them back.

DM: How often do you get requests for this?
PB: Quite often. And it’s a growing part of our business because Canadian businesses are increasingly international. Another similar thing we do is document certifications. If people need to have documents for official purposes that are certified business documents, we can do that. The vast bulk of what we do and our raison d’etre is advocacy, but you managed to identify the one major program that we have as well.

‘We have to ensure there’s close collaboration between the Canadian business community and our government.’ (Photo: Jana Chytilova)

‘We have to ensure there’s close collaboration between the Canadian business community and our government.’ (Photo: Jana Chytilova)

DM: The businesswoman found it useful, but she’s not a member, so I guess you don’t need to be?
PB: You don’t need to be, but there’s a discount for members. For companies that do this frequently, it pays for their membership.

DM: As you mentioned, your main job is to advocate for all your members — whether regional chambers, individual businesses or business associations. How do you accomplish that?
PB: We have an AGM where chambers across the country propose resolutions to be considered at the AGM on a wide range of business issues. If two thirds of delegates vote in favour, it becomes policy. We have, at any one time, perhaps 150 resolutions on the books. But at the end of the day, it boils down to one issue and that’s competitiveness. What can you do to ensure the success of Canadian business? If we’re dealing with skills, the [question] there is how to equip ourselves with the skills we need to be competitive. What is the role that infrastructure plays in terms of our ability to move our goods and services? On Canada-U.S. relations: What does this mean in terms of management of the border and in terms of issues like Keystone XL or country-of-origin labelling or softwood lumber? If it’s trade negotiations, what does it mean in terms of insuring access for Canadian goods and services and investors to other markets? All of these issues are seen through the prism of the success of Canadian business.

DM: Regarding the U.S., what is your priority there for the next four years?
PB: A good deal of my time since 9/11 has been spent on insuring we have an open border with the U.S. After 9/11, we had a border that was simply jammed up. Particularly for Canadian manufacturers, who operate on a just-in-time basis, that’s potentially devastating. We need to have a border that’s fluid, where people can move across it readily and where we can get our inputs coming this way.
Policies like Buy-America, which discriminate against Canadian companies, are a major concern to us. The [Canadian] government took the U.S. government to the WTO on the basis of the country-of-origin labelling where they were using the identification of products like pork coming into the U.S. and saying this is American, or not American. It was a non-tariff barrier to Canadian products and was found by the WTO to be in violation of the U.S.’s obligations.

DM: Did that change anything?
PB: They dragged their feet. Now we’re in a position where the Canadian government has a mandate that it can retaliate against U.S. products. No one wants to see that happen, but that’s the lever we have to get the Americans to do away with that legislation on a rapid basis. That’s another key issue.
Obviously, we’ll also be working with the Americans on TPP [Trans-Pacific Partnership], which is a major part of the Obama administration’s agenda. Then, more broadly, there are issues related to the industrial base of North America. Our economies are so deeply integrated, it makes sense for us to take a pan-North American approach and say ‘what can we do to ensure the success of the North American manufacturing sector or to ensure the success of North American energy in global markets?’ What we should be doing is collaborating more closely with our NAFTA partners in terms of strengthening our business sectors here in North America.

DM: Which one of those many priorities keeps you up at night?
PB: All of them. It’s a bit of whack-a-mole. As one goes down, another pops up. There’s never a shortage of issues. You hear presidential candidates talking about building a wall along the 49th parallel and think, ‘Tell me I dreamed this.’
Unfortunately, where there’s politics, people are infinitely creative about causing problems. There’s a Hippocratic oath for doctors, which is ‘first, do no harm.’ I wish we had something similar for politicians. That would be a great thing.

DM: Particularly in the U.S. presidential race at the moment?
PB: Absolutely. And you can see it on the TPP, where the two frontrunners are both opposed to TPP.

DM: Speaking of TPP, what are your hopes on that front? Are you pleased about it, concerned about it?
PB: Both. Anything that removes barriers to trade and gives Canadian businesses better access to global markets certainly is positive because Canadian jobs are very much dependent on our ability to reach foreign markets and we have not been doing well relative to others. Our share of global trade has been shrinking, so we need to have access to the world’s fastest-growing economies, many of which are in Asia. But I am concerned about ratification, not so much in Canada, where the reaction so far from Canadians has been very positive, but there’s a very tight time-frame for ratification in the U.S. and you have both leading presidential contenders from the two parties who have indicated their opposition. Ratification in the U.S. will set the stage for the other countries and I think everyone will be watching that very closely.
We also have to ratify CETA [Comprehensive Economic and Trade Agreement.] The last report I had was that the language was still being scrubbed by the Europeans and it’s a very long, slow process. I will be stopping on my way to the B20 in Berlin to meet with counterparts in Germany to talk about progress on CETA and the importance of moving ahead on that.

DM: Could TPP negotiations have been more open?
PB: Could the negotiations themselves be more participatory? They should be. If you compared the free-trade negotiations in 1988, where you had sectoral advisory committees, with what’s been followed since then, it has not been as inclusive and participatory as it was. Other countries tend to have their business communities intimately involved in negotiations, absolutely informed and consulted at every stage. In Canada, we tend to be briefed. Yes, the government takes input, but there’s not the input that takes place in other countries. The whole point of the negotiations is to advance the business interests of your country because it’s good for the economy, so business should be at the table as a full partner.

DM: Is that a frustration of yours?
PB: Yeah. I’d like to see improvements there. It’s better than it was some years ago. When I attended the notorious WTO ministerial [conference] in Seattle — the battle in Seattle — [in 1999], what was amazing for me was how business was considered then as just another group. There was neither the information flow nor the collaboration that was necessary to ensure the negotiations would be beneficial to Canada. We really do need a Team Canada approach to any of these international negotiations. Other countries are there to advance their international interests, as they should be. We have to ensure there’s close collaboration between the Canadian business community and our government. It’s better than it was 10 years ago. But it’s nothing like the closeness there was in 1988.

DM: Are you hopeful, given Justin Trudeau’s promises to be more open?
PB: Yes. One of the positive things with the outgoing government was a very ambitious trade agenda and that’s a very positive thing, but the Liberals also have a tradition of internationalism and of wanting to promote closer trade ties with other countries, so I’m expecting that there will be a good deal of continuity and they’ll look for new ways to boost Canadian international trade and investments.
Jean Chrétien, for example, put a lot of emphasis on Team Canada trade missions. We need to realize we’re all on the same side and it’s in everyone’s interest to enhance the business side of Canadian companies.

DM: If you could send the Santa Claus of the trade world a wishlist for the next four years, what would be your top five countries with which to sign trade agreements?
PB: I would start by completing CETA and the TPP. Japan would be next on the list. Japan has said it wants TPP out of the way before it does a bilateral deal with Canada, but our two economies are certainly complementary. If Canada and Japan can’t reach a deal, it’s hard to see how it can be done with other countries. Other countries have things, such as rice [one of Japan’s major exports] as a stumbling block, but we don’t have that in Canada. We need to look at how we enhance the trading relationship with China, what form that takes. It could be the accession of China to the TPP. Or we could be looking at other bilateral discussions with them. Those would be my priorities. India would be high on the list as well.

DM: What are your thoughts on the Doha development round of trade negotiations that began way back in 2001?
PB: Doha? I almost forgot what that was! It would be wonderful to see some life breathed back into it. I was in Brussels a year or so ago and there was some hope to see some progress, but very little has been made and that’s one of the reasons TPP is so important. My preference would be to see multilateral trade agreements — to see the WTO functioning, and functioning well. In the absence of that, the best hope is multilateral, regional and bilateral agreements. We have to keep moving ahead, but what this does is create a patchwork of relationships as opposed to a common set of rules that apply all over the world. You get business almost looking at a 3D chart where they say ‘Chile has a trade agreement with Peru and is it better to put a plant there than here because I can get it into the other market?’ Far better if we could have something more coherent and truly international, where business could make its decisions based on sound business criteria as opposed to ‘How do I fit within all these legal agreements?’

DM: On the TPP, are the concerns of the automotive industry, and previously the dairy industry, legit?
PB: The government dealt with the dairy producers pretty directly in terms of a major compensation program for roughly 12,000 farms. We need an automotive strategy, which should be part of a broader strategy to revive manufacturing in Canada. The auto sector needs to be at the core of that. The big issue was the transition period [of the TPP] and the fact that it’s a shorter transition period for Canada than the U.S. was able to secure. As a consequence, the government will need to look at what sort of measures can be put in place to ensure we continue to attract investment from original equipment manufacturers and from other suppliers as well. The starting point has to be that, as an article of faith, we must have a strong and vibrant manufacturing sector in Canada. We can’t allow it to continue to slip away. The idea of having an automotive strategy and saying ‘we’ll actively go out to build the industry in Canada’ is an important starting point for us and then look at what needs to be done to do that.

DM: In terms of encouraging entrepreneurship, are the Liberal policies, such as rolling back the tax-free savings account  and looking at pension reform, concerning to you?
PB: There are those, and other issues, such as increasing taxes on people in the so-called one percent. It’s amazing how many people fit into that one percent. It creates a disincentive. It’s important to recognize that Canadian business people aren’t tied to a tree, where they are forced to stay here. They can take their talents and investment anywhere in the world. What we need is to attract more people to Canada who are entrepreneurial as opposed to driving them out. If we increase the costs or make it a hassle to do that, we lose as a country. It’s easy rhetoric to attack business and say you’ll tax the rich, but what you’re doing is putting a tax on success and discouraging people from making investments and taking the risks that are necessary to build the Canadian economy.

DM: Will you be lobbying against that?
PB: Well, it’s certainly of concern to us, but we also realize that it’s an integral part of the government’s platform and it’s something they’re likely going to do very quickly. But in principle, anything that discourages investment and discourages people from starting a business, growing it, hiring people, is damaging to the Canadian economy. This was central to their platform, but there are other issues that we’ll be dealing with. We want to look at changes to the Canada Pension Plan because what we’re talking about is a new payroll tax and any payroll tax is a tax on jobs.

DM: How are Canadian manufacturers positioned for 2016?
PB: It’s been a tough time for the sector. We’ve seen it hammered, particularly as a result of the decline in the North American automotive manufacturing sector. But we still have a strong base. When I spoke on this at the Walrus talks in Saint John, N.B., the point I tried to make is that we’re as entrepreneurial as anybody in the world. It’s not a matter of not having good business people or not having people who want to build their businesses, or that they’re not putting the energy in. Rather, we have to look at the ecosystem that surrounds them and that’s everything from how we look at intellectual property to what sort of incentive there is to commercialize [research and development] in Canada. We need to take a holistic view of the challenges facing our sector, but the starting point has to be that a country that allows its manufacturing to disappear is mortgaging the future of its children. I’ll admit that I’m biased. I come from a manufacturing family — three generations — and I believe it’s something we do well in Canada, particularly as you get into advanced manufacturing where there’s a high knowledge component, where you’re not competing on the basis of lowest price. We have a competitive advantage on the knowledge component and one that’s sustainable, in my opinion.

DM: Of the elements in that perfect ecosystem, what’s the one that needs the most work?
PB: I wouldn’t pick just one. During the election, we set out four key elements in our election platform. First was access to a powerful workforce, ensuring we have the skills that are necessary. No. 2 was access to markets, which involved the trade agreements that would take down barriers and then putting the infrastructure in place to allow us to get our goods to market. We’re the only major energy producer in the world without [proximity between our oil and] tide water. The No. 3 issue is access to capital. Many say it’s tough to get the capital to keep a business going, particularly in the pre-commercialization stage. There’s a valley of death that you go through where you have a proven concept, but it’s not on store shelves. The final one is access to technology and innovation. Are we doing enough to commercialize new technologies and to invest in technology for our businesses to make sure they can compete? The answer is no, we’re not. There’s no one silver bullet. You have to be able to move ahead on a whole range of areas to be successful.
We’re eminently capable of doing that, but it will be important for us to set priorities within those areas. For example, we’re very pleased that the government is committed to a major infrastructure program. But what will be important is the nature of the program. We’ve been spending on infrastructure instead of investing in it for the last 40 years. So we have a major gap. There’s not enough money in the public sector to meet the need, so we’ll have to look at leveraging funds through things like PPP [public-private partnerships].
Even with the money that is available in the public sector, the temptation of politicians is to spread the money like peanut butter across the country. What is vital is that we take the money and focus it on areas where there’s an economic return — issues like the roads in key areas, bridges, ports, border management, airports. Those areas which will actually drive economic development need to be the priorities. It can be politically popular to throw a fresh can of paint on the local curling club, but what it doesn’t do is create the economic activity that the country as a whole needs. We need to do triage and focus on those areas where we’ll get the greatest economic return for our investment.
We have to have a sense of urgency. It’s reaching a boiling point. We look out the window and say we have a pretty good life, then you go to other countries and you see the pace at which they’re improving. The pace at which people are improving their educational systems, the pace at which emerging economies are moving up the development scale and moving from producing commodities to doing their own R&D and providing global leadership and providing new technologies. You realize that Canada has been falling further back. We’re the most fortunate people in the world if you look at our resource inheritance. There’s not a country in the world that wouldn’t trade places with us. We have every country’s first-generation diaspora living in peace. You get the creativity from that, but you also have networks that go back to those countries. Boy — what an incredible base for us to build upon in terms of developing our trading relationships. If you look at it in terms of geography, we’re sitting next to the world’s biggest market. But are we living up to our potential? Or are we stealing from our kids? I think we’ve been falling short.

DM: I read a forecast yesterday that even with two interest rate cuts in 2015, and the election of a pro-stimulus government, the economy may yet need another shot in the arm.
PB: We’ll see. It’s been disappointing that growth has been so sluggish. We’re growing, but it’s slow growth by any standard. I don’t think we can allow a gap to grow between U.S. interest rates and Canadian interest rates. As we start to see [U.S. rates] going up, and I anticipate that happening sooner rather than later, it would be hard for us to move in the other direction. I don’t anticipate Canadian interest rates going up in the short term, but I think everyone realizes they can’t remain low indefinitely.

DM: What did you think of the Quebec government’s cash infusion of $1 billion to Bombardier?
PB: I think it highlights the significance of aerospace within the Quebec economy and the critical role that Bombardier plays in the cluster. We all certainly hope it will be successful. It’s a source of pride to see Canadian aircraft being sold around the world. By all accounts, the C-series is a fine piece of technology and we all hope they’ll be successful in terms of marketing it.

DM: Just the number of Quebec companies in their supply chain is remarkable.
PB: In Montreal, you’re looking at a couple hundred companies so you realize the importance of a company like that in terms of driving so much economic activity. It’s not simply the OEM [official equipment manufacturers], but everyone down through the production chain. And again, we’ve seen it in the resource sector. [I saw it in the] visit I made to Sault Ste. Marie yesterday, where the ore is mined in Quebec, brought to Algoma Steel in Sault Ste. Marie and turned into steel. Then it goes to Tenaris [Tenaris Algoma Tubes in Sault Ste. Marie], where it’s made into pipelines and then shipped to Alberta and B.C., where it’s used to get oil and gas from the ground. You quickly realize how interconnected the economy is. You can’t just pluck out one of the players without serious consequences.

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