Canadian Food Companies Must Innovate for Export

Posted by on Dec 21, 2012 in Blog | 0 comments

The Canadian food industry is a complacent lot, focused on the massive US market and lagging behind in innovation.  That’s the conclusion of the Conference Board of Canada’s (CBoC) most recent study Competing for the Bronze: Innovation Performance in the Canadian Food Industry. In this post, I’ll discuss the implications for Canadian food exports to China in light of the country’s explosive urbanization and growing demand for imported food products. 

Most Canadian firms, in spite of strides made in recent years, do not put a high priority on innovation.  Private research spending is much lower than other sectors of the economy and public spending in primary agriculture R & D has actually declined over the last two decades while private spending has failed to take up the slack. 

Needless to say, those businesses that face competition are more innovative but supply managed segments of the industry are effectively sheltered from competition at home and from abroad.  Moreover, the small, geographically dispersed, and complexly regulated Canadian market often makes it difficult for firms to achieve the economies of scale needed for innovation.  The demands of large retailers also affect manufacturer behaviour.

The consequence, says CBoC, is Canada’s shrinking presence in the global food market, dropping a full percentage point from 4.2% in 2000 to 3.2% in 2010 (but recovering somewhat in 2011). Meanwhile, China’s global share almost doubled to 6.3% during that period and the US increased its food and beverage exports from 11.1% to 12.2%.  Even tiny New Zealand has a 2.5% share.

Spoiled by proximity to the US, apart from raw agricultural commodity exporters, Canadian food processors rarely look to large emerging markets such as China for expansion and they’re even less inclined to innovate their products to suit foreign consumer tastes. 

Ronald Doering, a past president of the Canadian Food Inspection Agency, wrote on www.foodincanada.com a couple years ago:  “Because Canadians can’t eat much more food, growth in the food industry depends almost entirely on producing value-added products for export.  If the Canadian food industry continues to miss the opportunities in China, they will have nobody to blame but themselves”.

Since then, Canadian manufacturers have upped their game in China, prodded by Foreign Affairs that this year designated food exports to China a top trade priority.  Besides traditional exports like wheat, yellow peas, and canola, Canadian companies are increasingly targeting the upper middle class market for top quality beef and pork, lobster, raw and smoked salmon, sea cucumber, honey and berries, maple syrup, and even greenhouse vegetables.  Overall Canadian exports to China grew a healthy 27% last year but the agri-food and seafood sectors performed sluggishly, rising only 3.9% to just over $3 billion.  In terms of top Canadian food export destinations, China is fourth behind the US, Japan, and Europe.

As for innovation for the Chinese market, the substitution of mung beans with Canadian yellow peas is a case in point.  Mung beans are used to make vermicelli noodles but since Canada doesn’t grow mung beans, Canadian researchers were able to develop a process to extract and use yellow pea starch to make the noodles.  Using a flour mill, pasta presses, cooking extruders and other food processing equipment, Winnipeg-based Canadian International Grains Institute (CIGI) researchers “fractionate” field crops into their component parts to make them more food-ready.  Mr Earl Geddes, executive director of CIGI told the press recently: “Our objective is to sell more Canadian field crops at higher prices.  The more people use our technologies, the greater demand for Canadian crops”.

Canadian agri-food exports going forward hinges increasingly on the shift from commodities to high-quality, healthy and nutritiously enriched food ingredients and finished products.  Justine Hendricks, vice-president for Resources at Export Development Canada commented: “Millions of citizens in emerging markets including Brazil, China, and India are entering the middle class each year.  As they do, they want higher-quality foods too”.

SFU president: Greater China Universities Outpacing Canadians in Education/Research Investment

Posted by on Dec 20, 2012 in Blog | 0 comments

His use of the words ‘danger’ and ‘threat’ is misplaced but the thrust of SFU president Petter’s reflections on his recent trip to Beijing and Hong Kong is undeniable.   One strategic element he missed however:  cooperating with mainland Chinese and Hong Kong institutions in high-tech research.   In another decade, China’s top flight universities will be among the best in the world in research.
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 The proposed takeover by the Chinese National Offshore Oil Corporation (CNOOC) of Nexen has triggered discussion about the dangers of Chinese investment to Canada’s social and economic security. But the greater threat may be that China and its neighbours will simply outsmart us. What these countries are investing at home, on education and research, could pose greater risks to our economy and quality of life than any amounts they are likely to invest here.
On a recent trip to Beijing and Hong Kong, I saw first-hand how Chinese investments in knowledge and ideas are fuelling its economic dominance. At the Communication University of China in Beijing, I met with the president in a brand new administration facility, after which I visited their expanded media museum in another sparkling new complex. I toured the fabulous new library at Renmin University, before walking across a campus dotted with construction cranes.
In Hong Kong, I saw City University’s impressive new media facility and toured the modern residences at the Chinese University of Hong Kong. Even the older structures at these universities have been renovated and upgraded.
If the building boom is impressive, the growth in China’s educational and research capacity is even more so. All of the universities I visited reported having significant infusions of government funding.
In this context, one begins to understand why Asia’s universities are surging up the list of leading international universities. For example, while SFU is proud to be rated 25th in the QS World University Rankings of the best universities under 50 years of age, City University and the Chinese University in Hong Kong are ranked 10th and first respectively.
This is no accident. As Chinese University of Hong Kong Provost Benjamin Wah told the Times Higher Education unit, Asian governments have come to regard post-secondary education and research as critical keys to social and economic development. “Although (Asia’s) economic prosperity was originally fuelled by inexpensive labour in low-end manufacturing, rising labour costs and other socio-economic forces have driven these countries from pure manufacturing to the creation of new ideas and innovation, in order to stay competitive,” says Wah. “These forces have led to significant investments in higher education and research.”
The strategy is paying off — big time. Asian countries are fast becoming leaders in developing new products, technologies and innovations, and are reaping the financial rewards.
While other developed countries are struggling to keep pace with these investments, Canada and the U.S. are falling behind. While Northern European countries boast university participation rates in the top 10, Canada is 21st — behind developing economies like Slovenia and Portugal.
If we hope to maintain a strong economy and high quality of life, Canadian governments must wake up to this challenge. In British Columbia, the Research Universities’ Council recently presented the B.C. government with an Opportunity Agenda, our best estimate of the kinds of post-secondary investments that are necessary to enable our young people to realize their full potential and to keep our province competitive in the global knowledge economy.
There are three elements. We need to provide: enough post-secondary spaces for every qualified student; and enough money that we are not turning away bright students whose parents can’t afford the rising costs. And we must invest at a competitive rate in research and innovation.
We dare not forget that Canada’s most important asset is its people. Whatever the fate of our natural resources, we won’t be able to defend our economy or maintain our quality of life if we fail to nurture and enrich our human resources. Based on what I witnessed in China, the time to reinvest in post-secondary education and research has never been more pressing.
Andrew Petter is the president and vice-chancellor of Simon Fraser University.

– Vancouver Sun

UBC Prof: Nexen Approval Will Boost Pipelines to Coast

Posted by on Dec 20, 2012 in Blog | 0 comments

Keith Head, a professor at UBC’s Sauder School of Business, said it may not matter to Nexen acquirer China National Offshore Oil Corporation whether it’s Enbridge’s Northern Gateway pipeline to Kitimat or a twinned Kinder Morgan pipeline to Burnaby that delivers oil to tankers destined for Asia.

“I don’t think they’re wed to any particular pipeline,” Head told the Straight in a phone interview. “But my strong presumption is they are thinking that there’s going to be a way to get that oil to China. And the only feasible way is pipelines.”

According to the UBC academic, there’s already a “strong business proposition” for the export of oil to Asia. At present, much western Canadian oil goes to Cushing, Oklahoma, where it’s priced as Western Texas Intermediate. That oil goes for about $20 per barrel less than London’s Brent Crude price, the global standard.

“Obviously, I think the Chinese [government], through CNOOC, is very interested in having some of the oil flow towards it,” Head explained. “I don’t think CNOOC is buying Nexen because it’s interested in exporting oil to Cushing.”

A report released in June by the Canadian Association of Petroleum Producers notes that Canadian oil gets “discounted prices” in Oklahoma.

“New additional capacity to the west coast is key in order to link western Canadian crude oil production to the world market,” according to Crude Oil: Forecast, Markets & Pipelines. “Both Kinder Morgan and Enbridge have pipeline projects to increase access to the west coast.”

– straight.com

Poll: Majority of Canadians Reject Foreign Investment

Posted by on Dec 19, 2012 in Blog | 0 comments

Canadians should stop hiding behind the maple leaf.  Canada needs foreign investment, wherever it comes from.  But, it will be years before the distrust of foreign state corporations, notably Chinese, will begin to ease.   A lot of it pins on how CNOOC behaves in the coming years.

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Most Canadians want the Harper government to stop the sale of Canadian companies to foreign investors, particularly if the buyer is a state-owned enterprise, a new poll has found.

The Ipsos Reid survey, conducted exclusively for Postmedia News and Global TV, found that 68 per cent of Canadians believe the Conservative government should block the sale of Canadian firms to “all foreign investors.”

Moreover, 74 per cent of Canadians say the governing Tories should stop such proposed acquisitions if they are made by state-owned enterprises owned by a foreign government.

The poll also cast a fresh light on public attitudes towards Canada’s international trade agenda. Most Canadians (61 per cent) support the idea of increasing trade with Asia — a key element of the federal government’s economic plan.

However, there is a note of caution among Canadians about doing business with China. Prime Minister Stephen Harper travelled to that country earlier this year and there has been preliminary discussion about launching talks for a free-trade deal.

But a majority of Canadians (59 per cent) say they oppose a free-trade agreement with China that would be similar to the one struck with the United States 25 years ago.

The nationwide survey comes after Harper announced earlier this month his government will allow the $15.1-billion takeover of Nexen by a Chinese state-owned enterprise, but that future sales of this type in the Canadian oil patch will only occur under “exceptional” circumstances.

Advocates of outside investment in Canada’s oil industry say the input of foreign capital is needed to pump billions of dollars into projects.

However, the new poll found that most Canadians (56 per cent) disagreed with the statement that “if Canada wants its oil and gas sector to grow, it needs to attract foreign investment from countries like China.”

While the poll found majority support (61 per cent) for enhanced trade to Asia, the support drops for specific countries: India (56 per cent) and China (51 per cent).

The results are from a poll conducted Dec. 7 to 12. For the survey, a sample of 1,021 Canadians from Ipsos’s Canadian online panel was interviewed online.

The margin of error is considered to be 3.5 percentage points.

– Vancouver Sun

The Campaign Against FIPA

Posted by on Dec 18, 2012 in Blog | 0 comments

Now that the approval of CNOOC’s Nexen takeover is history, China bashers and critics of the deal have banded together to lambaste the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA).  In fact, the Leadnow.ca advocacy group in collaboration with SumOfUs.org has been active for months, trying to rally support against the impending ratification of the treaty which they declare would “allow foreign corporations to sue the Canadian government in secret tribunals (sic.), restricting Canadians from making democratic decisions about the economy, environment and energy”.

Let’s set aside simpleton letters to the editor juxtaposing FIPA versus Canadian democracy and the vitriol and antics of the rabidly anti-China leader of the Green Party, not to mention the hyperbolic remarks of the federal NDP leader.  A couple anti-FIPA commentaries appearing in the Vancouver Sun attacked the agreement on several fronts including provincial rights, Canadian environmental protection laws, protection of the rights of Canadian businesses and investors in China, and ‘secret’ arbitration boards.   

On neglecting provincial rights, one commentary asks: “is it morally right and politically wise for the federal government to impose an agreement on the provinces that affects their rights without consulting them?”  In mid November, responding to criticism of FIPA in the Comox Valley Record, Tory MP John Duncan for Vancouver Island North notes that under the agreement, “Chinese investors in Canada must obey all of the laws and regulations of Canada”, which includes respecting the rights of the provinces under the Canadian system of federalism.

Another criticism is that Canadian businesses would be at the mercy of the Chinese legal system if and when their businesses are expropriated.  Mr Duncan writes:  “The main purpose of FIPA is to ensure Canadian investors in a foreign jurisdiction greater protection against discriminatory and wholly arbitrary practices…The agreement also ensures that all investment disputes are resolved under international arbitration, ensuring that adjudications are independent and fair.  Canadian investors in China will no longer have to rely on the Chinese legal system to have their disputes resolved”. 

In this connection, critics are particularly outraged that a secretive three-member arbitration panel would decide on matters of Canadian environmental and economic policy and thereby undermine Canadian democracy and sovereignty.  Under FIFA rules, they say, Chinese companies with interests in the Canadian oil sands could sue the Canadian government on the grounds of profit loss if, for instance, the Northern Gateway pipeline is cancelled due to environmental and/or First-Nation concerns.  

Bob Zimmer, Conservative MP for Prince George-Peace River, however, rejects such speculation outright.  Quoted in the Prince George Free Press, Mr Zimmer responded, “The FIPA that we have with China is a framework, somewhat of a reciprocity…The FIPA helps us with a framework for companies and foreign investment that wasn’t there previously.  It gives parameters the Chinese have to operate under with us.” 

Attending a Ottawa briefing with foreign affairs officials last month, John Weston, another Conservative MP, adds that FIPA sets new standards for transparency that guarantees public access to relevant documents and awards and sets terms for public hearings when disputes occur.

Critics further accuse FIPA of emasculating existing Canadian environmental laws since they can be construed as being applied in arbitrary or unjustifiable ways or a disguised restriction on international trade and investment.  Mr Duncan retorts:  “What the agreement does NOT do is impair Canada’s ability to regulate and legislate in areas such as the environment, culture, safety, health and conservation.  Furthermore, Canada’s ability to review foreign investments under the Invest Canada Act to ensure that they provide a net benefit to Canadians and that our national security is not compromised is preserved.”

Mr Duncan likened FIPA to the 24 investment treaties that Canada has signed with other countries.  “We join countries such as New Zealand, Germany, the Netherlands, Belgium and Japan, which have all signed investment treaties with China on terms that are similar to or in most cases less favourable than the terms we have negotiated with China.  Finally, in 2008, the Conservative Government introduced the unprecedented process of putting Canadian international treaties to the scrutiny of the House of Commons.  Every single treaty is now tabled in the house for 21 days to give the opposition an opportunity to debate the treaty”.    

While reasonable debate on the ramifications of FIPA is positive, unfounded fanatical opposition isn’t.  Opponents should not expunge common sense or lose sight of the numerous benefits that FIPA would bring to the peoples of both countries.