By spouting grandiose goals on the one hand and hiding behind the inevitable delays and failures of multilateral trade efforts on the other, Ottawa has perfected the art of appearing to be busy without ever getting anything done. It’s a manoeuvre worthy of George Costanza, the character in the Seinfeld television series who passed his time trying to figure out how to keep his job while spending the day sleeping under his desk. Inevitably, George was always caught out, spouting feeble excuses no one believed.
Not even the bureaucrats are buying it anymore. “Our attention has been off the ball,” admits Bill Johnston, a veteran trade commissioner recently named consul general in Ho Chi Minh City, Vietnam. “What vision is there for our role in the world? We have to get the message out there, but we have to see that vision coming down from on high. We tend to have gigantic trade missions or a new strategy for emerging markets, but if behaviour doesn’t change, then what’s it all about? We tend to confuse rhetoric with strategy and activity with results. These missions are like Alice in Wonderland. If you don’t know where you are going, any road can take you there.”
LA BOMBARDIERA
In October 1997, Westcoast Energy, together with a group of partners, won an international bid to build a us$1 billion nitrogen injection plant in the Gulf of Mexico. The plant, which enhanced the Mexican production of heavy crude oil recovered from vast undersea reservoirs, was the largest project of its kind in the world and a major coup for the Vancouver-based company. But Westcoast’s celebration was short-lived. Days after the announcement, Canada’s ambassador to Mexico publicly complained that Canadian companies would never be able to compete for large contracts in Mexico because of rampant corruption. Interviewed by the Mexican press, the diplomat cited the “very dirty story” of how Bombardier had won and then lost a us$360 million government bid to build subway cars for Mexico City. It was the third time the Quebec transportation company had lost out to Spanish rivals.
This decidedly undiplomatic accusation unleashed a political maelstrom in Mexico that not only prompted the ambassador’s resignation, but jeopardized Westcoast’s much larger deal. pemex, Mexico’s all-powerful state-owned oil monopoly, was furious, especially since it had gone to great effort to ensure that the bid process was open and transparent. Westcoast, worried that it might be thrown out of the consortium, sought the intervention of high-ranking Mexican officials. “There was a definite air of disqualification,” says Ian Mallory, Westcoast’s director general in Mexico. “Our partners— the Germans, Japanese and British — thought the Canadians were beyond unsophisticated. They thought we were complete idiots.”
Westcoast managed to hang on, but was treated like a naughty child at the luncheon to celebrate the awarding of the tender. The British, Japanese and German consortium partners were seated at the head tables with senior Mexican officials while Westcoast, with a 30 per cent stake in the deal, was, with the exception of its CEO , relegated to the “kiddie table.” In a speech, the head of pemex thanked all the partners — except Westcoast. “Why? Because Bombardier had Ottawa by the balls,” says Mallory. “Their contract was a third the value of ours. Nobody seemed to care. It was all about positioning back home.”
It wouldn’t have been the first time that Ottawa’s preoccupation with defending its national champion would come at the cost of the country’s entire trade policy, not to mention other Canadian companies. Ottawa’s ill-considered decision to back Bombardier in its ongoing subsidy war with its Brazilian aerospace rival, Embraer, had incalculable consequences for trade and investment, severely strained diplomatic relations and sent Canadian companies in Brazil running for cover. The question is, was it at least worth it?
The Brazilians were smarting even before Ottawa decided to challenge Embraer’s subsidized jet sales before a wto dispute panel in 1996. The federal government, bowing to domestic pressure, had been pressing Brazil to release two Canadians convicted of the 1989 kidnapping of a wealthy São Paulo businessman. The Canadian position was seen as a flagrant disregard for Brazil’s justice system, particularly since the pair, though lionized at home as unsuspecting innocents, were in fact members of a Marxist terrorist group. Ottawa secured their extradition in 1988 in a prisoner exchange and within months they were freed, serving just ten years of their twenty-eight-year sentence.
Then came — at least that’s the way the Brazilians saw it — the second slap in the face. Embraer had originally been part of the Brazilian air force when it went private in 1994. The company’s CEO at the time met Bombardier’s chairman, Laurent Beaudoin, during a luncheon. The Embraer chief suggested that Bombardier buy the Brazilian aerospace upstart in order to create a united front against global behemoths Airbus and Boeing. Beaudoin crisply rejected the offer, with words to the effect of: Don’t worry, we’re going to destroy you. “Bombardier was very superior about it,” confirms James Mohr-Bell. “They ignored them [Embraer] and then embarked on a campaign to kill them financially or step over them.”
Just as Embraer began to spread its wings, Ottawa took Brazil’s national champion to the wto. There is little question that Embraer was getting government help — although perhaps not as much as Bombardier’s billions in subsidies — and shortly after winning the right to impose trade sanctions, Ottawa slapped an import ban on Brazilian beef in 2001. The Brazilians, their national pride assaulted not once but twice, went nuts. They poured bottles of Canadian Club whisky into garbage bins and hauled a Brazilian steer, dubbed “La Bombardiera,” in front of the Canadian embassy. Clearly chastened, Canadian officials lifted the ban three weeks later. But the damage had been done. The one-time nice guys became known in Brazil as “the bad guys from Canada,” says Mohr-Bell.
“Something failed in the Canadian system,” he says. “They were letting favoured treatment of Bombardier go beyond whatever was reasonable— nobody was there to say: this is no longer in the interest of Canada.”
It certainly didn’t do Canadian companies any favours. Spooked by the palpable animosity, they cut any visible links to Canada, stopped advertising locally and shied away from promoting activities or public events. Brazilian officials refused to even reply to invitations to attend Canadian Chamber of Commerce events, while bilateral trade and investment dried up as companies like the Brazilian oil giant Petrobras refused to buy anything Canadian. “It was the complete hijacking by one Canadian company of Canadian commercial policy,” says Tim Plumptre, a former director of the Brazil–Canada Chamber of Commerce in Toronto.
And for all that pain, what did Ottawa gain? Brazil ignored the wto ruling, and without any significant bilateral trade Ottawa had no economic leverage with which to pressure the Brazilians, says Chuck Gastle, a Toronto trade lawyer who wrote a research paper on the case. “I marvel at the lack of strategy that brought Canada into such a dispute. You have to have an end game in trade. If you don’t, you have to wonder why you are doing it,” he explains. “The sad reality is, it strained the relationship with Brazil at a time when it was emerging as a key player on the international scene.”
The Brazilians eventually found it in their hearts to overlook Canada’s transgressions, and Prime Minister Paul Martin headed a Canadian mission to Brazil in November 2004. The Brazilians even offered the Canadians a trade deal. And why not? They could afford to be generous. Embraer, the pipsqueak company that Bombardier thought was too irrelevant to bother with, is now beating their pants off in the regional jet market. “It’s all forgotten and forgiven now,” says Plumptre. “For one simple reason — they’ve won.”
TEQUIL A SUNRISE
It was supposed to be a fabulous entrée into the Mexican market. More than four hundred Canadian companies were slated to attend a Canadian trade fair in Mexico City that was being touted as a springboard for bilateral trade in the run-up to NAFTA. Embassy officials scrambled to coordinate the hordes of arriving businesspeople while Ottawa doled out big bucks to help pay for their plane fares, hotels and display booths. But within hours the much-anticipated eve
nt looked more like a Tijuana-style bachelor party. “Half the companies had no business being there,” says one former embassy official. “By 10 am, everyone was wearing big sombreros and drinking tequila. It was absolutely insulting.”
One of Canada’s leading window manufacturers didn’t have any business being on a Team Canada trade mission to South America, but that didn’t stop company owners from snapping a picture of themselves with a grinning Prime Minister Chrétien. The photo, which greets visitors to its corporate offices, includes a clutch of dark-suited Chileans identified as the company’s newly signed local dealers. That the Chileans had no intention of representing the firm was beside the point, explains a company executive. “They got together a bunch of Chileans that they liked and took a picture with Chrétien so they could say it was a done deal. They did the same thing in Argentina,” he explained. “There never was a focus, never a commitment on their behalf, but they had a picture that said: ‘We’re there.’”
At the most recent Team Canada trade mission to China in January 2005, the government announced the signing of more than one hundred agreements by some of the 280 companies on the junket. A cursory scan of the long list of participants, however, turned up several questionable companies and bogus announcements. jte Environmental Resources, which reportedly agreed to buy stakes in two Chinese environmental protection companies, has a Vancouver-listed telephone number that does not answer. On its crudely constructed website, the company explains that it is “led by the Administrator, who is appointed by the President of Canada.”
Another company, 3l International Corp. Group, which the government press release describes as hailing from Richmond, B.C., is not listed in Richmond or anywhere else. A third firm, Valdor Fiber Optics, appears to be a real company, based in San Francisco, although with nominal representation in Vancouver. The only problem is that its purchase of a Shanghai fibre optics manufacturer, purported to have been clinched on the mission, was actually announced five months earlier.
The stories of abuse and misuse of government largesse are legendary and may partly explain why, despite the myriad missions, fairs and schemes exhorting companies to “go global,” there is so little success. In the government’s zeal to produce results, many companies have copped a free ride, but this scattershot approach to promoting trade is costing them more than they realize. By emphasizing quantity over quality and short-term gain over long-term results, Ottawa discourages Canadian firms from taking international markets seriously and entrenches reliance on government support.
For John Gruetzner, a Canadian business consultant based in Beijing, the damage is particularly evident in China. The repeated missions have not only begun to wear on the Chinese, but perpetuate the idea that the world’s fourth-largest economy is still a new and relatively unexplored market. By periodically parachuting in a raft of diverse and disparate firms, the unwieldy and politically weighted missions have distracted companies from the real business of meeting customers, striking up partnerships and understanding the market, he says. “The constant repetition of Team Canada prevents people from getting in and rolling up their sleeves,” explains Gruetzner. Instead, the missions “are like a high school reunion that keeps coming back every year.”
Rick Waugh, chief executive of Scotiabank, went on one mission to Brazil and swears he’ll never go on another. “All we did,” he says with tinge of exasperation, “was wait, and wait, and wait for the government sector to show up. And then we heard speeches and then we did a little bit of networking. It was very inefficient for a businessperson’s time.” Charlie Fischer, the head of oil company Nexen, is less sanguine. “Trade missions don’t do anything. They’re boondoggles, a waste of time.”
For many businesspeople, the crux of the problem is the government’s failure to understand what companies really need to make the difficult leap into foreign markets. Despite a dizzying array of agencies, programs and — according to one calculation— eighteen government departments with mandates to promote trade, there is a disconnect between the grand ideas dreamed up in Ottawa and practical, day-to-day business concerns. The result is a series of ad hoc and usually short-lived endeavours that lack any coherent strategy.
The Canadian Business Centre in Mexico City is a case in point. Opened in 1994, the centre, which sported a board room, office space, a secretary and imported-wood floors from Canada, was supposed to provide Canadian companies, grouped together in one spot, with a collective momentum. “It was a great idea,” says Pierre Alarie, a Canadian executive with long-standing ties to Mexico. But instead of having a core group of renters to pay for basic costs, the government opted to charge business travellers a daily fee. The rates were no better than those of a hotel, and after racking up several million dollars in losses the centre closed two years later. “The government should have surveyed companies in Canada first,” says Alarie. “It was a huge disaster at a time when you could do no wrong in Mexico.”
If business were just consulted, say those in the field, government would quickly discover that what companies want are not obscure support programs that have generated an entire industry of consultants just to wade through the bureaucracy, but simple, straightforward answers. For a company looking to export ice cream to Korea, for example, that means being able to find out what the tariffs and market regulations are and how to get that information from the Koreans, explains Lorna Swift, of York University’s Schulich School of Business. “The government is not getting the information, and it’s not getting the right information at the right time to the right people.”
In a 2003 survey done by the Canadian Federation of Independent Business, a full 80 per cent of respondents said that they did not use government trade promotion services, and that “the rare ones who do so have expressed mixed opinions on efficiency.”104 “Companies are asking for tariffs on a specific product, and instead we tell them that China has a robust housing market,” explains Bill Johnston. “They ask, ‘Why go to China?’ And we say, ‘The Chinese economy is growing.’”
Many attribute the government’s inability to focus on a lack of business experience, which some say is particularly evident in the embassies and among diplomatic staff. Although some businesspeople had high praise for certain individuals — like the ambassador to Cuba who parked a Canadian-made ambulance on the front lawn of his residence and then had guests walk through it to attend a party — they were the exceptions rather than the rule. In the case of India, for example, some of Canada’s largest investors in that country — and there are not many — noted they had yet to be contacted by High Commissioner Lucie Edwards, who had assumed the post in 2003. While Edwards has an impressive resumé, all too often, ambassadors are patronage appointments with little grasp of the country they are working in, say critics. “Do they speak the language? Have they ever done anything like this?” asks one well-heeled businessman. “When you look at the positions abroad, it’s embarrassing.”
Similarly, while Yvan Bourdeau, CEO of BMO Capital Markets, singled out the commercial counsellors at Canada’s Chinese embassy as among the best trained in the world, many businesspeople complained that although neophyte staffers were “careful, courteous and polite,” they couldn’t spot a business opportunity if it hit them on the head. Andrew Stodart, the former international brand director for Black Velvet whisky, uses the example of Taiwan, which had a 300 per cent tariff on Scotch whisky and a 400 per cent tariff on cognac. The tariff on North American whisky, in comparison, was just 25 per cent. “If somebody had been on the ball at the embassy, they would have written to every Canadian whisky producer,” he says. “But they have no business background.”
Instead, the Canadian embassy providing the most market intelligence in 2003 was in Damascus, Syria. It flooded the Trade Commissioner Service with 247 tender notifications by the Syrian government. What the service or companies are expected to do with this information is not clear. In fact, of the almost 6,500 pieces of market intelligence sent back to Canada from th
e various postings around the world that year, only 800 to 900 were specific trade leads, says Johnston. As to what happened to them, he says, no one knows.
By the same token, there is little rhyme or reason regarding where embassies and consulates are located. Some 20 per cent of Canada’s trade commissioners and their support staff are in the United States, including six in Buffalo and seven in Minneapolis. In 2004, Ottawa opened seven new consulates in the southern U.S. states. Yet according to an internal government report commissioned more than a decade earlier, government resources deployed in mature markets like the United States and Europe garner very little return for the investment.105 As one former government hand explains: “If you need to be supported by trade commissioners in a country like the U.S., then there’s something wrong with your approach.”
The real bang for the buck comes from locating consulates in developing countries, where languages and business practices are different and a government presence is seen as a sign of credibility. Charlie Fischer points out that Nexen’s operations in Yemen account for 30 per cent of the country’s GDP, yet Canada is the only member of the G8 without an embassy there. Instead of leveraging Nexen’s success to actually “make a difference” and help Yemen in its efforts to promote civil rights and democracy, Ottawa opened an embassy in Sudan to keep an eye on Calgary-based Talisman, which was operating a controversial oil project in the war-torn country. The government may have a role to play in ensuring that human rights are respected in Sudan, but Ottawa appears more concerned with optics than with the opportunity to make a tangible difference.
“We are the most successful foreign company in Yemen,” says Fischer. “Then you have Talisman in Sudan breaking all the rules, so they put in an embassy to track them. Why doesn’t the government put money where they can make an impact?”
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