Evaluation of the Canadian Trade Offices in China

Final Report
Prepared by the Diplomacy, Trade and Corporate Evaluation Division (PRE) in the
Evaluation and Results Bureau (PRD)
Global Affairs Canada
November 2017

Table of Contents

• Acknowledgements
• Acronyms and Abbreviations
• Executive Summary
• Program Background
• Program Background in China
• Evaluation Scope
• Methodology
• Findings
• Conclusions
• Recommendations
• Management Response and Action Plan

Acknowledgements

The evaluation team would like to extend special gratitude to the Greater China Trade Network for fully supporting the evaluation process and the site visits. China’s CTO network and CCC were keen to facilitate and participate. We would also like to thank the GAC Geographic Programs of South Asia and the South America for their involvement and interest. Furthermore, the evaluation team would like to recognize the GAC’s trade systems and analysis unit for their patience, efforts and feedback in supporting analysis that utilized data from TRIO2.

Acronyms, Abbreviations and Symbols

ADDIS

Canadian Embassy in Addis Ababa

AMDBD

CTO Ahmedabad (India)

ATC

Assistance Trade Commissioner

BEJING

Canadian Embassy in Beijing

BELO

CTO Belo Horizonte (Brazil)

BI

Business Intelligence

BTB

GAC - Systems and Analysis

CAD

Canadian Dollar

CBS

Canada-Based Staff

CCBC

Canada-China Business Council

CCIL

Canadian Commercial Interests List

CCC

Canadian Commercial Corporation

CCCRO

Canadian Commercial Corporation Regional Office

CHENI

CTO Chennai (India)

CHGDU

CTO Chengdu (China)

CHONQ

Canadian Consulate General in Chongqing

CLMBO

Canadian High Commission in Colombo

CRM

Client Relationship Management

CSR

Corporate Social Responsibility

CTO

Canadian Trade Office

DHAKA

Canadian Embassy in Dhaka

DELHI

Canadian High Commission in New Delhi

DSLAM

Canadian Embassy in Dar Es Salaam

EOF

Economic Outcome Facilitated

FDI

Foreign Direct Investment

FPDS

Foreign Policy and Diplomacy Service

FY

Fiscal Year

FTE

Full Time Employee

GAC

Global Affairs Canada

GANZU

Canadian Consulate General in Guangzhou

GC

Government of Canada

GMAP

Global Markets Action Plan

HL

High-Level

HOM

Head of Mission

HQ

Headquarters

HUB

Canadian Diplomatic Mission responsible for CTOs

HNGZU

CTO Hangzhou (China)

HDRBD

CTO Hyderabad (India)

IMS

Integrated Management System

ITSF

Integrative Trade Strategy Fund

KGALI

Canadian Embassy in Kigali

KLKTA

CTO Kolkata (India)

KPI

Key Performance Indicator

LES

Locally Engaged Staff

NANJG

CTO Nanjing (China)

NROBI

Canadian Embassy in Nairobi

MMBAI

Mumbai

MRAP

Management Response and Action Plan

PM

Prime Minister

PALGR

CTO Porto Alegre (Brazil)

PWC

Price Water House Cooper

OBMO

GAC- Business Management Office Asia

OGD

Other Government Department

OP

Opportunity Pursued (KPI)

OPC

GAC- Greater China Program

OPI

Opportunity Identified

QNGDO

CTO Qingdao (China)

OPR

Opportunity Referred

QSF

Quasi Statutory Framework

R-STC

Regional Senior Trade Commissioner

RECIF

CTO Recife (Brazil)

RIO

Canadian Consulate General in Rio de Janeiro

RO

Regional Office

ROI

Return on Investment

RMB

Renminbi

SHNGI

Canadian Consulate General in Shanghai

SHNYG

CTO Shenyang (China)

SHNZN

CTO Shenzhen (China)

SME

Small and Medium-Sized Enterprise

SPALO

Canadian Consulate General in Sao Paolo

STC

Senior Trade Commissioner

SWA

GAC - Financial Management Advisory Services

SWP

GAC - Financial Resource Planning

TBS

Treasury Board Secretariat

TC

Trade Commissioner

TCA

Trade Commissioner Assistant

TCS

Trade Commissioner Service

TD

Temporary Deployment

TANJN

CTO Tianjin (China)

TRIO

Trade Commissioner Service Database

WUHAN

CTO Wuhan (China)

XIAN

CTO Xi’an (China)

XIAMN

CTO Xiamen (China)

PRE

GAC - Evaluation Division

ZID

GAC - Office of the Inspector General

Executive Summary

Canada has a number of two-person Canadian Trade Offices (CTOs) in emerging markets of China, Brazil and India. The CTOs are mandated to provide core Trade Commissioner services in an effort to expand Canada’s commercial network abroad. These services help Canadian firms identify and seize business opportunities in key secondary markets.

In India and Brazil, Global Affairs Canada (GAC) directly manages four and three CTOs respectively. In China, all ten of the CTOs are administered external from the Government of Canada (GC) by the Canadian Commercial Corporation (CCC) since 2009. The governance structure of the CTO Program in China is outlined by a MOU between CCC and GAC. GAC is responsible for leadership and supervision, including day-to-day oversight from the nearest mission. While the evaluation focusses on the ten CTOs in China, relevant lessons learned from India and Brazil were shared as they were relevant. Notably, CTO managers in India and Brazil have leadership opportunities, clearly defined sector-leadership and team approaches. Both countries utilise existing tools of the department in their planning and reporting for results.

The evaluation found that CTOs in China made a strong contribution to core Trade Commissioner Services. There was a high level of client satisfaction for their work and their value extended beyond the results captured by the Key Performance Indicators. However, their contribution to the growth of Canadian trade and investment is not accurately captured. The evaluation documented that within the China Trade Network, there are additional risks and challenges that will remain without tailored solutions to address them. While the two-person CTO model is perceived as nimble and flexible, there has been little flexibility and nimbleness observed in practice. Steps have been taken to adjust operations and opportunities remain to address these challenges.

Program Background

Under the Global Commerce Strategy (GCS) in 2007 and the Global Markets Action Plan (GMAP) in 2013, Canada expanded its Trade Commissioner Services with the creation of 2-person trade offices in emerging markets of China, Brazil and India. The Canadian Trade Offices (CTOs) expanded Canada’s commercial network abroad in order to help Canadian firms identify and seize business opportunities in key markets.

China

Unlike the CTOs in Brazil and India, the CTOs in China are administered external from the Government of Canada (GC) due to Chinese laws and regulations. Prior to 2009, four offices in China were contracted to the Canada China Business Council to provide services on behalf of the Trade Commissioner Service (TCS). Since 2009, the number of CTOs in China has grown; and, they are administered by the Canadian Commercial Corporation (CCC). The CTOs are officially registered as Canadian Commercial Corporation Representative Offices (CCCROs) in China. The governance structure of the CTO Program in China is outlined by a MOU between CCC and GAC. CCC leads in setting up of office space and equipment, payment of staff and financial management of the CTOs. GAC provides leadership and supervision on the work of the Trade Commissioner as well as day-to-day oversight from the nearest Consulate General or Embassy. GAC is consulted on expense claims, office planning and other issues that may arise.

In 2009, six CTOs contracted through the CCC opened in China with continuous annual funding support from the GCS ($1M/yr). In 2013, a further $1M of continuous annual funding was allocated through the GMAP which supported the opening of an additional 4 new offices from 2014 to 2015, expanding the CTO network to a total of 10.

GAC directly manages CTOs in Brazil and India.

Brazil

There are three CTOs in Brazil. The BELO office was opened in 1998, funding for all three offices was announced in 2007/08 as part of the GCS.

India

There are four CTOs in India. While the offices in HDRBD, AMDBD and KLKTA were part of the GCS, CHENI was downsized from a Consulate to a CTO in 2013.

Program Background in China

The CTOs are mandated to provide core TCS services to Canadian clients in order to help identify and explore opportunities abroad. CTOs work to:

• provide intelligence on foreign governments’ trade, investment, and economic policies. 
• provide input and advice to provincial, territorial and municipal government partners on issues ranging from foreign direct investment to outgoing business missions.
• connect with Canadian universities and research institutes to build innovation networks and promote Canada as a an attractive investment destination.
• promote corporate social responsibility and  protect Canadian commercial interests, and contribute to strengthening Canada’s broader bilateral relationships. 

CTOs in China are placed in cities with high potential markets for Canada. Offices are often in commercial spaces in high-rise buildings of central-business districts. They are staffed by two locally-engaged staff (LES). One LES-09 is the trade commissioner and office manager, and one LES-05 is the office and trade commissioner assistant.

As CTOs in China operate outside of the GC, they do not have direct access to corporate tools such as:

• TRIO, GAC’s Client Relationship Management system used by the TCS;
• Horizons, GAC’s TCS portal for current information and learning and reporting; and,
• Strategia, GAC’s integrated planning and reporting tool.

CTOs rely on their colleagues at mission as a bridge to these tools.

Evaluation Scope

The evaluation provides senior management of the Department with a neutral and evidence-based assessment of the CTOs in China. The evaluation was guided by the 2016 Treasury Board of Canada Policy on Results which provides flexibility to calibrate evaluations. The scope of the work was guided by the clear priorities for GAC as part of its international trade mandate.

The focus of this evaluation was on the performance of the 10 CTOs in China and their unique management structure. It addresses the results to date, perspectives, challenges and contexts that affect the efficiency and economy of its operations.

The reference period was from 2011/12 to August 2016 which reflects the opening and the full operation of the 10 CTOs in China.

The objectives of the evaluation were to assess the following:

1. To determine the extent to which the CTOs are effectively contributing to the promotion and growth of Canadian trade and investments.
2. To assess the whether the resource utilization approach of the CTOs is efficient.
3. To consider whether the governance and organizational approach of the CTOs and its TCS are efficient.

Based on these objectives, the evaluation team developed corresponding evaluation questions and associated indicators, data sources and analysis techniques.

While the evaluation focused primarily on China; comparable programs were considered in order to gain a better understanding of the potential of various models.

Methodology

Based on the evaluation questions, scope and sources of evidence, the evaluation team developed series of indicators and analysis techniques to conduct the evaluation. The analysis used a mixed methods approach that consisted of quantitative and qualitative data to respond to the evaluation questions and indicators. Data was collected between October 2016 to January 2017.

Performance Data^{Footnote *}

• BTB, GAC’s trade systems and analysis unit collaborated to generate performance data tables for the CTOs. Data sources included: TRIO2, TCS client satisfaction survey and the BI (Business Intelligence) table of successes. 
• BTB provided STC reports (2013/14, 2014/15, and 2015/16), CTOs 2-page quarterly reports (Q4), as well as those of the missions in China, Brazil and India.
• Analysis and observations were reviewed and fact-checked with BTB for accuracy and reliability.
• Performance data was triangulated with interviews, testimonials and other data sources such as Strategia.

Financials

• Financial data such as budget reports and costing proposals for China CTOs was gathered from a number of sources (OPC, SWP, SWA, OBMO, CCC).
• Some CTOs provided budget and expenditure information.
• Evaluation used data sources that showed the anticipated costs of a hypothetical  “GAC-administered model”
• Financial data for India and Brazil CTO programs was incomplete which limited the ability to compare with the China CTO program.

Documents

PRE reviewed a large number of documents from various sources within GAC and outside of the GC.

• CTO and trade programming foundational documents
• Memos, briefings, internal analysis, presentations
• CCC governance documents, CCC online tools, CTO audits
• Strategic business planning documents
• TCS descriptions and tools

Interviews (n=114)

• Semi-structured interviews were conducted by phone and in-person. Interview protocols were created based on the evaluation questions and indicators. Six standard protocols were developed to ensure the relevance of questions for the different groups of stakeholders.

Stakeholder Type	# of Interviews
CTO Staff (CTO)	29
Local contacts (EXTLOC)Footnote 1	15
Hub managers/Trade Counsellors/HOMs (HUB)	43
Canadian Clients (EXTCAN)	6
(HQ) GAC, program, senior management	21

Site visits n=13

The evaluation team conducted field visits to China and India covering 6 hubs and 7 CTOs in total.

China

• 9 sites visits with in-person interviews (Beijing, Qingdao, Nanjing, Shanghai, Hangzhou, Chongqing, Chengdu, Guangzhou, Shenzhen)
• 5 locations with telephone interviews (Shenyang, Tianjin, Xi’an, Wuhan, Xiamen)

India

• 4 sites visits with in-person interviews (Kolkata, Bangalore, Chennai, New Delhi)
• 2 locations with telephone/video conference interviews (Hyderabad, Ahmedabad)

Brazil

• 5 locations with telephone interviews (Rio de Janeiro, Sao Paolo, Belo Horizonte, Recife, Porto Alegre)

Field visits allowed the evaluation team to triangulate information and observations from multiple sources. Several CTO managers were able to organise interviews with local stakeholders as as well as business clients. Site visits allowed for a fulsome view of the issues which may have been missed with language and cultural barriers.

Strengths

• A collaborative working relationship with BTB strengthened the quality and validity of performance data and analysis. Notably, BTB identified relevant data sources and analysis techniques to address indicators, produced databases tailored to the scope of the evaluation, and fact-checked analysis for additional background and qualifiers.
• The evaluation achieved 100% coverage for interviews with CTO and hub managers in India, Brazil and China.
• The evaluation team consulted closely with CCC, and was able to observe some of their tools and pilots.
• The evaluation gained a strong historical perspective by interviewing former program managers, and senior managers responsible for the program since its inception.

Limitations

• The performance data of China’s CTOs network was captured differently over several fiscal years. For instance, one year all CTO results were captured under BEJING, in another year all CTO results were captured at hub missions. Consequently, the evaluation cannot measure a trend over time for some of the pertinent indicators. Mitigation: The evaluation focussed on performance data for 2015/16, where it was most representative of individual CTOs.  Observations cannot be inferred to other years.
• For the evaluation's reference period, annual business planning details for the China’s CTOs differed in years 2014/15, 2015/16 and 2016/17 in Strategia. These variations made it difficult to examine planning trends including sectoral focuses. Mitigation: The evaluation focussed more on results and less on planning.
• There are substantial differences between TRIO1 (before 2013) and TRIO2 (after 2013), which limited the comparability of data over time. Mitigation: KPI data focussed on 2013 onwards.
• Different approaches in reporting of success and financials between BTB and the China Trade Network made it difficult obtain a full picture of the success of CTOs. Mitigation: This is noted in the relevant finding with rationales for the variance described. 
• The governance and management of CTOs in Brazil and India differ from the approach in China. Thus forecasting and expenditures were not broken down in a manner that was comparable across the CTOs of the three countries. Mitigation: Financial review focussed on China’s CTOs and a hypothetical scenario.

Findings

Finding 1: The CTOs make a positive contribution to TC services in China. However, their contribution to the growth of Canadian trade and investment cannot be accurately quantified as the information has not been consistently or completely captured.

Finding 1 is supported by four key observations:

• 1.1 China CTOs contributes substantially to TC services.
• 1.2 China CTOs record of successes are not consistently or accurately captured.
• 1.3 There was limited evidence that China’s CTO KPI results were aligned to KPI targets. Further, CTOs did not rely on outcalls to generate services.
• 1.4 There is a high-level of client satisfaction for the work of the CTOs in China.

1.1 China CTOs contribute substantially to TC services (2015/16 data)

China’s CTOs accomplished a substantial amount of productivity based on KPIs to FTE ratio. Notably, China’s CTOs have generated a substantial number of leads (opportunities referred) and have maintained a large number of clients that is above the amount generated by missions in China. The high productivity in services suggests that there is a large amount of reactive work in CTOs. The top three China CTOs in services were in Tianjin, Shenzhen and Xiamen. However BTB noted that there may be an inflated amount of services in China due to observations where one service may be accounted several times due to multiple transactions.

China’s CTOs have generated more services and clients per FTE

Text version

China

• Leads = 9.25
• Clients = 39.2
• Services = 64.5

India

• Leads = 7.75
• Clients = 30.5
• Services = 39.5

Brazil

• Leads = 19.6
• Clients = 35.6
• Services = 53

Compared to the rest of China, the CTOs have generated more leads and clients per FTE than China missions

Text version

CTOs (n=10)

• Leads = 9.25
• Clients = 39.2
• Services = 64.5

China Missions (n=4)

• Leads = 5.7
• Clients = 34.2
• Services = 76.53

1.2 China CTOs record of successes are not consistently or accurately captured (2015/16 data)

Based on BTB data, CTOs had reported and verified success in QNGDO (1), SHNZN (1), WUHAN (3), and XIAMN (1).

Using data from BTB:

• 2% of all of the economic value of successes generated in China is from the CTOs
• In terms of CAD, CTOs accounted for $7.1M of the $285.045M.

However, using data from China Trade Network: CTOs accounted for $41.8M of the $285.05M or 14%.

Using data from BTB:

• 8% of the number of successes generated in mainland China is from the CTOs
• CTOs accounted for 6 of the 73 successes

Using data from China Trade Network: CTOs accounted for 19 of the 73 successes or 26%.

Important details to know in recording successes

GAC’s trade performance systems and analysis unit (BTB) defines successes as Economic Outcomes Facilitated (EOF) or (Foreign Direct Investment) FDI win. BTB has generated a global database of successes with details of each success captured from TRIO. Each success is validated by the Unit. Opportunities Pursued (OP) are not considered in order to prevent duplication.

For multiple reasons, it is not always possible to include a financial amount in the success captured. Thus the recorded number of successes is as important.

The China Trade Network has captured successes more broadly to include OPs. Aside from 2015/16, successes completed by CTOs are recorded under another Canadian mission in China and cannot be tracked to the specific CTO at HQ.

Efficiency in generating successes

A ratio of (services + referrals : success) is used to assess efficiency of generating success in BTB.  On average, a ratio of (<100:1 success) is considered efficient. Specifically, <100 would be more efficient and >100 would be less efficient. The ratio of success in CTOs were:

(Source: GAC, TRIO2, 2015/16 data only)

While this number suggests inefficiency in China, the number of services may be skewed for at least two reasons. BTB noted that China missions and probably their CTOs have inflated their service count by attributing multiple services to a single client where there should only be one service. Second, the China Trade Network noted that successes may be low due to the fact the recruitment facilitation in the Education Sector is tracked under services rather than successes.

1.3: There was limited evidence that China’s CTO KPI results were aligned to KPI targets. Further, CTOs did not rely on outcalls to generate services.

Unlike CTOs in Brazil and India, CTOs in China have no access to TRIO or Strategia. CTOs provide monthly activity updates in a template format for officers at mission to manually enter into TRIO. As a result of this additional step, it can create delays and backlogs which compounds existing challenges of KPIs entry into TRIO for CTOs.

The annual business plans of CTOs in China are not in Strategia. CTOs do not have access to viewing Strategia plans of other missions or of other CTOs.

Planning: China’s CTO KPIs targets and priority sectors

There was limited evidence that KPI planning was aligned to the sector priorities or business plans of individual CTOs. During the evaluation reference period, the KPI targets of the CTOs remained static at 1 EOP, 2 OPs, 130 Services, 20 Opportunities Referred and 30 Outcalls. KPIs were not tailored or nuanced to reflect sectors and local markets of the CTO. As setting KPIs and sector priorities was only implemented in 2016/17, a more inclusive approach is expected in 2017/18 that will be informed with previous years’ results. It’s expected that the KPI targets and sector priorities for individual CTOs will be reported at the initiative-level in the responsible mission’s Strategia plans and reports. 

India and Brazil KPI targets range from a few standardized targets to targets adjusted to local markets and sectors. Both India and Brazil were fairly successful in reaching their KPI targets.

Meeting KPI targets in China’s CTOs

KPI targets were met roughly 50% of the time. An important factor to consider in performance is the date of when the CTOs came into full operation. Notably the second group of four CTOs that were established from 2014 to 2015 did not always operate at full capacity for a complete fiscal year (see Program Background). New CTOs require time to develop their knowledge and networks before they can be fully leveraged to generate results (KPIs).

Outcalls from China’s CTOs

Among the KPIs, outcalls had the widest margin of actual KPI entry to planned. Data and ratios from KPIs indicate CTOs are not dependent on making outcalls in order to generate leads. This indicates that CTOs obtain work, including leads from elsewhere. CTOs may support service requests, larger successes or trouble shooting from missions. Some outcalls were placed to government and non-government contacts which reflects a level of effort to obtain information and key contacts of the local market. Outcalls were used to gather intelligence and less on advocacy.

Services in China’s CTOs

CTOs focus on the basics of the TCS with services that supports International Business Development. These services consist of preparation for international markets, market potential assessment, qualified contacts and problem solving.

Finding 1.4: There is a high level of client satisfaction for the work of the CTOs (2013/14 – 2015/16)

• checkmark All stakeholders indicated that clients were generally satisfied with the services offered by the CTOs across China, India and Brazil.
• checkmark Client satisfaction was demonstrated by emails, letters and phone calls directed to the CTOs themselves, and in some cases to the hub manager in the relevant Canadian mission. 
• checkmark All CTO staff and Hub managers were able to show the evaluation team tangible examples of client satisfaction.

A very high level of client satisfaction was expressed in the TCS client satisfaction survey (Q.7) completed by CTO clients over the past three fiscal years.

In order to obtain useful data for analysis, BTB used a 3-year range to provide the Evaluation team with a 10 respondent minimum per mission.

• checkmark TCS Network has an average overall client satisfaction (Q.7) of 85.5%
• checkmark The CTOs of Wuhan (100%), Shenyang (94.1%) and Nanjing (92.3%) stood out in terms of high client satisfaction.  
• checkmark CTOs in China scored notably higher (>5%) in two areas of the TCS client satisfaction survey: Timeliness (Q.2i ) and Responsiveness (Q.2f)

Finding 2: CTOs value extends beyond services and results defined in KPIs.

Number of HL visits to CTO locations

Text version

• Hangzhou: 3
• Qingdao: 3
• Shenzhen: 3
• Xian: 3
• Chengdu: 1
• Nanjing: 1
• Tianjin: 1

In 2016, 36% of high-level visits went to a CTO location.

CTOs support high-level (HL) visits

GAC in China receives a large number of HL and official visits that are often commercial in nature (e.g. business delegations). In 2016, GAC hosted 42 high level visits, 15 included visits to CTO locations. A vast majority of stakeholders noted that CTOs provide invaluable services to HL and official visits through enhanced services such as supporting travel logistics and by organizing meetings, programs and events for incoming visitors.

During the G20 Summit in Hangzhou, the CTO played an important role in supporting the Prime Minister’s (PM) visit by providing on-the-ground timely information for the G20 Summit and other related events. For instance, the CTOs were involved in meetings of the PM and local private sector leaders. GAC stakeholders in China praised the performance of the CTO staff and remarked that an office in Hangzhou placed Canada at an advantage over other G20 members. Canada was able to know before other G20 members which roads were closed and the locations of key events.

CTO staff across China valued the extra work to support HL visits. In their view, these opportunities were important in order to enhance their local networks by increasing access to senior local government officials and important actors in the private sector.

CTOs support services of the TCS

According to stakeholder’s interview, the CTO network in China contributes to the promotion of Canadian trade and investment in a number of other ways that are not captured in KPIs.  In a business environment where “Guanxi”— best summarized as networks or “relations to”, is highly valued, having CTOs in second tier markets is essential as it takes effort to establish those relationships. Over half of the interviewees stated that the CTO network in China was very useful in terms of building and maintaining networks in second tier markets. Reflected in their types of outcalls, these networks include private, government and non-governmental contacts.

TRIO partially captures the TCS work of the CTOs

Market Intelligence

CTOs have allowed Canada to follow the pace of change in selected emerging local and sub markets (market needs and evolving regulations). CTOs regularly send market intelligence to Canadian missions in China, rather than a client or contact, which is not considered a service under KPIs.

Local Contact Verification

Canadian clients and hub stakeholders appreciated the ability of the CTOs to rapidly and reliably verify the credentials of local contacts. The authentication of local contacts can take significant efforts as it may require verification from multiple sources.

Finding 3: There has been a deficit in operating the CTOs due to inflation and currency fluctuations.

The actual costs of the CTO Program in China have exceeded the available funding since inception. Increasing program costs were due to several factors including inflation, exchange rate fluctuation, increasing salaries and management fees.

During the reference period of this evaluation, the Program filled the funding gap through the reallocation of internal resources while it sought more sustainable approaches to addressing the deficit. This included working with CCC to reduce costs, obtaining Quasi-Statutory Framework (QSF) status, and seeking additional funding.

The cost of a hypothetical GAC-administered CTO Program in China is substantially higher than costs in the current model. For 2015/16, estimates from OBMO put the price tag of a GAC-administered CTO program at $3.52M, that is an increase of 19%.

Actual costs: $2.96M
Estimated GAC-Admin Costs: $3.52M

The hypothetical GAC-administered model is based on 2 out-of-office LES positions with remote Signet-D access in current CTO office space. Notably, the model excludes costs related to security upgrades that are necessary to bring the premises up to GAC security standards. Finally, it is important to note that the hypothetical GAC model does not include all the realities of operating in China.

The China CTO program became eligible for QSF in 2016/17. QSF is  standard for all Canadian missions abroad and it allows GAC to protect itself against fluctuations in exchange rates and inflation. It is expected that QSF will substantially relieve the growing cost pressures due to greater inflation in China and increased valuation of China’s currency. However, there remains a risk that the QSF will not address other potential financial risks (E.g. Lower inflation in China than in Canada, salary and rent increase). To address other cost increases (salary and rent), additional funding received policy approval in 2016.

Finding 4: Global Affairs Canada has pursued a two-person LES model which is considered to be standard with little change over time.

The CTOs were established to strengthen and expand a network of small-scale, flexible offices in support of Canadian SMEs. Since they were set up, no CTOs have closed, moved or changed FTE model (1 LES9, 1 LES-5) in China, India or Brazil.

Finding 5: Since the first CTOs opened in China, steps have been taken to adjust operations. These steps demonstrate efforts to improve the use of resources in selected areas.

CCC has made adjustments to improve efficiencies

Interviewees in the CTO, mission and headquarters identified two specific improvements that were led by CCC. They introduced an extranet to facilitate the sharing of administrative templates and information with the CTO network. Second, CCC has been able to reduce its business and corporate taxes by over $200 000 from 2013 to 2016 by identifying the CCCROs as not-for-profit offices.

ATCs (Assistant Trade Commissioners) assigned to education sector in 2012

The Program found that the administration of CTOs did not require a full time assistant. Thus ATCs (LES-5) in each CTO were additionally  tasked with the education sector within their CTO region in 2012. The details of the ATC role to lead or support the education sector varies across CTOs. This was also common for CTOs in  India.

Overall the reaction is positive. ATCs noted that it provides them with expanded professional work experience. Hub and CTO stakeholders  commonly noted that it gave the CTO manager more time to focus on other sectors.

A few interviewees expressed a need to clarify roles and responsibilities between the mission and CTOs that work on the Education sector in order to improve efficiency and maximize potential synergies. This lack of clarity was noted during larger educational trade shows.  A few others raised a concern regarding the correct classification and level of the ATCs given their increased TCS-related responsibilities. 

Determining sector priorities and annual planning

CTOs have developed annual business plans, including sector priorities in consultation with hub managers. In 2015/16, annual planning began to be more consistently developed across the 10 CTOs. In 2017/18, CTOs will be expected to enter their priority sectors into their hub’s Strategia Commercial Plan. However CTOs will remain without access to business planning tools that are shared through the Signet-D networks.

KPI reporting shows that there could be better sector alignment in planning and delivering on results. The KPI targets in the China CTOs are static. While the evaluation recognizes that tailoring results and sector alignment was underway during the evaluation reference period, there are six CTOs that have been established for over five years. These CTOs do not have KPI targets that are aligned to the work of the individual offices.

More broadly, the evaluation noted that other Trade Programs in GAC recognize Strategia as a source of qualitative data to better understand the TCS results.

Decentralized management began in 2016

During the first half of FY2016/17, BEJING delegated partial management of the CTOs to CHONQ, SHNGI and GANZU. This included responsibility to approve expenses with distributed budgets. Distributed budgets were aimed to improve integration with missions and to advance regional priorities with delegated authorities to the STCs. The CTOs continue to work with their hub managers to plan and report. BEJING remained the lead in staffing, coordination with CCC and other networking and human resource issues.

Overall, decentralization is viewed as a positive change. CTO staff stated that the hubs had a better understanding of their markets. The evaluation recognizes this change is recent. However, a few CTOs expressed concern that they will now have a smaller view of their landscape as information will only be hub-based rather than more country-wide. A few other CTOs noted that they were better supported from a central BEJING-model than the decentralised hub structure. There were concerns expressed regarding responsibilities of TRIO entry at four different hubs instead of one hub–BEJING.

Finding 6: While the CTO model is perceived as nimble and flexible, there has been little flexibility and nimbleness observed in practice.

Rationale for flexibility and nimbleness of CTOs has not been about location

Chinese second tier markets and cities are less competitive while possessing economic growth rates that are often above the Chinese average. Chinese economic planning and urbanisation has increased consumption of broad-based consumer goods in these markets.  In this environment, Canadian clients face barriers and challenges in language, cultural and market access. To be competitive, clients often require localized support and information that is timely on key decision makers, businesses and market intelligence. China’s CTOs work to addresses these challenges and needs.

Complements Finding 4: Global Affairs Canada has pursued a two-person LES model which is considered to be standard with little change over time.

Challenges of China’s CTOs are systemic

CTOs follow the regulatory and legal requirements to operate foreign entities in China. This has resulted in the following challenges: 

• The CTOs have no direct access to Signet-D and its tools (TRIO2, Horizons, Strategia, wiki@international, and TeamInfo).
• CTO’s official title creates confusion for clients and local contacts.  (e.g. Canadian Commercial Corporation Representative Office (Qingdao)).
• The CTOs are inside China’s firewall which  exacerbates existing challenges to information access.

Interviews noted that the organisational separation of CTOs from GAC often creates  duplication in financial and human resources processes for CTO staff. Further, the remote management from hub to CTO creates risks in tracking hours, work load and transfer of  client  and sector knowledge.

These challenges provide the necessary context for Finding 7, 9 and Recommendations 1 and 3.

Flexibility within Global Affairs Canada

While these specific examples are not directly applicable to China, the evaluation found other types of flexible TCS arrangements in the GAC network.

• Trade Commissioners (TC) in three locations in the United States work in collaborative workspaces such as universities or business incubators with remote access to Signet-D.
• Temporary duty assignments on specific projects/events are valued as opportunities for professional development.
• TC in ADDIS, DSLAM, KGALI missions report to Regional-STC in NROBI.

No rationale to expand the CTO network in China

Interviews did not identify a need for additional CTO locations or an increase of CTO staff. Views gathered often asked whether the resources were put in the right place. Interviews captured views of several options:

• Sharing ATC resource among more than one CTO
• Some CTOs could have one staff while others could have more than two
• Additional support in hubs to manage the decentralised model

Text version

Country	# Diplomatic missions	# Trade officesFootnote 2
USA	6	16
France	6	10
United Kingdom	5	7
Canada	4	10
Germany	4	10
Australia	4	6
Netherlands	4	6

Detailed observations

• Some models (e.g. UK, Germany) are membership-based managed by business organizations. This model only caters to members and is funded through membership fees.
• The UK, Germany and France utilise separate entities that aim to promote national cultural and educational products and services.
• The US operates a unique model in collaboration with the China Council for the Promotion of International Trade—a Chinese quasi-state institution. While the US model has access to the resources of the Chinese government, there are challenges in staffing operations and administrative processes.
• Australia’s model was also viewed favourably by many stakeholders. Austrade is a “crown-corporation” of the Government of Australia, and as such they are able to set up as “governmental, non-diplomatic” offices.  Austrade trade offices in China are fully integrated into the organization’s electronic systems.
• The Dutch model currently operates a “representative office” model similar to Canada, although each office is headed by a Dutch national. Interviews noted that the Dutch are exploring options to improve “governmental, non-diplomatic” status for their trade offices.

Through various approaches, most like-minded countries offer commercial services in China’s second-tier markets. These trade offices are generally concentrated in the same locations as CTOs.

While all models have advantages and disadvantages, stakeholders stated that Canada’s current model compares favourably.

Finding 7: There are challenges in doing business with CTOs in China. Opportunities to find solutions to these challenges have not been maximized.

Some challenges and risks were resolved, some were mitigated and a few are systemic. The table captures prominent issues.

Finding 8: India and Brazil have pursued initiatives that provide leadership opportunities of CTO managers.

The trade network in India and Brazil demonstrated greater efforts to build and define the roles of their CTOs. The CTO function, scope and team support is articulated within the country-trade network. Evidence included governance documentation, email correspondence and interview comments. Brazil and India’s approaches, while different, were both able to help to balance the individual nature of KPI reporting and performance against the need to work as a team to succeed. Further, there were opportunities in both countries to develop CTO leadership roles that complemented a commitment to Canada.

India

Geographic responsibilities of the CTO are identified in Strategia. India CTOs’ KPI targets are standardized with a few deviations. For instance, FDI visits were added and AMDBD increased a number of targets in 2015/16. CTO planning also connects to broader trade strategies. CTO managers are either Sector Champion or Team Member of country-wide sector team. They participate in sector-team meetings. The sector team reports to STC Committee.

Given that the four “regional offices” cannot be on all teams, the TC’s in those offices have been asked to self-select to be regular members of at least two teams but can and should be engaged with any sector team if an initiative will impact their region or territory.  Further depending on the initiative, the location and scale, Trade Commissioners and Trade Commissioner Assistants can be added to teams on an as-needed basis.

India’s CTO managers demonstrated leadership and collaboration on complex matters. They provided problem solving services and helped to troubleshoot. They are able to reach out directly to GAC Regional Offices in Canada. The managers brought delegations to Canada and organized HL visits to their location. CHENI and KLKTA CTO managers have mentored CLMBO & DHAKA Trade Commissioners respectively.

Brazil

Geographic responsibilities of the CTO identified in the Job Description. CTO managers are sector leads for their country. Brazil CTOs’ KPI targets are tailored and guided by their work in priority sectors. The Manager’s Statement of Qualifications and Job Descriptions also identifies specific sectors of work. The Brazil Trade Protocol that defines the team approach which includes CTOs. Because of these special circumstances, the role of TCs and TCAs in these 3 Offices is less dominated by sector or functional specialization. They need to be able to organize programs for visiting clients and senior officials. They need to establish and maintain relationships with multiple local governments, associations, police, protocol, airport authorities – among other requirements. In addition to their initiatives in their respective sector of responsibility, they are specialists in leveraging their limited resources to nurture goodwill, promote the Canadian brand and support, selectively, efforts in other sectors.

Because of these special circumstances, the role of TCs and TCAs in these 3 Offices is less dominated by sector or functional specialization. They need to be able to organize programs for visiting clients and senior officials. They need to establish and maintain relationships with multiple local governments, associations, police, protocol, airport authorities – among other requirements. In addition to their initiatives in their respective sector of responsibility, they are specialists in leveraging their limited resources to nurture goodwill, promote the Canadian brand and support, selectively, efforts in other sectors.

Brazil’s CTO managers demonstrated leadership and collaboration. They have brought delegations back to Canada. They have been able to support relevant FPDS files such as Corporate Social Responsibility in the extractives sector.

The China Trade Network has made in roads by providing core TCS training and holding annual CTO general meetings that includes training and knowledge sharing. CTOs have been involved in organising delegations to key trade events and supporting high-level visits. These opportunities have helped broaden CTOs’ network and deepen their sectoral knowledge. These steps are important as CTOs operate in an environment with limited access to TCS information and support.

Finding 9: The China Trade Network has additional risks and challenges that will remain without tailored solutions to address them.

Examples from Brazil, India and others demonstrate that there are multiple approaches to managing large trade networks and small trade offices more efficiently and effectively. For CTOs in China, the specific challenges and risks necessitate tailored solutions. China CTOs are lacking longer term performance data, a comprehensive governance structure inclusive of CTOs and the full use of existing tools that can support their operation.

Conclusions

Overall, CTOs in China contributed substantially to TCS services. There was a high-level of client satisfaction for the work of the CTOs in China in the past three fiscal years. Further, their value to TCS extended beyond the results defined in KPIs. Examples that demonstrate this included supporting a large number of high-level and official visits that were of a commercial nature, building local relationships in second tier markets and verification of local contacts for Canadian clients. While it was clear that CTOs made a strong contribution to TCS, their contribution was not captured consistently.

Most like-minded countries offered commercial services that were generally located in the same locations as Canada’s CTOs. Models varied from membership-based, managed by business organizations, a fee structure to non-diplomatic government entities. Beyond China, CTO managers in India and Brazil have leadership opportunities. This included clearly defined sector-leadership roles within the country trade networks. CTO assistants in China and India support the education sector.

While the two-person CTO model is perceived as nimble and flexible, there has been little flexibility and nimbleness observed in practice. The department has pursued the same model with little change over time. Within the China Trade Network, there has been a deficit in operating the CTOs due, in part to, inflation and currency fluctuations.  The China Trade Network has additional risks and challenges that will remain without tailored solutions to address them. There is still opportunity to find solutions to these challenges.

Recommendations

Management Response and Action Plan

Challenges remain in integrating the CTOs into Departmental systems and processes, as they are distinct, external entities. This legal separation is likely to continue owing to the Chinese regulatory framework on foreign entities operating in China. Additional challenges stem from the chronic underfunding of the CTO program. Until ongoing funding is secured ,these challenges are likely to remain and could limit the effective implementation of the Management Response and Action Plan.

Recommendation 1

The China Trade Network should maximize new and existing tools in order to better integrate the CTOs into the country commercial program.

1. Develop and define a governance structure of the China Trade Network that is inclusive of the CTOs.
2. Maximize tools to address the gaps that would improve the efficiency and integration of CTOs with the department (e.g. CCC Extranet, CRM).
3. Improve the quality and the timeliness of KPI reporting so that results are successfully tracked and shared per CTO.

Recommendation 2

The China Trade Network should explore flexibility and nimbleness in order to optimize services in their dynamic markets.

1. Consider flexibility and nimbleness of staff allocation and location of the CTOs.
2. Recognize and take advantage of CTO staff’s efforts to support Canadian growth in trade and investment which are not captured in KPIs.

Recommendation 3

The China Trade Network should seek out appropriate leadership and learning opportunities for the CTOs in order to strengthen the network.