Diversifying into the Asian market: Practical considerations

BENJAMIN NA: Good morning, everyone. And welcome to our third installment of our webinar series, "Diversifying into the Asian Market." My name is Benjamin Na, I'm the Managing Partner of Gowlings in Toronto. And I'll be your moderator today. This webinar series that we are hosting comes at a very important time.

As global trade dynamics shift, particularly with heightened trade tensions and tariff uncertainty between Canada and the US, more and more Canadian businesses are looking beyond traditional markets and diversifying into other regions, such as Asia, for more stable and long-term opportunities for growth. We're really pleased to have assembled a panel today that brings together on the ground experts from Japan, Korea, and China to offer some practical information and guidance for those looking to diversify into Asia. Before our panelists are introduced, I have a few housekeeping notes.

Today's session will be recorded and will be shared after the webinar. If you have any questions, please post your questions in the chat. We'll do our best to answer your questions at the end of this discussion. But if we are unable to get to some of the questions because of time, we'll endeavor to provide written answers to the questions following the webinar.

And at the end of the session, we would love to get your feedback as well. And there's a survey, which will be accessible through a QR code on the screen, as well as linked in the chat that we'd be grateful if you can complete. Now, it's a real privilege to have such esteemed panelists with us.

Before they are introduced, we're also honored to begin with brief remarks from Kouhei Maruyama, Envoy Extraordinary and Minister Plenipotentiary, Deputy Head of Mission from the Embassy of Japan in Canada. Minister Maruyama has kindly joined us at the outset of today's session. Minister, thank you for being with us. I'll turn it over to you.

KOUHEI MARUYAMA: Thank you very much. Nick, hello? Well, hello, everyone. My name is Maruyama from the Embassy of Japan in Ottawa. Well first, I would like to express my respect and gratitude to all those who-- for your hard work with this wonderful webinar today. And thank you very much for inviting me to this wonderful occasion today.

I'm honored to meet with all participants who are interested in strengthening economic ties with Asia, especially with Japan. I've been the Deputy Chief of Mission at the Embassy of Japan for the past six months. And prior to that, I was the Consul-General in Vancouver for two years. In Vancouver, I was surprised by the large Asian population and rich diversity in the West Coast. And I was also very encouraged by the strong interest in the Asian Pacific from that region of Canada.

Since I moved to Ottawa, the political situation of Canada and the international environment surrounding Canada has moved dramatically. And I'm very happy to be able to work in Ottawa on this very important, significant time for Canada, Japan relationships. Today, Counselor Hiyazaki is together with me. He is also a member of our embassy. And he is a professional in the field of economics and trade.

Counselor Hiyazaki he is more qualified than I to answer your questions. So I'd like to leave the question and answer session to him. So I'd like to take a few moments at the outset to fulfill my duty by stating a perception of the current state of Canada-Japan relations from a diplomatic perspective.

And not long after the Canadian parliamentary general election, the telephone conversation between Japanese Prime Minister Ishiba and Prime Minister Mark Carney took place on May 2. A summary of the call has been released by both governments. From what I've heard, that I have heard directly from those who were present during the call, it was a very constructive, productive, substantial, and excellent meeting.

It was particularly significant that the two leaders discussed a wide range of economic issues, including cooperation in the G7, strengthening the strategic partnership between Japan and Canada in the Indo-Pacific region-- energy, security, and the impact of the US tariff measures on the global economy and the multilateral trading system. The two leaders-- I think the two leaders will continue to maintain close contact. As the relationship between the two leaders of Canada, Canada and Japan continues to develop.

Today, I would like to mention following three points. The first is the challenge we face. Japan is also a priority to the situation since the inauguration of President Trump. And we are engaged in various negotiations, including ministerial level meetings. We are also watching the situation in Canada with strong concern.

Just yesterday, the Prime Minister Carney and President Trump had a meeting in Washington DC. Well, this is a painful situation in Canada. I'm impressed that many Canadians are saying that this could be a wake up call for Canada. So Canada is a country with great potential in the areas of natural resources, energy, and cutting edge technology. However, there are significant challenges, including inadequate infrastructure, overregulation, relations with Indigenous peoples, and the relationships between the federal and provincial governments, as well as between provincial governments.

So I would like to say that we are very looking forward to seeing what challenges Canada will take up in the future to seriously resolve these issues. The next one is, I think, it is important to recognize the major composition of the world. Looking at the world at large, we can say that there are several groups. Both Canada and Japan share basic principles, such as freedom, equality, democracy, basic human rights, and the rule of law.

While there may be frictions or discrepancies, even among these friendly nations, we should always keep in mind that we are on the same side when viewed in the context of the world as a whole. And finally, I'd like to talk about the partnership between Canada and Japan. In difficult times, the question becomes, who is a true friend and who is a true partner? And we believe that Japan and Canada have just a relationship.

I'm confident that Japanese and Canadian companies can develop further collaboration in the areas of natural resources, energy, and cutting edge technology that will benefit the global economy. And I believe that such a relationship will become increasingly important. I hope that this webinar will be a useful discussion that will lead further relationship building. I'm sorry for taking so much of your time. I'd appreciate it if you could further the discussion through Q&A session with Mr. Hiyazaki from my embassy. Thank you very much.

BENJAMIN NA: Thank you, Minister, for your time in this morning and for sharing with us your perspective on the strong and growing partnership between Canada and Japan. As the minister will be stepping away shortly, I'm also pleased to invite our other panelists to introduce themselves. We have David Mallette, who is with us from Korea.

DAVID MALLETTE: Good morning, everyone.

BENJAMIN NA: So David is the commercial counselor to the Embassy of Canada to Korea. He's been serving in that role since August of 2021. He manages a team of trade commissioners, who cover various sectors and functions, including the science, tech, and innovation portfolio. He's been a trade commissioner for most of his 20 year career with Global Affairs Canada. And David has had previous postings in Greece, Russia, and Kazakhstan, where he's largely focused on mining and the energy sectors. With us as well, we have Lindsay Margenau, who is with us from China.

LINDSAY MARGENAU: Hi, everybody, good morning. I'm also a senior trade commissioner like David. My job here in Beijing is to lead our team of trade commissioners. We do a very similar role here. We cover a variety of sectors. We help Canadian companies understand the Chinese market and do business here.

I've been here for only about eight months, but this is my second tour in China. So I have a bit of a background from around 2012 was the last time I was here. Things have changed. I've also served in India for five years, in the Middle East, in Dubai and in Washington.

BENJAMIN NA: Also based in China, we have Vivian Desmonts, who's the co-managing partner of the China practice at Gowlings.

VIVIAN DESMONTS: Hello, everyone. Thanks, Benjamin. Yes, I co-manage our offices in China, Beijing, Shanghai, Guangzhou. I've been working in China for almost 25 years as a foreign lawyer here in China. And we typically advise foreign companies doing business here in China.

BENJAMIN NA: So welcome and thank you all, again, for speaking to us this morning, or this evening, I should say, given where some of you are based. Let me begin by setting the stage. Let's start with some regional perspective. Lindsay, with the Canadian businesses increasingly looking beyond the US, what sectors, or industries, or product categories are seeing the most growth opportunities for Canadian companies in China?

LINDSAY MARGENAU: So it's a really good question, actually, Benjamin, and, I think, quite timely. Because we continue to see a number of Canadian exporters, or Canadian importers who use the US market as their base, start looking elsewhere, start trying to find other markets. And we're actually seeing a number of them turn up with us here in China because of the scale of this market.

China can be a really highly promising market in some areas for sure, depending on the sector, depending on the company. But it's also a highly competitive market. And it's subject to regulatory and political risks. So we find that sometimes-- in our team, we find that Canadian companies sometimes underestimate the commitment that's required to succeed in the China market. And we recommend that all companies, who are considering China assess the opportunities that they're seeing against risks, like operational risks, financial risks, legal, and also reputational challenges.

Some Canadian brands that we all know well continue to do very, very well here, specifically in the consumer products sector and the prepared foods sector-- non-sensitive areas where China's large population offers a ton of opportunities. Companies like Canada Goose, Lululemon, Arc'teryx, we see these brands on Chinese citizens on the streets every day. They're extremely well known. All of these companies have walked that tightrope and found opportunities here balanced with the risk. But companies in other fields, for example, companies seeking innovation partnerships, technology, ICT, defense, life sciences, these sorts of companies, we would really recommend that they speak with our teams across China before they pursue any business here to make sure that they're going in with their eyes wide open.

BENJAMIN NA: Thank you, Lindsay. David, how about in Korea, what industries or sectors are seeing the most growth opportunities there?

DAVID MALLETTE: Well, there's the ones that we currently focus on. But they're the ones that we're also looking ahead at in terms of new developments, particularly in light of geopolitical developments, what's happening in the US and around the world. But currently, the main focus where we put a lot of our resources and our time and effort, where we see a lot of interest also from Canadians, where we see there's a good fit with what's happening in the market, is in the agriculture and agrifood sector, in the information and communications technology sector, life sciences, and clean tech.

So those are-- for now, I can go in to specific subsectors, but those are the areas, where we really spend a lot of time. And I should also note, as you mentioned-- and I apologize for not giving a more full introduction of myself at the beginning-- but I do cover the STI portfolio. And that covers a whole broad range of different areas where we seek, basically, co-development partnerships with Korea. And so there's-- and from year to year, that can change in terms of focus.

So last year, we had a semiconductor mission from Canada, where we had nine companies participating. As people on the panel know, Korea is a leader in semiconductor development with Samsung and SK Hynix. And so there's a lot of opportunity for collaboration across a variety of areas.

We're often seen traditionally here in Korea as more of a resource producing country. Whereas, if you look at our exports and the statistics, it's very telling because you see the top 10 exports going to Korea. Which I think is kind of a crude measure of where our trade because these have been very long-standing partnerships. But they're things like energy, ores, metals, agriculture, agrifood products.

Then you see what is coming from Canada to Korea, and it's things like automobiles, chips, semiconductors, and the very high-value added side of things. And so we're seeing a change in that. And certainly, the sectors we focus on tend to be more in that area. So I mean we're not really involved in doing so much energy deals and stuff like that.

However, that's an area where Korea continues to have very strong interests. And so with the commissioning of the transmountain pipeline with LNG Canada, there is Korean interest there. There are shipments. They're interested in more of Canadian energy. And they're certainly interested in Canadian minerals and mining.

They do not have a mining sector in Korea. There may be a couple of mines. But they're certainly interested. And we actually signed an agreement-- not an agreement, but a memorandum of understanding back when our prime minister was here, former prime minister, Trudeau, when he was here in '23, on critical minerals and supply chains, security.

And there is a-- and that was very much something that the Koreans were seeking with Canada. And we've been working very closely with partners at Natural Resources Canada, ISED, Industry Science and Development Canada on how we can do more in those areas. So there are certain areas. Another big area that's on the horizon is defense.

Korea is becoming a big name in the defense industry. And they are certainly interested in some of the projects which Canada has on its table, including our submarine procurement project. And so we can see what we would call industrial offtake opportunities there to help Canadian industry in that sector. So that's a big, broad overview. And certainly, if we want to dig deeper, I'd be happy to take questions later.

BENJAMIN NA: That's great. Thank you, David. Sounds like a lot of opportunities there. Mineo, from Japan's perspective, in which industries or sectors are Japanese companies currently focused on in Canada?

MINEO HIYAZAKI: Good morning and good evening. So regarding the question, this is a general comment, but we can say energy and natural resources, clean technology, and advanced technology, including critical minerals, AI, quantum technology, and nuclear power technology.

BENJAMIN NA: Now, let's turn to some practical considerations for diversifying into your respective regions. David, let me begin with you. What are some key considerations Canadian businesses should keep in mind when seeking to diversify into Korea?

DAVID MALLETTE: Well, I guess, first off, it's that Canada has an FTA, a free trade agreement with Korea. And so it's important that this be understood and understand what it can do. Because a free trade agreement only works if you actually seek the preferential tariff within the agreement. If you don't, you're going to be subject to what's called the most favored nation tariff, which is basically subject to everyone under WTO rules.

But because we have a free trade agreement, what you're going to see, if you actually look on a tariff scale, you're going to see the MFN. And then if you look at Korea specifically, you're going to see something that is probably quite a bit less. Most of the tariffs have already been reduced to 0. So it's important that companies, especially those, obviously, who are looking to export goods, understand that this is something that exists, and that you need to actually apply.

So the reason the way you apply, obviously, is your products, your exports need to meet certain rules of origin requirements. And if they do, then you can certainly take advantage of the preferential tariff. So I'd say-- and our website, thetradecommissioner.gc.ca has all sorts of information about that, right down to the granular stuff of where you get the forms and what you need to do in terms of determining rules of origin.

So I just want to throw that out there right from the outset that this is-- we spent a lot of time negotiating these agreements. And they're only good if companies actually take advantage of them. And you do need to actually apply under it when you are in the process of exporting. Another thing I'd like to note, too, the Korean economy, if you were to compare it to the structure of the Canadian economy, it's very heavily weighted towards large conglomerate companies, called Chaebols.

These are, in many cases, family-owned companies that go back many decades to around the time after the Korean War. And they branch out into many different industries. They have different affiliates. And some of the most common ones, which have become household names around the world, Samsung, LG, Hyundai, SK, those are the biggest, but there are probably about somewhere around 20. And these make up a big chunk of the economy. I've been told that the 10 largest Chaebols account for about 58% of GDP in Korea.

And a lot of Canadian companies want to work with the tables. They hear Samsung or LG and they said, I want to work with Samsung or LG. But it's not that easy. These are really big companies. So you really have to understand the company. And with unlimited time and resources, I would love to be able to do a mapping of all their different affiliates and who is who.

But it's a constant change. And they're constantly changing. Who you spoke to last year may have moved on this year. And so this is where working with our team here, we can help you navigate that a bit. But we always like people to say like, when you say you want to work with Samsung, could you be a little bit more specific? Because Samsung has electronics. It has banking. It has insurance. It has hospitals here in Korea, semiconductors. They do shipbuilding. They do a whole bunch of things.

And they're not always talking to each other. They don't communicate well necessarily. And they, sometimes, compete even with them because everybody's trying to show how their particular affiliate or division is performing the best compared to it's a very competitive society overall. So that's just something to keep in mind if you are looking. And because they are such a big chunk of the economy, people do generally want-- companies do want to actually collaborate and try and do work with them.

And then I'll pick up on Lindsay's comment, too. Korea's somewhat the same. I mean, some of the brands that she mentioned, we see them here. We see them and they're all the rage for maybe a season, and then they might subside. And then something else comes along. So yes, we've seen Canada Goose, Arc'teryx, Lululemon, they Still have a presence here. But there's always something that's like the big thing this year. And it can be in food, it can be in cosmetics. It can be in clothing, electronics. So very big on trends. But you have to keep in mind, it won't last unless you have something to follow up with it and/or to keep it trendy. And so this is, obviously, a challenge in the consumer goods section that we're finding.

And I'll just finish. One more point to say is, even though Koreans spend a ridiculous amount of money on English education for their kids, and you might think that it's very widespread in terms of usage, it's actually not. A lot of people know it. A lot of people can understand it. But there's a sort of a timidness, or a shyness to actually speak it.

Now, I'm generalizing, of course, but it is not maybe as widely spoken, or as you might expect, again, given the amount of emphasis that's actually put on it in the early years to learn it. And so that all to say that you shouldn't come here expecting that if you're going to set up meetings, or if you're going to meet, that the English is going to be at a perfect level, or that there's even going to be a willingness to speak English, and that interpreters may be necessary. And then certainly, if you're looking to build your team for Korea, you'll want to have Korean language speakers on board. So I'll leave it at that.

BENJAMIN NA: Oh, thank you, David. And Lindsay, how about in China, what are some key considerations to keep in mind when seeking to diversify there?

LINDSAY MARGENAU: Definitely some of the same sort of themes as what David just said. Entering, I think, any market in Asia, including China, requires a long-term commitment and a really specialized and sustained effort. These are cultures that, I think, are based a very different cultural model than what Canadians are used to in terms of doing business. And so to be successful, we feel that companies really need to establish an in-market presence and need to be very conscious about complying with local import requirements, regulations. Having a local team is really important in China, in particular.

I would say one of the biggest considerations that we ask companies to reflect on is to say to themselves, why China? Why is it that you're coming into China? And what is it that you're trying to accomplish in China that you couldn't accomplish in another market in the region? For example, what do you bring to a company-- sorry, a country that's this size, that has this amount of diversification domestically alone? What is your special value?

It's also really vital, I think, something that Canadian businesses should keep in mind, is that China is not a true free market economy, like what we're used to in many parts of the world. Changes can and do occur suddenly and arbitrarily, sometimes for political, or other non-economic reasons. These changes can very, very quickly affect your market access. They can affect the tariffs that you pay, as well as the business activities, just the approvals factors on foreign companies.

Canadian pet food suppliers had a heyday a few years ago, when we were exporting a ton of Canadian pet food into this market, only to have those gates closed very suddenly without any warning. And that problem consists persists today. So they really have to go in, as I say, with eyes wide open. Tremendous opportunity here, but also being fully aware of the risks and challenges and ready to confront those.

BENJAMIN NA: Well, thank you, Lindsay. That was quite helpful. Mineo-san, from Japan's perspective, when Canadian businesses are seeking to partner with Japanese companies, what are some key things to keep in mind.

MINEO HIYAZAKI: In general, it is said it takes time until Japanese companies make a final decision because they seek a long-term, solid business relationship with their partners and analyze everything carefully. So in that case, you might need to be patient.

BENJAMIN NA: Right, patience, sometimes, it's not so easy. Vivian, are there some typical cross-border legal issues, or pitfalls you see Canadian companies run into?

VIVIAN DESMONTS: Yeah, sure. Thanks, Benjamin. And in relation to China, where we're based here, I fully concur and agree with what Lindsay Margenau just mentioned. China there's many opportunities because of the size of the market. And the middle class is growing there. There's literally hundreds of millions of consumers, in addition to the very sophisticated industrial network.

And at the same time, there are many challenges for sure. And we often see that many Kenyan companies, or even American, European companies tend to underestimate that there is actually complex legal framework. As Lindsay mentioned, I mean, it's not a free economy market. No, it's a Communist country.

Nonetheless, I mean, we often say it's not a country with a rule of law, but it is a country actually ruled by laws. There's literally hundreds of thousands of laws and regulations in China. And in terms of the typical legal issues that our Canadian clients face when doing business in China, or focused just on a few for this conference today, firstly, probably, of course, it's in everyone's mind, intellectual property protection, IP, trademarks, patents, copyright.

We need to keep in mind that China is a first to file country, like many jurisdictions in continental law, like in Europe. So you need to file the trademark, or file the patent in China to be able to go to the court or enforcement bodies, in case of counterfeit, or copycats. Otherwise, if you just rely on the laws for protecting well-known trademarks, or well-known brands, it's going to be very challenging because you will need to be a famous brand here in the China market.

I remember very well when I started to work over 20 years ago, end of the 1990s, Walt Disney had so many copycats here in China and struggled according to Chinese law, which did protect well-known trademarks, but struggled to prove that Walt Disney was actually well known in China before Chinese courts. Because it wasn't-- nowadays, of course, very different, Walt Disney is very well established in China. But for other Canadian companies, typically, you need to register a trademarks here. And our firm is happy to assist on that.

And once you have registered trademarks, once you have registered patents in China-- and I'm happy to say that in the last few years, like 7, 8 years, Chinese authorities have started to take IP protection really seriously, not just for public health, or public safety reasons, like fighting against counterfeit drugs, medicine, counterfeit brakes for cars, or counterfeit spare parts of aircraft engines. That was quite common 15, 20 years ago.

Nowadays, Chinese authorities are well-trained in terms of IP protection everywhere in the country. And the main reason is because Chinese groups themselves, the tech companies themselves, have lobbied very actively with the Chinese government. And Chinese government has understood. So we are able to win cases, more than 80% of cases, against counterfeiters in China, provided that our foreign clients have registered their trademarks or patents in China. This is really a must.

Consideration of time, I'll go quickly on other typical issues that our clients went into before coming to us for advice. In terms of contract enforcement, very often, as a Canadian company, Canadian companies are comfortable with a contract with a Chinese business partner, where the contract is governed by the laws of Ontario, let's say, or BC, or Quebec. And thinking that they would be well-protected because they know that they would be well-protected under the laws of their own jurisdiction in Canada.

But when you think of it, a contract is useful when, actually, there's a dispute later on during enforcement with your business partner. When your business partner doesn't respect the contractual commitment, then you take your contract out of the drawer and then you see what's going on, and then you try to enforce it. You get a great judgment in Canada, let's say, after a few years of litigations and fees and time spent.

And then once you get great Canadian judgment, then you want to enforce it against the Chinese counterpart. But the Chinese business partner doesn't have any assets in Canada. So you will need to have this Chinese judgment recognized and enforced by a Chinese court in China, where the assets are, or where the infringement of your high tech technologies is taking place.

So that's like after years of litigations and to end up with a Chinese court probably saying, well, I'm reviewing this contract, and the terms that may be very basic to you and obvious are actually not compliant with Chinese laws, or not compliant with Chinese taxation, or licensing, or compliance rules, and so not enforceable in China. So contracts, we're happy to assist and review vet contracts to make sure that they are enforceable here in China, and that they are with the paper they're printed on.

Third issue, very frequent issue for Canadian companies doing business with China, or in China is anything related to the foreign exchange control. The Chinese currency, RMB, is not freely convertible. There is always an administrative approval that banks will take care of in China. But nonetheless, they need to tick all and check all the boxes and administrative requirements to approve international bank transfers. Otherwise, you cannot get money in China, or you cannot get money out of China if you are not compliant.

And I'll just finish very quickly with also related to compliance. Data protection, cybersecurity is nowadays becoming a hot topic legally in China. And I'll finish this by that. I'm conscious of time and happy to take questions later on.

BENJAMIN NA: Well, thank you, Vivian. That's very helpful. And you all touched on this. And maybe you can expand on it further. But entering a new market isn't without its challenges. Lindsay, in your experience, what are some of the most common mistakes businesses make when trying to do business in China, or with Chinese companies?

LINDSAY MARGENAU: So I think it runs the gamut, depending on what sector companies are in. But I would, I think, comment on what Vivian just mentioned, which is being really aware of the regulatory environment here and how different it is from Canada and from many other countries where companies are doing business. Just being very respectful and conscious of following those rules to a T. Making sure that you have good advisors on your side.

Companies like Gowlings, law firms, advisory firms really do make a difference for Canadian companies to help them navigate the really complex and, frankly, ever changing market here. So if I was to say how to avoid mistakes, let's make sure you are committed, you're honest and truthful, and that you have a good set of advisors on your side.

BENJAMIN NA: Well, that's good advice. David, in your experience then, what are some of the mistakes businesses commonly make when trying to do business in Korea?

DAVID MALLETTE: Well, I think similar to the comment you made earlier by colleagues at the Japanese embassy is that Korea and Canada are like-minded countries in many respects. I mean, we want to uphold the global international rules system. We respect rule of law, human rights, democracy. And so there is a lot of commonality between us.

But that does not mean we're the same. And I would say, definitely, we see that in sort of maybe, particularly, the Korean approach, in that there is a high degree, I would say, of industrial policy in Korea and a desire to-- even though it's not tacitly, or explicitly stated-- this sort of, you could say, almost like a bit of a protectionism and a favoritism towards companies made in Korea and whatnot.

And so this is an area where, sometimes, what you're going to find is that if a Canadian company were to come with a novel technology, or a novel solution of some sort, the Koreans may show an interest in it. But they may show an interest in it, not because they want to necessarily trade with you, they actually want to own it. They want it to be there. And they would like to find a way to develop it.

So we would say the NDA, the non-disclosure agreement, once you start disclosing information and getting into sensitive areas is a definite. I mean, just because-- yes, there is a rule of law. But that does not mean that infringements cannot happen. And the CKFTA the Canada Korea free trade agreement will not protect you.

I've had companies say, well, we have a free trade agreement and there's an IP chapter in there, which basically commits us to follow the IP rules set established under the WTO. There's no special provisions that say because we have an FTA, a free trade agreement, that there is enhanced IP protection between the two countries. And so that's something to keep in mind in this case.

And again, I think, just going back to my earlier comment is, companies, a mistake they made is they don't claim preference under our free trade agreement. Or they assume that their goods meet rules of origin requirement and they don't get an advance ruling from Korean customs. And that can be very dangerous because they can come back and do an audit at some point and hit a company with retroactive tariffs and exporter. And so it's important, I would say, as a best practice, to get an advance ruling from Korean customs to make sure that you are meeting the rules of origin requirements if you are claiming the preferential tariff under the free trade agreement.

BENJAMIN NA: That's great. Thank you, David. Mineo-san, from Japan's perspective, what are some of the barriers or friction points that Japanese companies encounter when trying to engage with Canadian companies?

MINEO HIYAZAKI: Yes, we haven't heard any barriers or friction points about the relationships with Canadian businesses from Japanese companies. The main reason for this would be that they do business together based on our fundamental principles, such as democracy, basic human rights, and the rule of law. However, there are business environmental challenges in Canada for Japanese companies, as minister Maruyama mentioned, such as lack of infrastructure, stricter regulations, the relationship with Indigenous people, and the relationship between federal and provincial government.

BENJAMIN NA: Thank you. And Vivian, to avoid some of these mistakes that Lindsay and David, in particular, have mentioned, at what stage should companies involve legal counsel when entering a new market?

VIVIAN DESMONTS: So thank you. Well, it's true that as lawyers, we are quite fortunate to find ourselves involved very early in expansion projects, or new distribution projects. And it's always very exciting. So yeah, very early in the planning process, when our clients start to work, whether it's with Chinese companies, or even other companies from other jurisdictions in Southeast Asia, let's say, very often, I find that Canadian companies, or foreign companies don't do a minimum due diligence on the counterpart.

And they would rely-- for example, for working with a Chinese company, or a new supplier, they would just rely on information on the website, which is in English. And then what's mentioned on Alibaba, for example, a platform, on that supplier, and then off they go. And they don't prepare contracts. They don't make inquiries about, who are the shareholders, the beneficial owners, the controllers of these Chinese companies. If the Chinese company that they are going to start working with is actually just newly established, or is it a well established company incorporated for many years with the registered capital fully contributed to, or not?

And this is information that we can get here in China with the public and official companies registry, which is very rich of information, much more than in most provinces in Canada. For the companies registered in China, we are able to confirm to you, who are the shareholders, if there's pending litigations, if the company is blacklisted or not, who are the company officers and if they have positions in other companies in China.

Recently, for example, in addition to a quick company check like that for a Korean client, wanted to distribute its skincare products in China on e-commerce platform and with the hundreds of millions of Chinese consumers. They wanted to work with a distributor that they found like that on the internet. Actually, the distributor, Chinese distributor reached out and saying, your product is great, let me distribute it in China, where we're going to do great things together.

And we did our homework. We did our routine checks. OK, who is this company. Ah, established just a year ago, uh-huh, by two individuals. Oh, really, shareholders are individuals. Capital, oh, not contributed yet, OK. And then we continue our little preliminary due diligence. And then we find out this potential distributor has registered already as a trademark in China, the brand of our client.

So this information, we were able to share very early in the process with our Korean client that immediately paused the project. Of course, we filed to claim back the trademark that this potential distributor very kindly registered but then thank you to translate back to us. And so we hope to, in these kinds of negotiations.

I mean, moving on, or next step where we often act very early in the project. It's, of course, in terms of contract drafting, I've mentioned it earlier on. Having a contract governed by the laws of province in Canada, or even the laws of Hong Kong, let's say, need to have legal advice to consider, is it actually enforceable? And where are the assets? Where may the infringement or disclosure of confidential information happen?

If it's in China, very often, we would actually advise to have the contract governed by Chinese law. So that in case of infringement, or in case of dispute, if we can't agree on the amicable settlement, then we go to the Chinese courts immediately and then we can have it enforced. And litigations in China takes six months to a year maximum. It's much quicker than litigations in Canada by experience. So I think I'll stop there. And I'm happy to take other questions later on.

BENJAMIN NA: Thank you, Vivian. As we're approaching the second half hour of this webinar, let me ask these questions about what support might be available to Canadian businesses, who are looking for some help, or assistance, or some advice on diversifying into Asia. Lindsay, what support and resources are available through the trade commissioner service to help Canadian companies build trade relations with China?

LINDSAY MARGENAU: Sure. So here in China, we actually have the largest team of trade commissioners in the world. We have five different offices across China. So here in Beijing, Chongqing, Shanghai, Guangzhou, and in Hong Kong, we have more than 100 trade commissioners. And I think the reason for that-- you've heard through the lines that I'm communicating tonight-- this is a complex market. It's a challenging market. And we want to make sure that Canadian interests are protected when Canada and Canadian companies are doing business here, whether it's selling into China, or sourcing from China.

And so our trade commissioners are here to help. We've got a number of documents online and information that can help you. And I guess, in terms of advice for Canadian companies who might be considering China for the first time, or considering expanding in China, I would say, do your research in Canada first before you get to China. Don't be wowed by the opportunities here and rush headlong into it.

We always say that Canadians need to be very firmly aware of the Canadian policy environment that impacts business in China. So for example, if you're considering sourcing from China, you really need to be fully aware of the Canadian regulations on inadvertently sourcing products that might have been made by forced labor. For example, bill S-211 on forced labor could impact your ability to import goods if you can't provide due diligence on where those goods have come from.

We also say that Canadian companies need to be fully aware of things like the sensitive technology research areas of concern between Canada and China. This is a Canadian policy. You can find more information through the trade commissioner website. But these are the sorts of things that you need to really do your due diligence on and make sure that you're fully in line with Canadian policy before you start looking abroad. So our team is also happy to help people navigate those kind of questions, as they go through, considering the China market.

BENJAMIN NA: That's great. And David, what support and resources are available through the trade commissioner services in Korea?

DAVID MALLETTE: Well, I think they're the ones that are available throughout our network globally. And I see that from the companies. And thanks, Lindsay, for providing us, me, a sense of who's already a member of, or a trade commissioner service client. So they're well aware of these types of services that we provide.

And of course, just to reiterate, for those who aren't, we provide market insight assessment, new business opportunity leads, qualified business contacts, and assisting with complex business problems. Those are the core services. And certainly, those who are interested in finding out more can go to the website, tradecommissioner.gc.ca.

There are also support programs in place that are for small and medium-sized enterprises, associations, innovators, and community investments in Canada. I'd like to say, too, that since we had the unveiling of Canada's Indo-Pacific strategy back in November 2022, there's been a push, obviously, to look at the Indo-Pacific area. And more resources have been committed to the region.

And one of the most, probably, prominent areas where we've seen increased uptake, or activity is through these large trade missions that were led by the former minister of export development, Minister Ng, and to a number of different markets. And these were featured in the hundreds of companies, in some cases, very well organized, very well funded. And we were very diligent, also, in tracking the results that came out of them, which were quite impressive in some cases.

And so I would say, for those who don't follow the trade commissioner service on LinkedIn or otherwise, our website, I'd encourage you to do so because that's how you can find out about upcoming things relevant to the market. So we participate in flagship trade shows. Our trade commissioners will organize pavilions, dedicate resources and time to basically bringing in a Canadian delegation to be at a trade show here.

And so you can find out about it if there's something that maybe is of interest to you by following us. We also do things in third countries and in Canada. So for instance, our ICT trade commissioner regularly goes to the Consumer Electronics Show in Las Vegas, not because we want to give her a vacation in Las Vegas, but because there are a lot of Canadian companies there. There are a lot of Korean companies there. So that's a great opportunity for them to meet and for her to assist in facilitating some of those introductions.

Specific to Korea, I mentioned the free trade agreement that we have in place. We also have a science, tech, and innovation agreement in place since 2017. And that is associated with funding under the Canadian international innovation program. And so there is a funding package there to help innovators establish partnerships with Korean innovators and in co-development validation type projects.

And we also, under the Indo-Pacific strategy, we set up what's called a clean tech demonstration program. And that allows Canadians, specifically small and medium-sized companies, who are developing, or are already in the process of developing a new type of clean technology, basically, to have it funded for scale up in the Indo-Pacific region. So basically, what we do is we can bring a company in and help them to get the contacts and get the project going. And then the idea is to have that expand into other markets in the Indo-Pacific.

And so we have an officer, and that's all she is devoted to is that particular program. And every year, it will different country of focus, different subsector. Last year, we looked at battery recycling. This year, we're looking at wastewater treatment. And so from year to year, that will change as well. So something to keep an eye on for those companies who are working in that space.

BENJAMIN NA: And, David, if you could offer one piece of advice to Canadian businesses who are seeking to get into the Korean market, what would it be?

DAVID MALLETTE: I think similar to what we've heard from others-- and I'm particularly thinking of Japan-- and that is-- and Lindsay, I think, too, mentioned this-- is do your homework, be prepared before you come here. And we generally are-- our trade commissioners do a pretty good job. When you contact us, it's the beginning of a conversation, really.

And so if we sense you're not ready for the Korean market based on your export experience, we'll work with you and we could redirect you back, too. We have regional offices across Canada covering all provinces. And so if you're new to exporting, or if it's-- they can work with you. The regional offices can help you get to the point where you're going to have a much higher degree of comfort in looking to internationalize your activities.

But I would say, for Korea specifically, commit the time and the resources and be present. Because if you are looking to establish a relationship, particularly with the big conglomerates, they will take similar-- from what we heard from the Japanese embassy, they will take their time. They will sit on it. They will mull. They will do their research. And then you might think they're not interested, but then lo and behold, a few months, or perhaps even a year or so later, they'll come back. And they'll want information from you fast. And they'll want you to be prepared to act.

And so this is why it can be a bit tricky for Canadian companies because they think they've lost the communication thread, but in fact, it's still there. And so sometimes, it's just a matter of checking in and seeing things where things are. But there is a sort of slow, long process of making a decision but then this expectation that you act very quickly once a decision is made. And if you don't, it's taken that you're no longer interested. And perhaps, they'll look elsewhere.

So this would be my suggestion. And in some cases, it's imperative to work with a Korean partner. Especially if you're looking to bid on government projects in the defense sector, especially, you need to work with a Korean partner. There are going to be the ones who are going to help you navigate some of the hurdles and some of the regulatory challenges that will need to be managed.

BENJAMIN NA: That's great, thank you. That's great advice. Mineo-san, for Canadian companies that are interested in diversifying into the Japanese market, where can they turn to for support and understanding where opportunities are and where they can make connections.

MINEO HIYAZAKI: If Canadian businesses would like to find the Japanese partners, we'd like to recommend them to consult with the Canadian embassy in Tokyo first. We think they are very active and powerful to support Canadian companies. And moreover, if Canadian companies are interested in investing into Japan, we'd like to recommend them to contact JETRO, which stands for Japan External Trade Organization. It is a Japanese government affiliated organization. And they have an office in Toronto. They will support potential investors.

And lastly, for your reference, I'd like to mention my personal view. In general, Japanese companies, which are interested in Canadian companies, they already have basic information well on those companies. But competitive small, medium-sized Canadian companies, such as a high tech startup companies and the mining junior companies, might be a business chance with Japanese companies because Japanese companies might have not been aware of those Canadian companies yet.

BENJAMIN NA: Thank you, Mineo-san. That's JETRO. That's J, E, T, R O, is that right?

MINEO HIYAZAKI: Yes.

BENJAMIN NA: Japanese export. OK, great. And they're here--

[INTERPOSING VOICES]

MINEO HIYAZAKI: Yeah, oh, sorry. J, E, T, R, O, Japan External Trade Organization.

BENJAMIN NA: And you said they have an office here in Toronto, you said.

MINEO HIYAZAKI: Yes.

BENJAMIN NA: OK, great. So we have a few more minutes for questions. I don't see any. Oh, here we go. I'm sorry, I'm just reading the chats.

I have a question here from Daniel Jensee from Henson Shaving Aerospace Machine shop that made razors better than all the other razors. They've seen fast growth in Canada and USA. Do you recommend moving into Asia for them? And if so, when? How about-- want to start with Lindsay.

LINDSAY MARGENAU: Hi, yeah. That's an interesting one, and one that piques my interest because I think it could be very valuable for e-commerce platforms in China. And that's something I haven't talked about yet. But e-commerce is huge in China. And anything that is sellable through e-commerce is a real area of opportunity we find for Canadian companies.

China has its own e-commerce platform. So there's no Amazon here. But Chinese platforms are very different from Canadian and American and other platforms. So we have a Canadian store on one of them, called jingdong.com. And that's a way that you can get a sort of easy way in for relatively low costs to try out something and see how your products sell here. So if something of that would be interesting for you, feel free to reach out to our team, or to me. I'm happy to connect you. And we can discuss whether e-commerce in China might be for you.

BENJAMIN NA: Yes. And I know e-commerce is significant business in Korea. David, how about from the Korean perspective?

DAVID MALLETTE: That's a tricky one. And I would have to defer to-- I think some market research would be in order. Because despite my facial hair, it's not very common here in Korea. And I'm not saying that's because people necessarily shave. It's just it's not a common thing genetically. And so that would be-- I think you'd have to do a market study.

It's actually hard finding stuff for shaving and for body hair and whatnot. So if that's what the focus is, yeah, you definitely have to look. Certainly, amongst the expat community, it could be a hit. But amongst Koreans, I would say, that's a big question mark.

BENJAMIN NA: OK. Being Korean, I totally get it.

[LAUGHTER]

So I've got another question from Ronnie Nahim. And he's asking, where would you recommend to set up factories for fans and lighting. I'm not sure if you can speak about Vietnam or Philippines, he's also asking about that. David, maybe I can turn that question over to you.

DAVID MALLETTE: Yeah, I mean, that's an area that we would-- I mean, as the trade commissioner service, we would probably only get involved in that sort of thing when you start encountering difficulties, let's say. We're not in the business of helping you establish a commercial presence in the country, in our host country. And so whether it's manufacturing, whether it's setting up an office, there are companies that can help. There are companies and there are firms that we can refer you to, consultancies and whatnot. And there are certainly others that you can work with. But we ourselves, that's not something that we necessarily would devote our time to.

Look, we are much more interested in creating companies who want to go and set up business in Canada and make an investment in Canada. But certainly, we do not devote resources to establishing a commercial presence here in Korea.

BENJAMIN NA: OK.

VIVIAN DESMONTS: And maybe in terms of establishment and foreign type investments, so I'm happy to share a bit, some experience from our clients that had manufacturing units in China and considered the, or actually delocalizing in Southeast Asia, for example, Vietnam, or Philippines, or Malaysia, typically, it depends on the industry and sector. Because many of them, not just for political reasons, it's more for actually market reasons, commercial reasons, the labor is actually relatively expensive nowadays in China. China being a more mature market. Whereas, in Southeast Asia, labor costs are much lower than in East Asia, or Northeast Asia, China, Korea, Japan.

So to pick between Vietnam, Philippines, Indonesia, or whatever other jurisdiction, it's impossible for us to reply like that. I think the advice we've just given for China, Korea, Japan about doing your own homework, visiting on site, seeing for yourself, making connections with people on the ground, talking with the Canadian institutions, consulates, trade commissioner's office, but also Canadian chambers of Commerce here in the different countries in Asia so you can make your own opinion and build relations with potential business partners, I think, this is really key.

BENJAMIN NA: Great, thank you, Vivian. I've got time for one more question. It's from Sassan </span><span class="label _6q3y4" style="background-color: #f89406;">[INAUDIBLE]</span><span>. About medtech and AI in healthcare. He's asking, are there any trends in China, Japan, or Korea, or any restrictions to be aware of, specifically concerning privacy, or data localisation? Maybe I'll ask you, Lindsay, first.

LINDSAY MARGENAU: Sure, yeah. I saw your question, Sassan. And I'd really recommend that if you're looking at the China market, that we have a quick chat. AI is huge in China. It's an awesomely enabling tool. But it also brings a significant risks for particularly small companies, particularly when we start about data local-- we start talking about data localization. So I believe you've been in touch with our team before, but feel free to reach out to me directly, or to the team here in China because I think we'd be really happy to chat with you about some of the opportunities that we do see here, but also how to make sure you protect yourself.

BENJAMIN NA: Yeah. And Vivian, I know this is one of your expertise as well. Any further comments to add to that?

VIVIAN DESMONTS: Yeah, happy to help and to take on the questions afterwards, or to follow up by email. I'd be happy to share, for example, a PowerPoint presentation we've done just a couple of months ago with our Montreal office. It was a webinar just on China data protection, the latest trends, including regulations on AI. So happy to share that later on.

BENJAMIN NA: Great, thank you. OK, well, that brings us to the hour. And that brings us to the end of today's webinar. On behalf of Gowlings, I want to thank Lindsay and David, Mineo-san, and Vivian for sharing their valuable insights. And thank you, all of you, for attending. As I mentioned at the beginning, we have a survey, which we'd be grateful if you could complete. It's accessible through a QR code on the screen, as well as in the LinkedIn chat.

As I also mentioned, a recording of today's webinar will be sent to you in the coming days. And also, to stay up-to-date on some key insights on the ongoing tariff wars, we have a link to our tariff hub that will also be sent to you. And if you have any further questions, or would like to be connected to a trade commissioner, or to JETRO, I'm sure that our panelists will be happy to share their contact details.

I want to, again, thank you all for attending, and especially grateful to our panelists for their time. I know Lindsay and Vivian and David, in particular, it's quite late where you are all and so appreciate it again. Thank you all and have a great day.

DAVID MALLETTE: Thank you.

MINEO HIYAZAKI: Thank you.

LINDSAY MARGENAU: Good night.