Industry Committee on Feb. 5th, 2008

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Ms. McDonough.

We'll go to Mr. Simard, please.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you very much, Mr. Chair, and welcome, to our witnesses.

My first question is to Ms. McCready.

I'd like you to tell us how important clusters are in the biotech industry. In Winnipeg, for instance, when they built the level-four disease control laboratory, within months they had Biovail and all these small companies basically surrounding it. And it keeps growing. So perhaps tell me about the importance of clusters.

Secondly, there are two ways of doing things when it comes to research. One is to basically spread it across Canada, where everybody gets a little piece of the action. But what seem to be more prevalent now are centres of excellence, if you will. Maybe you could give me an idea, as well, of what you prefer when it comes to those two options.

[Cate McCready]

We like both.

The reality is that when you look at the global dynamic of who we're competing against for ideas and being able to retain our ideas, neighbourhoods matter. The people you're walking through a building with, the people you're interacting with, be they from the research community in a hospital, be they from the research community.... Thanks to experimental farms and centres of excellence, that relationship is incredibly integrated in successful clusters, particularly like those we see in Boston and San Diego. It's an intrinsic ecosystem where people can feed off each other in a very meaningful way.

One of the interesting opportunities right now in Canada, particularly within our sector, is the diversity of our economic fundamentals. So from a rural economy to our urban centres, our technology integrates both of those things. If we get smart about how well to do that, using programs like standards of excellence, using cluster development, and using IT to foster that environment a little bit more effectively, so that the people who are making car seat foam out of soybeans can market that across the world to the new car coming out of India, for instance, we allow them that technology, those ideas, and that mechanism to do that.

Currently some of them are working a little too distantly—that's admittedly—and I think there is a question around where our clusters will gradually evolve and what exactly they will look like.

[Raymond Simard, Liberal, Saint Boniface, MB]

Thank you.

Mr. Pilat, I think you indicated that our service sector should be a little bit more adventurous, maybe a little bit more open to the world. I completely agree with you.

The reality, however, is that in a lot of the emerging markets we find very few large Canadian companies, never mind smaller Canadian companies. One of the reasons is that smaller Canadian companies have gone out there and have come back. The culture shock, the economic shock, for instance, the sensitivities, were not what they expected. In other words, they were not well prepared.

Do you have any recommendations in terms of countries that have done well in preparing their companies to penetrate these emerging markets?

[Dirk Pilat]

That's a difficult question.

I think there is a lot of effort from countries to do that, but the success rate is limited. I think it is also partly about companies themselves actually learning and trying to operate in a global environment.

I'm originally from the Netherlands, which has a very open economy. We've always had a number of services or economies operating very quickly abroad, and I think we've been successful in that. In Europe now, with the integration of markets, of course, it is happening on a much bigger scale.

I think you can prepare companies a little bit with public policy, but on the other hand, it's also the forces of the market that will eventually do it. I understand Canada has a problem there with a lot of small companies, which makes it harder.

[Raymond Simard, Liberal, Saint Boniface, MB]

One of the challenges, I would imagine, is that we sell 80% or 85% of our products to our neighbours to the south. The other day somebody said that it wasn't that easy a market, but I do think it's an easy market, because we share the same languages and we have a lot of things in common. So that is a challenge that we have.

I'd also like to go back to Mr. Gander with regard to labour shortage. I think it's a huge issue, and I'm surprised you didn't mention it in your presentation. I know my colleague spoke to it. We were told by IBM and Microsoft that 25,000 jobs would be coming up in the next little while. We're talking about 8,000 kids in the pipeline. I'm not sure you're getting to these people early enough. It would seem to me that if you reach them at university, it's already too late.

Have you thought about doing something at the secondary or high school level?

[Barry Gander]

Yes. One of the ways CATA works is to partner with other organizations that have expertise in particular areas. We are working with some government agencies, especially the ones that can, as precisely as possible, define what these kids are going to be walking into in terms of future jobs. That way, we can go back and tell the schools about the kinds of things they should be looking for.

But I also agree with your comment that it's not necessary to specialize early. They should have a well-rounded education, I think. All they have to do is know how to learn. If we can get that across to them, then they're all right. The kids aren't silly or stupid; they know what's going to pay and what's not. They've got their eyes on it.

But I do agree that it is spikey across Canada, and there are funny characteristics in a St. John's or a Vancouver that are different. But certainly putting a centre in a particular place does encourage a particular kind of growth—the nano centre in Edmonton, for example, and you were mentioning your own in Winnipeg. Montreal has some really powerful technology.

[The Chair, Conservative, James Rajotte]

Great. Thank you.

Thank you, Mr. Simard.

We'll go to Mr. Van Kesteren.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you, Mr. Chair.

And thank you, witnesses.

[Mr. Van Kesteren speaks in Dutch]

It's nice to have you here, as well.

This is not the first time we've heard this. There seems to be a disconnect. I want to direct both my questions, actually, first to either Mr. Fathi or Mr. Gander, but also to Mr. Pilat.

There seems to be a disconnect as to what they are producing when we invest in technology and what is produced in the marketplace.

After reading through your presentation, Mr. Pilat, I'm intrigued that we see a tendency and an encouragement to first of all open up new markets to encourage people. Could you tell me, Mr. Pilat, in the European market first of all, are there countries that devote more time or more effort to entrepreneurship as opposed to science and technology, and are they more successful?

[Dirk Pilat]

I don't think it's a question of either/or; I think it's a question of doing both. You need to have a very strong entrepreneurial climate to really get new companies in the marketplace.

And if we look at some of the work we have at the OECD, Canada actually is pretty well positioned there in terms of having fairly low barriers to entrepreneurship, which means that companies can easily start up. This is a problem in many European countries.

At the same time, I think you need to have the basic knowledge being created--some of the new ideas coming into the marketplace: biotechnology, nanotechnology, information technology--and that can then be picked up by the market. So I think you need to have the interaction between science and technology, creation, and entrepreneurship.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

But as a government, I know we need to encourage that, we need to encourage higher education and some of the science and technologies, but where should the thrust of our efforts be? Should it be in that area, or should we, as a government, concentrate more on trade agreements and taxation levels?

I know you're going to tell me it's both, but which is more successful?

[Dirk Pilat]

The common wisdom with a lot of the stuff we've done at the OECD is basically that if you don't get your overall environment for innovation right, if you don't get your business environment right, then a lot of the other things you want to do will not work. I think you first need to get that environment very right, and then you can also get a lot more returns out of your investments in science and innovation. So you need to definitely get your market environment right, and then I think you can get more out of science and innovation too.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Okay.

Could I get a comment possibly?

[Barry Gander]

If I might, that's very good.

I think that what Canada has been doing thus far is pouring an awful lot of money into the research side, into research communities. But I think there is an equal measure we should be doing on commercialization and monetization. You don't really commercialize a service sector anyway; you monetize the value of what the idea is, but we don't do that in Canada. We have research tax credits, for example, aimed at helping companies invent something, but then there is no doorway out the other side. If we want to give tax credits for research, there should be an equal tax credit for being able to commercialize it and get it out.

It's a process we don't understand very well here, so I think there is an awful lot of work we can be doing on the policy side to push that as well.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm going to split my time.

[The Chair, Conservative, James Rajotte]

You have one minute.

[Bruce Stanton, Conservative, Simcoe North, ON]

I'll just pick up on that same idea, if I can.

In looking at our government's strategy around mobilizing science and technology, one of the categories we had there was information communications technologies, in terms of commercializing. Where are we deficient there in terms of capturing that group of service companies that we're not fitting in? Could you speak to that?

[Eli Fathi]

Commercialization really has two gaps: one is the innovation gap, and the other is the business commercialization gap. We're addressing the first part very well. The government is putting sufficient dollars into universities in this area. The issue is that what we get out of it, which is taking the prototype from the university and then taking it to create a business, is where we have the second big gap. There is a chasm between this and taking it to the market, because it's not sufficient to have the product.

I'd like to give an example. Look at the technology that was developed in Quebec City, which was related to a company from Denver that took that technology and created the new shoes that are selling very well around the world. We developed the technology, and somebody else created the business.

We really have to look at what we do with the business side, and not only with the technology side.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Stanton.

We'll go to Monsieur Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Thank you, Mr. Chairman.

Good day everyone.

Mr. Gander, after checking the website, I wondered if the Canadian Advance Technology Alliance was in fact the organization that your represented

[Barry Gander]

Are you asking me to describe in general the Canadian Advanced Technology Alliance?

[Robert Vincent, Bloc, Shefford, QC]

I have here a report on innovation strategies in Canada that puts forward six recommendations. Is this in fact your report?

[Barry Gander]

That's right.

[Robert Vincent, Bloc, Shefford, QC]

I'd like to briefly discuss the report.

One of your recommendations notes the following:

Public companies, who conduct the vast majority of R&D, can only get their credits when they are profitable. In difficult economic conditions such as those prevailing in the high tech industry, this creates a serious problem.

Are you implying that companies that are not profitable cannot take advantage of R&D opportunities?

[Barry Gander]

That's exactly what it means.