Evidence of meeting #15 for Industry, Science and Technology in the 40th Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was that's.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

3:30 p.m.

Conservative

The Chair Michael Chong

Welcome to everyone.

Pursuant to Standing Order 81(4), we're studying the main estimates for 2009-10.

I'd like to welcome the Honourable Tony Clement, Minister of Industry, who is in front of us today along with his departmental officials, Mr. Richard Dicerni, deputy minister of industry, and Mr. Paul Boothe, senior associate deputy minister. I'd like to thank all of you for coming on short notice and for coming in front of our committee to answer our questions about the main estimates.

We'll sit until about 5:15 this afternoon. Then the minister can leave and the committee can then vote on the estimates and report them back to the House.

Without any further ado, I give the floor to Minister Clement.

3:30 p.m.

Parry Sound—Muskoka
Ontario

Conservative

Tony Clement Minister of Industry

Thank you, Mr. Chair. I appreciate the opportunity to be with you this afternoon and to come to the Standing Committee on Industry, Science and Technology to discuss the 2009-10 main estimates.

As you noted, I have my senior officials here with me. To my left is Richard Dicerni, the deputy minister. To my right is Paul Boothe, the senior associate deputy minister, and behind me we have Kevin Lindsey, the chief financial officer, and Ron Parker, the senior assistant deputy minister for the industry sector.

At our meeting in February, I began my address by outlining the rapid deterioration of the global economy. We don't yet know how long the recession will last, but we do know that one day there will a recovery.

The challenge for the industry portfolio is to help ensure that we weather the current economic storm and set policies and programs in place to prepare Canada to be more competitive than ever whenever we return to economic good times.

As we discussed in February, Canada faces the challenges with sure footing on some very solid foundations. We've got the strongest banking sector in the world, we have paid down a significant amount of federal debt in years gone by, our fiscal structure remains sound, we have dramatically reduced taxes in the last four budgets, the private sector enjoys one of the most innovative tax credit systems in the world, and we have set the conditions to make Canada an attractive place to invest.

We've had a long-term strategy in place since 2006. Advantage Canada, as it's known, was designed during a period of economic expansion, to be sure, but it has proven to be a good strategy for the downturn as well. When the Minister of Finance introduced Canada's economic action plan this past February, we built upon these advantages.

They include a fiscal advantage. Let me say that in sharp contrast to many other OECD countries, Canada had been reducing debt and carefully managing spending before the recession hit. This gives us room to put in place measures to support the economy without putting our long-term fiscal position at risk.

We have a tax advantage. Budget 2009 proposes over $20 billion in new tax relief over 2008-09. Since 2006 we have increased total relief for individuals, families, and businesses to about $220 billion over five fiscal years.

We have an infrastructure advantage. Even before the downturn, we had been investing more in infrastructure than at any other time in the past half century. The economic action plan accelerates and expands these investments with almost $12 billion in new infrastructure stimulus funding over the next two years. These investments will put shovels in the ground today. They will put paycheques in worker's pockets today and put food on the family table. They will also build infrastructure that will improve our competitiveness and quality of life for decades to come.

There is the entrepreneurial advantage. We have taken significant steps to cut red tape. In the January budget, we took further measures by proposing to establish a Canadian securities regulator and to work with the provinces to amend the agreement on internal trade.

Finally, there is the knowledge advantage. Our goal there was to create the best educated, most skilled, and most flexible workforce in the world.

Mr. Chairman, the economic action plan launches the Canada skills and transition strategy to help Canadians weather the economic storm. We have also made significant investments in our S and T strategy, which you heard about in question period today. I will seek to elaborate on those in just a few minutes.

The Advantage Canada long-term strategy is taking hold. It is proving its worth during the recession, and we will stick to the strategy simply because it is working. It will help us get through the downturn and prepare for a more competitive economy down the road.

Mr. Chairman, when I met with this committee in February, I talked about S and T, manufacturing, and small business development. I'm pleased to have this opportunity to update the committee on these files and to talk about some of the other issues that arise from the 2009-10 main estimates.

S and T is an integral part of our strategy to build Canada's knowledge advantage. We will build a competitive advantage for Canada based on excellence in S and T. Investing in S and T is crucial for developing highly skilled people and improving the long-term competitiveness of Canadian firms.

In the previous three budgets, the Government of Canada provided over $2 billion in new funding for S and T. In Canada's economic action plan of this year, we are investing more than $5.1 billion in new funding towards science and technology initiatives. This represents one of the single largest federal investments in S and T today.

Let me remind the committee of just a few of those measures. In March we announced a $2 billion investment in the new knowledge infrastructure program. This will support infrastructure enhancement at secondary institutions, colleges, and universities across the country. The presidents of the colleges and universities have told us that this was their top priority. These investments create jobs in the short term, but they also provide the infrastructure that universities and colleges require for years to come.

We are investing $750 million in the Canada Foundation for Innovation in support for equipment and facilities, and another $250 million over two years to undertake an accelerated investment program to address deferred maintenance at federal laboratories.

The economic action plan also commits $110 million over three years to the Canadian Space Agency to support research and development in terrestrial prototypes for space robotic vehicles. Canada is and should remain a global leader in this technology, Mr. Chairman.

The Canadarm became a source of national pride--we know that--and Dextre advanced Canada's reputation as a robotics leader. We developed the technology to service satellites while they're still in orbit. With the investment in the Canadian Space Agency, we will protect Canada's heritage and leadership in robotics and move on to the next phases of the technology. We want to remain at the forefront of space robotics with projects such as the Mars Lander and the lunar rover. These technologies have many applications closer to home as well. The country that is the leader in building space robotic vehicles will also be the country at the forefront of such technologies as electric cars and robotics used in the mining industry.

Canada's economic action plan also provides $200 million over two years to the National Research Council industrial research assistance program, or IRAP, as it's known. Members of this committee are well aware that IRAP has been a very popular program for the NRC. The budget provides $170 million to double IRAP's contribution funding and $30 million to help companies hire over 1,000 new post-secondary graduates in business and science. Once again, Mr. Chairman, here is a program that will provide 1,000 new jobs in the short term. These jobs will help businesses develop competitiveness and skills that will help them in the years to come, as well.

The budget provides $87.5 million over three years to temporarily expand the Canada graduate scholarships program. An additional 2,000 master's students and 500 doctoral students will be able to advance their studies, deepen their skills, and better prepare to capitalize on the opportunities ahead.

Mr. Chairman, our S and T investments covered in these estimates also include $50 million for the Institute for Quantum Computing in Waterloo, Ontario. This institute will support the construction and establishment of a new, world-class facility. The investments also provide $5 million to help establish the Ivey Centre for Health Innovation and Leadership at the University of Western Ontario. And they supply $3.5 million over two years to the Networks of Centres of Excellence so they can offer an additional 600 graduate internships through the industrial research and development internship program.

Our S and T investments also include up to $85 million over two years to maintain or upgrade key, existing Arctic research facilities. These investments will ensure that a strong research infrastructure network is in place to support Canada's new high Arctic research station.

In all these examples, Mr. Chairman, we're making investments in a way that stimulates the local economy now and provides the foundation for competitiveness for many years to come.

Mr. Chairman, Canada's entrepreneurial advantage includes framework laws that give both businesses and consumers confidence in the rules of the marketplace. As a result of Canada's economic action plan, we've taken significant measures to streamline and modernize the Competition Act and the Investment Canada Act.

Canada's competition and investment policies serve the country well. They yield a tremendous economic gain, but they have not changed substantially since the 1980s. We needed to bring our framework laws in line with the demands of the modern knowledge-based global economy.

This committee is well aware that in July 2007 we asked Mr. Red Wilson to chair the competition policy review panel to examine the Competition Act and the Investment Canada Act. The panel submitted its final report in June 2008, and we moved swiftly on the panel's recommendations by incorporating them into the Budget Implementation Act, which received royal assent in March. Reforms to the Competition Act protect Canadian consumers more effectively from anti-competitive behaviour and deceptive market practices such as misleading advertising, mass marketing fraud, and price fixing.

The Commissioner of Competition now has recourse to administrative monetary penalties for abuse of dominance. This will provide greater deterrence for anti-competitive behaviour. We have substantially increased fines and jail terms for price-fixing cartels. Businesses will have more certainty under the new rules governing merger review.

Mr. Chairman, these amendments strike an important balance. On the one hand, we ensure that the law will not discourage legitimate business activity, because legitimate businesses have nothing to fear from these changes. In fact, those considering mergers and acquisitions will find the new rules more straightforward.

At the same time, we provide better protection for consumers and companies engaged in honest business practices. Now other elements of the Budget Implementation Act have amended the Investment Canada Act. Further reviews of proposed investments will be applied only to the largest and most important perspective—investments. By raising the threshold for review gradually, we are making it easier for foreign investors to create jobs in Canada by investing here.

I would like to emphasize the importance of our national security amendments. Before now, Canada was the only major industrialized country that did not have a mechanism for reviewing foreign investments on the basis of national security. The national security review mechanism that we now have in place is consistent with our international obligations and is not disguised protectionism. Before leaving the topic of marketplace framework law, let me give the committee a sneak peak at what we will discuss in the coming weeks under Bill C-27, the Electronic Commerce Protection Act.

Members of this committee are well aware of the tremendous growth in online commerce. In 2007 StatsCan reported that the Internet accounted for $62.7 billion in sales in Canada, and this year e-commerce is projected to exceed $8.75 trillion worldwide. But along with the growth of the Internet has come the growth of online threats, including spam, spyware, malware, trojans, and virsuses. Spam now makes up over 80% of global e-mail. It is a major inconvenience and a drain on bandwith in its own right, but spam is also a conduit for other malicious online threats. With Bill C-27, we will take major steps to combat spam and other online threats. We will use the regulatory authorities of the Canadian Radio-television and Telecommunications Commission, the Competition Bureau, and the Privacy Commissioner. We will also give businesses and consumers their own recourse to the courts to fight spamers.

We worked hard to get this bill right. The government has closely studied the regulatory and legal frameworks in other countries, and Bill C-27 brings together many of its best practices. As for small business, the government recognizes the particular challenges small businesses face and has taken measures to foster an environment conducive to growth.

Access to credit is a major concern. Budget 2009 increased the Business Development Bank of Canada's borrowing capacity, and this improves financing available to creditworthy businesses. The government is also improving the Canada small business financing program by significantly increasing the maximum eligible loan amount. Government-funded business services such as BizPal and the Canada Business Network provide essential information for small business owners to help them start and grow their businesses while at the same time reducing the paperwork required to meet government obligations.

We're investing in Canada's youth by helping the country's young entrepreneurs through funding for the Canadian Youth Business Foundation. Measures have also been taken to reduce taxation. We have accelerated the reduction of the small business tax credit, which is now 11%. The GST has been reduced. The lifetime capital gains exemption has been increased, and there are generous tax credits that promote research and innovation. These are some of the steps taken to help small businesses in this difficult economy

Our government is also taking steps to ensure that Canada emerges from this economic crisis with a more modern and greener infrastructure. Budget 2009 accelerates and expands the recent federal investment in infrastructure, with almost $12 billion in new infrastructure stimulus over the next two years. We are talking about shovel-ready projects. These are projects that can start as soon as the upcoming construction season begins, including the development of roads, bridges, clean energy, and broadband Internet access across the country.

We've also provided $1 billion over two years for a community adjustment fund. Additional economic stimulus will mitigate the short-term impacts of the economic downturn by creating employment opportunitites and will address the transitional and adjustment challenges in restructuring industries or communities. CAP assistance in Ontario will be provided on a priority basis to communities severely affected by the economic downturn, including those that are reliant on resource-based industries such as forestry, mining, and those that depend on the manufacturing industry.

We're also investing in Ontario's communities. Recreational Infrastructure Canada will provide $500 million over the next two years to build and renovate hockey arenas, swimming pools, and other rec centres. In addition, Canada's economic action plan committed $225 million over the next three years to extend broadband access to Canadians who currently have no Internet access or who have only very limited access, particularly those living in rural and remote areas of our country. It's an important initiative that will lay the groundwork for the future economic and social success of all Canadians.

In today's economy, broadband is a vital part of the modern communications infrastructure and an important tool in the knowledge economy. Broadband brings with it important economic and social benefits, such as access to telehealth services, improved business opportunities, and distance learning. Broadband will give Canadian homes and businesses an unprecedented ability to access information, services, and opportunities that would otherwise be out of reach. Canadians in connected areas know that a good website is an important business tool. Parents and educators know how the Internet can help children study and learn more about the world. The broadband program will provide these same services to more Canadians regardless of where they live. We hope it will be a dramatic improvement over the services currently offered to Canadians with limited access to this important resource.

Finally, Mr. Chairman, I know the committee would want me to say a few words about the situation facing Canada's automotive sector. One way to support the sector is to help make credit more available. As the committee will know, the economic action plan introduced the new Canadian secured credit facility to purchase asset-backed securities backed by loans and leases on vehicles and equipment. This facility will provide up to $12 billion to support the auto and manufacturing industries through the financing of vehicles and equipment for consumers and businesses. In addition to increasing the amount of credit available, we're taking steps to enhance consumer confidence. We expanded the accounts receivable insurance program by $700 million, bringing the government's total exposure to $1.25 billion. This is proportionate to what is available to U.S. suppliers through the auto supplier support program.

We also created the Canadian warranty commitment program to help auto consumers by backstopping warranties on new vehicles purchased from General Motors Canada or Chrysler Canada while the companies work through their restructuring plans. This will help Canadians feel more confident about their purchases. It will help maintain sales volumes. And of course we are coordinating our efforts with the U.S. government, because as we know in this highly integrated industry, we all need to work together.

All this is in addition to the short-term financing we have provided in partnership with the Government of Ontario to help the companies' Canadian operations while they restructure. Last week we certified Chrysler Canada's restructuring plan and together with the Government of Ontario we provided funding support to Chrysler Canada and Chrysler LLC to further those efforts and maintain a 20% production share in the North American market. All told, our two governments have jointly loaned $3.775 billion to Chrysler, which is proportionate to the U.S. $12.08 billion authorized by the U.S. government.

Mr. Chairman, I'm convinced the committee will want to discuss many other aspects of the industry portfolio. For example, we have established regional development organizations for southern and eastern Ontario and increased funding for the Community Adjustment Fund.

Last month we announced projects funded through the marquee tourism events program, a $100-million initiative over two years that is a key part of Canada's economic action plan. So the industry portfolio is, as you know, Chair, very broad in its reach, and I focused on just a few of the initiatives that I wanted to bring to the committee's attention. The recurring theme, if I may say so, in all these investments is that we are taking action now to provide stimulus to the economy in tough economic times. We are doing it in a way that sticks to our long-term strategy. In this way, Chair, we will create a more competitive Canadian economy for the future.

Thank you, and I would welcome the committee's questions.

3:50 p.m.

Conservative

The Chair Michael Chong

Thank you, Minister Clement.

We'll begin with Mr. Garneau.

3:50 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

Thank you, Mr. Chair.

Thank you, Minister, for your comments.

I have a number of questions. First, I want to ask about what you call the knowledge infrastructure. We're talking about $2 billion here, which I assume is part of the $5.1 billion. Would that be correct?

3:50 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

Correct.

3:50 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

So that's 40%. I'd like to dig down and understand what exactly this bricks and mortar infrastructure funding is and how you relate it to science and technology. What are the requirements to be met to access this funding?

3:50 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

The requirements are that it's a shovel-ready project that relates in some way to research and development. If you remember your Venn diagrams, research and development is a larger circle, and science and technology is a smaller circle. So research and development can be in the science and technology field. It can also be in social sciences or humanities, but it has to relate to R and D in some way. It could be something like revamping a laboratory or modernizing a classroom. All these things will help in R and D in the future and from our perspective would qualify.

I believe we have been able to announce funding in three provinces. I myself announced funding for British Columbia and Nova Scotia projects. Gary Goodyear announced them for Alberta projects just yesterday. They will continue to roll out as we seek provincial partners in their funding arrangements with their colleges and universities as well.

3:50 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

You called it science and technology initiatives, as opposed to broader R and D. Does that mean that virtually any building on a campus--and you also mentioned the secondary level--is eligible for this funding?

3:50 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

Not secondary education. It would have to be college or university.

3:50 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

Oh, okay.

3:50 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

I probably said “post-secondary” quickly.

It does have to be post-secondary. It does have to be related to research and development. It cannot be, let's say, a dormitory. That would be a project that one could not justifiably relate to research and development. Some may disagree, but that's our position. Another example is building a road inside a campus. That would not qualify.

3:50 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

I assume a building that is used for the faculty of English, for example, would qualify.

3:50 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

Yes, I would say it certainly could if it has to do with some aspect of research of English literature, for instance. I want to stress, and I did mention it in the science and technology part of my speech, that I'm very conscious of the fact that it is broader than that. It could be in the social sciences or humanities as well.

3:55 p.m.

Liberal

Marc Garneau Westmount—Ville-Marie, QC

I appreciate that clarification.

I have some charts here that are from Statistics Canada that show that as of 2005, the federal funding for university research for natural sciences and in engineering and social sciences research--inflation-adjusted in 2002 dollars--has been actually decreasing since 2005. This is Statistics Canada information.

Would you agree with the fact that if one adjusts for inflation, the actual amount of money that has been allocated to NSERC and SSHRC has decreased?

3:55 p.m.

Conservative

Tony Clement Parry Sound—Muskoka, ON

In the main estimates I have it in constant Canadian dollars. For the 2006-07 budget it amounted to $6.261 billion, and in 2007-08 it was $6.481 billion. And of course, as I said, this year there is a $5.1 billion net increase--that is, an incremental increase. So from our perspective the numbers are going in the right direction. We believe it is part and parcel of our economic strategy to invest in knowledge infrastructure, and that must continue. And certainly, in that large an envelope, it is incumbent upon government to always review what we're doing to make sure it is effective and make sure it meets the goals that are aspired to by the public.

But at the same time, I believe we have an economic obligation to continue these kinds of investments, as well as, quite frankly, having a moral obligation. When you're talking about basic research, for instance, this is important for us to understand our world and our universe. And part of the moral obligation, as well, is that for our businesses to compete with the world we need to have an advanced knowledge infrastructure. So that's our position, and that's what the science and technology strategy has explained since 2007.