Industry Committee on Oct. 25th, 2012

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Mr. Spreekmeester, what would your comments be regarding the recent changes to the program? Do you use that type of federal research and development program, and the tax credits?

[Kevin Spreekmeester]

No, we haven't.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

You don't use them, is that correct?

[Kevin Spreekmeester]

That's right.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Mr. Barber, can you comment on these changes? Do you believe that the changes to federal research and development programs are going to have an impact on various Canadian businesses and on research and development?

[Dr. Douglas Barber]

I have to say that I'm green in this environment and I don't know where the translation is available to me.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

I can repeat it in English. I can do the translation right away.

I was talking about the federal program for research and development, and the recent change to the SR and ED program, where the rate went from 20% to 15%, and also that the capital costs won't be an eligibility for the company. What impact do you think it will have on research and development by company, large or small?

[Dr. Douglas Barber]

I think it probably won't make a lot of difference, because it's relatively trivial. My experience of the tax credit has been that you're always unsure about whether you have the tax credit or not, so you operate as though you don't, and when it comes, it's a windfall. So it isn't a stimulus.

In the case of the direct funding—I've been on the board of IRAP—industry does about $15 billion worth of R and D, which is low for a country like Canada, and IRAP had about $80 million. Even doubling that really doesn't get us into the mode.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

So it's difficult to predict if you're going to get the tax credit or not—for most businesses.

[Dr. Douglas Barber]

That's the big problem of the SR and ED, the uncertainty.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much.

My comments are once again for the representatives of Startup Canada.

Many young companies—often startup companies—will not manage to grow from being small businesses to medium ones. They may have a good idea, intellectual property, and suddenly a buyer from outside of Canada will turn up to buy these startups, with a lot of money. In that way, offshore buyers will get hold of intellectual property and perhaps even move the business outside of Canada.

Would you say that is an accurate statement? How can we reduce the number of these cases or prevent that type of situation?

[Dave Waters]

One of the challenges is that there's a lot of anecdotal evidence supporting the issue you're raising—of small firms being created, starting up, and just not having the capability, and usually it's a shortage of financing, to be able to carry them on to a bigger stage, and therefore selling out perhaps a little too early, with their intellectual property going offshore, where it is then commercialized and perhaps the products sold back to Canada. There is a lot of anecdotal evidence to confirm that. However, we really don't have a lot of good data that I'm aware of that would permit a chance to really examine this in more detail and to understand the dynamics a little bit better.

Now, one of the things I have noticed recently in terms of StatsCan data, which looks at university research and development, is that it seemed to indicate that more than 50% of the licences that are offered by university tech transfer offices actually go to offshore companies. To me, if that is accurate, then that could indicate a very significant leakage in our system of trying to develop intellectual property in Canada from publicly funded research. We should be trying to maximize those opportunities.

Those, again, are the kinds of issues we need to explore I think with more rigour, as opposed to the anecdotal evidence, but certainly the anecdotal evidence would suggest....

[The Chair, Conservative, David Sweet]

Thank you, Mr. Waters.

The time ended with Startup again.

Now it's over to Mr. McColeman for seven minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you to the witnesses.

This has been some of the most refreshing testimony I have heard at any committee I've been at, in terms of moving forward on the issues on the ground. It was described as the “landscape”. I would interpret it as actually what's happening on the ground in the world out there.

The first question, Mr. Spreekmeester, is on the Internet entry piece. We heard about the unprotected border, but do you have anything more, such as your recommendations or things that are happening within your industry on the illegal entry of these products over the Internet?

[Kevin Spreekmeester]

Yes, it's a slow-moving process.

I work as well as co-chair on the task force on counterfeiting of the Outdoor Industry Association in the United States, and they've taken a much more aggressive approach on the Internet than we have. It's littered with land mines because of first amendment rights and things like that.

It would be helpful if we had greater participation by financial institutions to get to the accounts of counterfeiters through PayPal, Visa, or MasterCard, where we could immediately stop the flow of cash to the counterfeiters as soon as we recognize counterfeit websites or rogue websites.

A lot of this is funding organized crime and terrorist activities. We know that. It's used for money laundering, and yet there seems to be a reluctance to put policy in place that would help take it down. We see that as a harder road to hoe.

[Phil McColeman, Conservative, Brant, ON]

I appreciate hearing that.

Dr. Barber, on your comments about the culture and it being weak in our country, I just want to underscore that. I studied for an undergraduate degree in Canada and then I went to an American university for my graduate work. I can tell you the cultural difference is night and day in terms of the way U.S. colleges and universities.... I travelled a bit in the States to some other institutions.

Having said that, I want your comments on the way they have shaped their culture through the connection of graduates. My sense is that people who graduate from American universities become very loyal to their alma mater. They go back and fund programs, and they intersect with current students and faculty members in a joint forward motion together.

Can you comment on your observations about how Canada stacks up in that regard?

[Dr. Douglas Barber]

Yes. Let me start first by saying that in the prosperity of nations, Canada sits about thirteenth. We used to be in the top five; we're now down that low. The Americans remain in the top three all the time. All the other countries that have moved above us in the prosperity of nations are countries typically with a population of less than the province of Ontario. So you don't have to be big to be good. This year Singapore is number one, and I've known the Singapore scene for some time. The big characteristic of these smaller countries is that they actually have a synergy and a collaboration that goes on among government, academia, and industry all the time. They work together; they know they're working together and that they can't win without working together.

The thing that amazes me is that the Americans work together too, and I think it's somewhat for the reason I talked of earlier. When you talk about the universities relying on their alumni, yes, they do. A place like Berkeley will tell you that the amount of money they get on licences is trivial. They can get $100 million from a graduate any time. How is it that they do that? It's because they keep themselves open to their graduates. They've known them for this whole time; they keep connected, so it's a synergy. It's not just what the graduates do; it's what the faculty does to stay there and say, “Can we help you? Is there some way we can help you in your work?”

It's again a synergistic environment that we don't have. I sit in a university where many people don't know what's happened to their graduates.

[Phil McColeman, Conservative, Brant, ON]

Thank you for that.

Last, I'll go to our entrepreneurial group.

Mr. Waters, is there an intersection with what you're doing with post-secondary education institutions in Canada?

[Dave Waters]

Can I ask for a clarification, please?

[Phil McColeman, Conservative, Brant, ON]

You're obviously out talking to entrepreneurs in the development stages, I would say, of your enterprise as it is. Are you also talking to post-secondary institutions in terms of some of their outreach and some of the things they're doing?

[Victoria Lennox]

We are. We just piloted a program with ACOA across New Brunswick. Essentially, we've developed university enterprise models assessing the quality of entrepreneurship on campus at universities and colleges across the province, based on best practices across the world.

Just to echo Mr. Barber's comments, it comes at the institutional level. It's having industry, entrepreneurs, and alumni involved with policy, and entrepreneurs in residence bringing them back into the community. It's about programming within the institution. I think what we often forget, and what American universities have that I don't think a lot of Canadian ones have—maybe St. Francis Xavier, the University of Toronto a bit more, and the University of Waterloo a bit more—is a sense of community culture among the students themselves. They have the student clubs that create that sense of fellowship.

What Startup Canada is going to be investing in across the country is cultivating that student enterprise on campuses across higher education. It will be connecting entrepreneurial communities, investors, and entrepreneurs with institutions.

It's a really difficult one to tackle. It comes at the institutional level. How are these higher education institutions incentivized? But it is also how we empower, inspire, and engage young people in their own education through experiential learning opportunities. It's trusting them with their own education.

I see a big role for Startup Canada in this area moving forward. This project we did with ACOA and the New Brunswick Business Council, which is a council made up of the top entrepreneurs in the province, will really set the tone for the work we can do in terms of creating almost a competitive climate for institutions across Canada so that they increase their ambitions to be more entrepreneurial. It will also increase awareness among young people that they should consider the entrepreneurial capacity of universities when choosing where to go.

[The Chair, Conservative, David Sweet]

Thanks, Ms. Lennox.

Now we'll go on to Mr. Regan, for seven minutes.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you very much, Mr. Chairman.

I want to thank Mr. McColeman for asking a question that allowed Ms. Lennox to talk about the great St. Francis Xavier University.

I just wish that my X-Ring wasn't being resized right now. I'll get it back tomorrow, as a matter of fact.

[An hon. member]

Not all the grads are successful.

[Geoff Regan, Liberal, Halifax West, NS]

Not all the grads are successful. Thank you, Mike. Order, Mr. Chairman.