Let me make four or five key points. The first is that science, technology, and innovation is, has been, and should be a critical part of federal policy. I think over the last 20 to 30 years there's been a diminution of its role in driving policy options and policy solutions. So I applaud you for focusing in on science and innovation as a critical part of the GF 2.
Secondly, just to remind you where I come from, I'm a professor of public policy. I study innovation as it relates to the agrifood system. So much of what I'm going to talk about, I write about and publish on a regular basis. So if anything tweaks your interest, you can find background information.
The third thing is I think it's important when we talk about innovation in the agrifood system in Canada that we keep two realities in mind. The first is that while we perceive your competition to be Chinese and Brazilian and American farmers, more fundamentally, your competition in terms of accessing land, labour, and capital to keep the industry vibrant and growing in Canada is other sectors in the Canadian economy. So it's not only important to be price competitive with other exporters, it's important that the sector be able to generate enough wealth from its use of its resources to sustain that use of those resources in this sector. Right now there are major parts of the Canadian agrifood industry that don't generate enough value to sustain the ongoing use of the land, labour, and capital, especially the mobile labour and the mobile capital.
The second point is that much of what we're talking about is fenced around by distorted policies around the world. So as we think about science and innovation, we're fundamentally going to have to worry about where it fits in the context of international trade. One of the impacts of that is that pretty much universally around the world we're not investing enough in the basic and applied sciences in the agrifood world.
The simplest test of that is that the return on investment for directed agrifood investment is running around 50% to 70%. We'd all love to get 50% ROI from our investments, but much of that is dispersed among a large group of people, so to have the ability to actually extract that and pay for the investment is very difficult.
The Canadian government has accepted innovation as a critical part of the Canadian economy's future, but if there's a problem, it's that agriculture, for some reason, either by choice or by chance, seems to have been partially carved out of that vision. Many of the things that are relevant to agriculture--the programs, the services, the investment pools--are not eligible for R and D and basic science research in the agrifood area, and that's a major concern. So the Canadian government is in the right space, but the agrifood policy area in many ways has been carved out.
As you go through your review, you're probably going to get a lot of advice, free or otherwise, about where Canada should put its resources. I often suggest to anybody who thinks about innovation policy to think about four Ps.
The traditional economists will say all we need to do is get the prices right, and the government's role should be pretty minimalist--don't do any intervention, just make sure the prices are right so that you get rid of all kinds of perceived distortions in the marketplace. That is an important element to it, but that's the base. Correct prices will bring forward investment, but not necessarily investment that will keep this industry viable.
There are three other Ps that really matter. There's place. Most of the really interesting innovation that comes out of the agrifood world and virtually every other sector is in agglomerations of research communities, users, consumers. So it's the cluster model. Place is a critical part, but place isn't enough anymore.
The second part is processes, innovation systems. There are natural flows of information that are important to converting basic science into applied science, into application and use. We have some very good examples in Canada and very good networks between Canada and the world that bring much of that technology into the Canadian context and use it for industrial purposes.
The fourth P that a lot of people talk about is creativity--the creatives, the people who make it happen. So it's not just about place, it's not just about getting the macro prices right, it's not just about getting a whole bunch of institutions in place. It's about attracting and retaining and mobilizing and enabling the scientists and scholars and entrepreneurs to actually do what they do best, which is bring new things to use.
I think you're going to be posed with policies right across that piece. I think those four Ps help, in a way, to define what kinds of policy options may make some sense in the broad area of agrifood research.
In the first instance, there probably needs to be less pulling away from basic and early applied research by the federal system. There has been a pullback, and that is partly what the Jenkins report and some of the advice coming from STIC are about. Right now we are very passive in the way we assist firms and industries to invest in development and innovation. There's a lot more federal capacity--be it through the Ag Canada research centres or the National Research Council institutes--where the federal government could be a critical player.
There are three or four elements about the federal investments that I want to quickly touch on.
When we last talked I laid out some of my concerns about the changes in the way Ag Canada and some federal programming had been operating that had been sort of cutting out agriculture as a priority area. There has been an additional change to that, in that the National Research Council is now talking about substantially changing the way it operates institutes.
I can speak with a fairly high degree of confidence that many of the important innovations in the agrifood world, for which Canada was ground zero, were inextricably linked to the capacity and the mobilization of knowledge from the NRC, particularly PBI in Saskatoon, and others. If the institutes die or change into downstream, project-based ventures, I think you're going to lose some very important strategic actors in the system.
Federal research effort is pretty diffuse, not only through the undirected grants, but even at the operational level in the intramural research between departments and agencies. It doesn't get together very well. Even within the same department across different divisions or sectors, they have difficulty working together. I think that's a shame in a country this small with this need for science in its industry.
Second, we're becoming too short term. We're moving from seven- to 10-year planning horizons to one- to two-year planning horizons. Our main competitor in many of our product lines is Australia. They took the lessons we showed them in the centres of excellence program and embedded them system-wide in the agrifood system through the GRDC. I think we should be re-examining our horizons there.
Third, there's the real challenge that we tend to spread our capital too thinly. We want to do something in every community. There are natural agglomerations. They are natural places where things happen. You don't have to choose them. The industry and the commodity groups have chosen them for you, so you just need to support and assist them. The artificial pulling apart of capacity is a dangerous policy area, and there are some opportunities there.
Another area I talked about before and won't belabour is that intellectual property is a critical part of the future of agrifood: brands, patents, and plant breeders' rights. We have most of the bits there, but we could do more. The one big concern I have is that once we have things that have intellectual property value, we have great difficulty in partnerships within the public domain. I had a student look at a recent partnership in Saskatoon that comprised public institutions using public funds. They had over 150 pieces of intellectual property, but they couldn't come to an agreement to pool them and exploit them as a common resource. That's a major failing of a governing system.
The final point I want to make is about regulation and governance. If the Canadian agrifood industry is going to thrive in the 21st century, it will have to differentiate and exploit value wherever it is. That means we'll have supply chains for commodities and products that are GM or GM-free, organic, and halal. They'll have unique functional attributes, and we don't have regulatory and supply chain systems in place to currently handle them.
The conference I'm now at in Vancouver is an international conference of regulators and industrial people from pretty much across the agrifood system around the world, and we're all facing the same problem. Canada can and should be a leader in that policy debate, and I will give you a symptom of the challenge.
It was next to impossible to get some of the key informants and leaders in the Canadian regulatory system to engage in the dialogue in Vancouver. I had no problem getting the Europeans, the Brazilians, the Australians, or the Americans to turn up, but the Canadians just didn't turn up. They all got their marching orders on Monday this week. We've been planning this conference and talking to them for over a year.
So here's an opportunity right in our backyard, where we could have taken a leadership role in defining the debate about how the system will differentiate products and sustain value in all these competitive but parallel supply chains.
In conclusion, I think you have a really important topic here. Innovation is the future of agriculture. It's not about divvying up the profits and trying to maintain markets. It's about trying to make, create, and innovate within a whole variety of technology and product market categories.
I thank you for inviting me, and I'll pass it over to my colleague.