Thank you, Mr. Chair. Thank you for giving me the opportunity to appear before you today.
My name is Philippe Bergevin. I am a senior analyst at the C.D. Howe Institute. My remarks will focus on a slightly different topic, at the committee's request. I have prepared some observations on the Investment Canada Act.
I will be making my presentation in English, but I will be pleased to answer your questions in both French and English.
To start, I'd like to offer some specific comments on the amendments contained in division 28 of Bill C-38, which relate to the Investment Canada Act. Overall, I believe the measures are positive, although perhaps they do not go far enough. The measures that are aimed at facilitating the disclosure information related to the act are definitely welcome steps. Increased transparency enhances predictability in the application of the act, which obviously is positive for both investors and the public at large.
I do, however, see some potential unintended consequences with respect to the proposed powers for the government to accept securities against potential fines imposed on foreign investors. While this amendment will enhance the credibility of the commitments made by foreign investors to the government, I believe they will have, to some extent, a chilling effect on some foreign investors. If they were to become common practice, it would, frankly, perhaps raise some red flags in the case of some investors.
I think that's going to increase the level of transparency further in terms of the act itself. There are still no formal requirements for the minister to disclose publicly the reasoning for rejecting an investment, in particular if and when a foreign investor eventually withdraws their application. It's important for the minister to articulate his or her reasoning when turning down an investment, and even when accepting an investment, because it builds an inventory of decisions that can help clarify the legislation and therefore the understanding of potential investors. Disclosure also helps the notion that the review process is not unduly politicized, but rather based on sound principles.
There are also, in my opinion, further opportunities to clarify aspects of the act through the use of guidelines. The criteria used under the act are inherently subjective and unpredictable in their application, so the increased use of guidelines helps provide more guidance on the government's interpretation of the act.
More fundamentally, however, I would respectfully submit that parliamentarians consider whether the net benefit test is the right question for Canada, in the same spirit as the Red Wilson competition policy review panel report. I think Canada should adopt a national interest test and scrap the current net benefit test. What does that mean in practice? It simply means that you move the burden of proof from the business to the government, so it requires the federal government to invoke important public policy reasons such as national security, or cultural policy, for instance, to block a proposed investment.
There are already some similar concepts in the act, but such public policy reasons would become the main building block of the act under national interest tests. Such an approach would be more consistent with the view that there are positive benefits, on average, associated with foreign investment, while recognizing that in some limited circumstances there are valid public policy reasons that could be invoked to deny a foreign investment proposal.
To conclude, while the amendments before you in regard to enhanced transparency regarding the Investment Canada Act are, in my opinion, positive steps, there's an opportunity to adopt a test that would recognize that in most instances foreign investment is beneficial for the Canadian economy, while making sure that the federal government still has all the latitude to uphold important public policy objectives.
Thank you.