Finance Committee on Nov. 5th, 2013

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay. Thank you.

I have two minutes left.

I also looked at the innovation report card, because we've talked about investment here, but you have to have the ideas, you have to have the innovation to move the economy forward. Your report card gave Canada a “D”, which is quite troubling. It's near the bottom of its peer group on innovation. You say that the “D” grade underlines a relative weakness in all three categories of the innovation process: creation, diffusion, and transformation. What can we do here in Canada to improve our standing on innovation?

[Glen Hodgson]

That's the $64,000 question. First of all, you're right, we've been giving Canada a “D” in innovation for probably most of the last decade. In fact, the flip side is, what are we doing on productivity growth where we've opened up a gap, probably about $7,000 per capita lower than the Americans, for the last 25 years?

What do we do about it? First of all, we stop relying on crutches to carry our economy forward. To a great degree, we think Canada didn't innovate because we didn't have to. Until 2003 or 2004, we were able to rely upon a soft dollar as a way to have a kind of price advantage in global markets, particularly in the United States. But with China's rise, with the rise of commodity prices, we've lost that crutch. We're now looking at a fundamental mindset, a change in mindset, both in the private sector and within government, about innovation.

We've created a centre at the Conference Board of Canada called the Centre for Business Innovation, where we're trying to get behind the numbers, not in terms of public policy but in terms of creating an innovation culture within organizations. As you're doing your research, you'll find reports now emerging from the centre talking about what it takes to actually create an innovation culture within an organization or within a country. There's no simple answer; there's clearly no silver bullet. It starts by actually treating innovation as a priority. If you start there and start asking yourself questions about all aspects of public policy, you might begin to discover various answers.

[The Chair, Conservative, James Rajotte]

Thank you very much.

Thank you very much, Ms. Nash.

We'll go to Mr. Saxton, please.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you, Chair, and thanks to our witnesses for being here today.

My first question is for Ailish Campbell, the vice-president of the Canadian Council of Chief Executives.

Ms. Campbell, in your opening remarks you mentioned the importance of trade when it comes to securing Canada's prosperity and growth, and also for creating jobs. Our government, obviously, agrees with this, and this is the reason we've spent so much time negotiating free trade agreements. We now have 42 countries—if you include the recent European trade agreement—included in these free trade agreements.

You also mentioned that we should be concentrating on Asia. We've opened six new trade offices in China, for example, and two new trade offices in India. We've also spent over $1 billion in the Asia-Pacific gateway infrastructure to make sure that our goods and resources can make it to market in an efficient and expeditious way. Obviously, we're on the same track in that regard.

With regard to the free trade agreement with Europe, some people have called this an historic agreement that opens up 500 million new consumers for Canadian businesses. In your opinion, what will the impact of this free trade agreement with Europe be on the Canadian economy, and what opportunities will it create for Canadian businesses?

[Ailish Campbell]

On that, I would first and foremost say that investment is a leading indicator of success we will have in trade. We are already a very high-level source, after the U.S. The U.K. and France were very heavily invested in Canada, in terms of foreign direct investment stocks, but there are huge opportunities there for partnerships, particularly building on Peggy Nash's question, I would say, with the innovation leaders of Germany and Scandinavia, where partnerships between our research universities, our small and medium-sized enterprises, and large multinational firms that will land global mandates and then choose to locate them in Canada to supply the North American market and even the market of the Americas I think are an integral part of how we'll measure success out of that agreement.

I would also say that the circulation of highly qualified personnel is integral. I'm very interested to learn more details about the facilitation of business personnel through CIDA, specifically because firms have a choice about where to place investments. Sometimes, having a supply of highly qualified personnel is absolutely the critical factor to the location of that investment. Europe has an advantage over us. It's a very simple one: they have more than 15 times our population.

If we want to attract investments to Canada, we have to be sure that highly skilled personnel—professionals, after-market service individuals who have very specific skills—can come into Canada to maintain those investments, to locate global mandates in Canada, as opposed to the United States, which, again, has the population and therefore potentially a specialized skill advantage over Canada. I'm looking forward to those two aspects in particular.

Third, I would say it's a huge opportunity for our agricultural/agrifood exporters. This is a highly developed market, so I won't say it will be easy, but with promotion in a high-quality product and a very large market, we feel this is a huge advantage that Canada has over its competitors. The U.S. does not have this access to CIDA, so the imperative, really, is to conclude that agreement as quickly as possible to get those opportunities into the field and then promote Canadian products in that market.

[Andrew Saxton, Conservative, North Vancouver, BC]

Thank you very much.

My next question is for Ian Russell, the president and CEO of the Investment Industry Association of Canada.

Mr. Russell, as a government we're always looking for better ways of doing things and for best practices, which sometimes means that we look at what's happening in other countries. You mentioned in your report the enterprise investment scheme, which was introduced in the U.K. and was widely successful, and which has attributes that could be applied here in Canada.

Could you share with us what some of those attributes are and your opinion on ways we could implement them here in Canada?

[The Chair, Conservative, James Rajotte]

Just make a brief response, Mr. Russell, please.

[Ian Russell]

I think the success of the enterprise investment scheme speaks for itself. Since 1993, some 19,000 companies have raised $8.6 billion. These are all very small companies, start-ups and emerging companies. The program, which has gone on since 1993, was expanded in 2012 after an independent Treasury review of its effectiveness.

It's a program that has attracted much interest from the small business sector in the U.K., and it has proven to be a vital financing vehicle—and, I might say, a very cost-effective financing vehicle—for getting needed capital into very small enterprises in the U.K.

As I said, I think the success of the program over the 20-year history of it speaks for itself.

[The Chair, Conservative, James Rajotte]

Okay, thank you.

Thank you very much, Mr. Saxton.

Mr. Brison, please.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you, Chair.

Thanks to each of you for joining us today.

Ms. Campbell and Monsieur Hamel, I've spoken with some of your members, and I've also spoken with people in the tourism industry, who have expressed concerns over the impacts of the visa requirement on Mexico and also over the more recent changes to the visa requirement for Colombia.

Should these changes be reversed? Are they having a negative effect on the movement of people and decision-makers between our countries?

[Ailish Campbell]

The Canadian Council of Chief Executives firmly stands behind the most liberal and sensible visa regime possible.

It's very important that we differentiate between types of travellers. Perhaps a more granular approach to some of the visa issues we've been having may be a way to answer security concerns that have been stated by this government, but also, frankly, to keep our eye on the bigger picture, which is the economic activity between our two countries.

Anything we can do to narrowcast, shall we say, what our concerns are and move students, business people, and investors through we would firmly support, and not only from those two countries but from destinations around the world.

[Scott Brison, Liberal, Kings—Hants, NS]

Monsieur Hamel.

[Yan Hamel]

We did see a greater decline in the number of visitors from Mexico after the visa requirement was put in place. Is it possible to improve those figures? Certainly; but as we said earlier, we must not neglect security, however. We have to find a happy medium, so that we are very attractive to outside markets and also limit the potential obstacles to foreign tourists.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

Mr. Effer, your idea of innovation flow-through shares is an interesting one. Eighty per cent of the mining deals in the world over the last, I believe, 10 years were transacted in Toronto. There are not too many getting done these days because of the market slump in commodity prices.

But I'd like to ask Ian Russell, whose members have transacted a lot of these mining transactions over the last 10 years in Toronto, whether an innovation flow-through share model might contribute potentially to making Toronto and Canada a global centre for the financing of, say, biotech and IT, in the same way that it has contributed to the success we've had on the mining finance side.

[Ian Russell]

Thank you, Mr. Brison, for the question.

The short answer would be yes. As you point out, the flow-through share concept, which has been in the mining industry for about 30 years, has been hugely successful as a cost-effective vehicle for small mining companies and oil and gas companies to raise capital. As you point out, much of it has happened in Toronto, but it has not exclusively happened there. In the energy sector, flow-throughs have been an active market in western Canada. I might add that the mining industry in Quebec has been very dependent on flow-through shares.

There's no question about their success. Indeed, we have argued that the concept could be expanded into other sectors, particularly the knowledge-based sectors—biotech and high-tech companies—using a similar concept, again to provide a little lower cost of capital for those companies and to make it easier for them to raise capital.

So yes, we would be supportive of that idea.

[Scott Brison, Liberal, Kings—Hants, NS]

Thank you.

On the infrastructure side, we have provinces in tight fiscal situations and our federal government is continuing to struggle under a deficit. Do we need to have a more coherent and bolder strategy around public-private partnerships and engaging our pension funds? We have some of the most powerful and successful pension funds in the world, with CPP, OMERS, teachers, AIMCo. Should we be building a model here that is exportable in terms of its design, financing, and construction of infrastructure around the world? Should that be an industry concern?

[The Chair, Conservative, James Rajotte]

You have about 10 seconds. Who is that question directed to?

Mr. Hodgson, very briefly.

[Glen Hodgson]

I have been an advocate of P3s for about 15 or 20 years. Before it became the vogue in Ottawa to talk about it, we were talking about it at EDC.

[Scott Brison, Liberal, Kings—Hants, NS]

P3s became cool.

[Glen Hodgson]

Before they became cool. A province like Ontario, for example, has really leaped ahead building schools and hospitals in the P3 model. I think any serious examination, where you can get all the parties working together and come up with more innovative structures, would be a good thing, including bringing in the pension funds.

[The Chair, Conservative, James Rajotte]

Thank you.

Thank you, Mr. Brison.

Mr. Hoback, please.

[Randy Hoback, Conservative, Prince Albert, SK]

Thank you, Chair, and thank you, gentlemen. It's great to see you here this morning.

Ailish—have I pronounced that correctly? My daughter is Alicia.

[Ailish Campbell]

Gentlemen and a lady.

[Randy Hoback, Conservative, Prince Albert, SK]

You talked about CIDA and the importance of trade. I think what you said about agriculture is very true: $119 a tonne on oats or up to $190 a metric tonne on wheat. If we start putting that back to the farm gate and you start looking at what the Europeans are collecting in tariffs off just those two products alone.... We're not talking about pork or bison or beef and the market access there. I think that trade is very important.

I'm curious, Mr. Hodgson. When you did your analysis looking forward, did you take into consideration stuff like CIDA, the Honduras agreement we signed today? How do they play into your numbers? Do you take any of those assumptions and plug them in there and see what the impact would be?

[Glen Hodgson]

Yes, we take the world as it is in doing our forecasts. We have the capacity to take things like a CIDA deal and then run it through the numbers and see whether that adds to growth. It'll add a little bit. It won't add a quarter or a half a per cent annual growth, but it'll clearly be a positive net contributor, as we can access global markets, as you said, and get better prices for our sales around the world. Almost every economic model in the world shows that more free trade is good for an economy.