Finance Committee on Oct. 19th, 2017

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Here in Canada, and in a few Southeast Asian countries too, consumers really like their points. It's one of the jurisdictions in which people have the most points on cards. Consumers really want the points. They don't care about the back end, and what's happening between the merchant and the company. You might introduce a hard cap, and the government would be typically slow to react; it sometimes gets things wrong, like this proposed small business tax change, or the proposal to change the proposals. Why do you think more government would be the answer, instead of leveraging your 26,000 members and forcing the companies to come to the table with you the way Walmart and the chamber network have done?

[Satinder Chera]

I would say that you've highlighted an interesting point, which is that there certainly is no free lunch, right? These points do come at a cost, and the cost is typically on retailers.

I note that the credit card companies have recently given merchants the right to add a surcharge. It's convenient for the credit card companies to do that. They created the problem in the first place, and now they're saying to merchants, “Well, you be the bad person if you want to recoup some of those costs from your customers.” Again, I would just make the argument that if they can do it in other jurisdictions, why can't they do it in Canada? It's not good enough to simply say that we should speak to the credit card companies. We have tried, but some of the information they're supposed to provide to government they haven't provided to date, so we believe the government needs to step in.

I think the one positive benefit of the government and Minister Morneau reviewing this file is that hopefully it'll bring some further transparency to this file. Again, if it can't be done in Canada, explain why it can't.

[The Chair, Liberal, Wayne Easter]

Ms. McGuffin, before I go to Mr. Fergus, you say in your submission that the Canada Music Fund needs to be modernized to better support you. How do you see that being done?

[Margaret McGuffin]

There are three particular things. One is that music publishers are capped at a funding of only $75,000 a year, whereas record labels are capped at $650,000. It's a very big difference. You could have a bigger music publisher than a label, and because of some old rules and how the industry used to be structured, there are caps that don't benefit from growth in the music publishing industry and the innovations in the music publishing sector.

Second, we'd like to see more funding overall to allow for those changes, and unlike the Ontario music fund, we punish success. Our most successful companies cap out earlier than they would if they were in other types of innovation funding. This is a fiercely competitive global market. Our Canadian companies are competing against independent companies worldwide that are getting private equity financing. It's become a very hot industry.

[The Chair, Liberal, Wayne Easter]

Thank you.

Go ahead, Mr. Fergus.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Thank you very much, Mr. Chair.

I want to begin by thanking you all for your presentations today. They have been very interesting and useful.

I have a few questions for you. I will start with Ms. Day-Hamilton and Mr. Laforest.

I want to thank you for the work and research you are doing in quantum computing. I can say in front of my colleagues that I believe there are two or three things that will really change the future of the human race, and the first is the potential creation of quantum computing. That's tremendous. Next is nuclear fusion, with artificial intelligence in third place. Those are major projects, and I hope that we will be involved in them.

I think it is important for all Canadians with skills in those areas to pool their efforts.

That brings me to my question. You are working with the academic community and the private sector in the Kitchener-Waterloo region. Are you also working with all the other entrepreneurs and scientists in Canada in order to successfully develop an operational quantum computing system?

[Dr. Martin Laforest]

Yes, and I will add that this is not only happening in Waterloo. Canada is a nation, and this is happening across Canada. There are some very good research centres in Vancouver, Sherbrooke, Montreal and Ottawa. We all talk to each other. We are part of a community and we all know each other. There are even a few networks to ensure good cooperation and a good transfer in Canada, not only in terms of staff, but also in terms of knowledge.

When it comes to working with industry, we have a new program, the Canada first research excellence fund. One of its goals is to increase our collaboration with members of the Canadian industry in particular. That program was just launched and it's very new. We are actively working on finding potential partners from the private sector, so that we can work together on not only identifying problems quantum science can resolve, but also on finding solutions.

So we don't just want private sector people to come see us to tell us that they have a problem and ask us to find a solution. We want to work together and invest together to find new ways to use quantum science to solve our current problems, which the private sector is trying to resolve.

So, yes, we are working together across Canada.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Are any of the groups that are collaborating a bit more reluctant because no model has yet been developed to share the benefits stemming from a quantum computing patent? What can be done to help you overcome that problem?

[Tobi Day-Hamilton]

I don't think there are researchers within the Institute for Quantum Computing who are hesitant to work with other jurisdictions, particularly because the University of Waterloo has a unique IP policy. Our intellectual property policy is inventor-owned. The researchers actually own what they create.

Whether they're researchers, students, or other people they work with, they own that IP themselves. They're free to go and work with other partners and jointly develop those technologies should they see fit.

I think that's a unique opportunity for Waterloo in particular to have more collaboration, because they have that ownership. The university doesn't take a stake there, so they can go out and find industry partners. They can find other research collaborators to take that technology further.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I had the pleasure of visiting D-Wave, in Vancouver, at some point. It will also be my pleasure to visit your institution.

As I said, it is crucial for all players to work together. That will probably change our history.

Mr. Chera, thank you very much for your presentation. I appreciate your concerns over interchange fees. I know that is a concern.

I would just like to ask Mr. Kmiec and Ms. O'Connell’s question again. I had the pleasure of meeting with Visa and MasterCard representatives, who have a completely different point of view. I have not had an opportunity to run this by you. They told me that, in countries like the United Kingdom, the government legislated to cap the fees that are charged, and then used the back door to impose other fees that have made credit cards more expensive for consumers.

Do you agree with that point of view? Can you give me another perspective on that?

[Satinder Chera]

That is one of the reasons we wanted to have this review that the minister is undertaking, to get all the facts onto the table. When we hear from our members that they see their bills going up, the question is why. As well, when we look at other jurisdictions, the numbers are more favourable than they are here in Canada. Again, why is that the case?

There were commitments made by the credit card companies under the code of conduct introduced by the previous government. We've certainly felt that the code of conduct was a step in the right direction, but there were certain commitments, particularly around bringing their rates down and demonstrating a clear, open, and transparent audit. That hasn't happened to date, and one of the things we've asked is, why not?

I think that is one of the reasons the minister is doing the review, because when the announcement came out from Visa and Mastercard in September 2016, the information that they were to provide they did not provide. The natural question, then, is why they can't do it in Canada. From our perspective, payments are an important area, certainly for our members. For many independent, family-run operations, costs continue to go up. Is there a way to bring these costs down, and if they have done it in other jurisdictions, can we look at doing it here in Canada? That is why this review is so critical.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

I have another question for Mr. Chera.

You have members in Quebec, right? Some convenience stores from that province are members of the Canadian Convenience Stores Association.

In Quebec, we have long had legislation that prohibits the marketing of certain products to minors. I can buy chips and chocolate bars at a convenience store close to my home.

I assume that the intent of Bill S-228 is the same. I can't imagine it being any different. Are you aware of the situation in Quebec? How can those two objectives be combined? I am talking about selling products, but without marketing them to young people.

[Satinder Chera]

I think everyone would agree. As I understand it, the government's intent is to help reduce childhood obesity. Everyone acknowledges that it's a noble goal and it's something we should be working towards. There are many different ways you can help to implement that.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Are you aware of the situation in Quebec?

[Satinder Chera]

Yes. However, with this legislation, the concern is that because there are a lot of unknowns and the legislation is created pretty broadly, our read of it is that anything the government would pass would ultimately fall on retailers to implement and they would be held accountable for it.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

If I remember the legislation, though, it's not much different from the legislation before the National Assembly. I'm trying to figure out whether there is any undue concern over ambiguity.

[Satinder Chera]

Again, our read of the legislation is that it would impose an obligation on retailers. We haven't heard evidence otherwise. We know that Health Canada is doing a review on it. We've raised these concerns with them, but we haven't yet heard back. In fact, I met with them earlier this week and certainly we reiterated what our concerns were, but we haven't received any response yet.

If we were to receive a response, we would certainly take it back to our members. However, in the absence of any clarity around how this legislation would be implemented and what impact it would have, it's difficult for us to provide a clear answer.

[Greg Fergus, Liberal, Hull—Aylmer, QC]

Mr. Chair, I know I have no more time, but I just want to add one thing.

I'm not trying to be difficult. It's just that I'm trying to look at this from the other way around. I'm wondering why you haven't heard from your Quebec members as to this situation. The Quebec members would probably tell you that there is not a problem here, given their experience, which has been over a little more than a generation, in terms of not marketing towards children.

I know you're waiting for the government to answer, but my question is around why you haven't heard from your Quebec members.

[Satinder Chera]

No, I get that. In terms of the implementation of the rules and who would be responsible for enforcing them, again, would it be similar in other parts of the country as it would be in Quebec? We don't know. In terms of the legislation as it is currently written, we were never consulted on it in the first place. We have picked up on it, and we see this review that Health Canada is doing on marketing to kids.

I want to be very clear. We don't disagree with the intent of the government; our concern is to make sure that we're part of the conversation. These are some of the obvious questions and concerns we have. To date, because there hasn't been any sort of response, we're not really sure whether to remain worried or not.

[The Chair, Liberal, Wayne Easter]

Thank you both. That was substantially over time.

Mr. Albas, I know you had another question or two.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

I have a quick question for Ms. Day-Hamilton.

Obviously, I think most Canadians would agree that funding basic research is important and government does have a role to play there. You commented earlier, though, that researchers end up holding the patents themselves and can then decide to commercialize and whom to partner with, etc. We've seen recent cases in which taxpayers have funded new R and D in Bombardier for their C Series only to have Airbus swoop in, and now they're going to be building those planes down in Alabama.

That's a practical example of taxpayers subsidizing research only to find the economic benefits going somewhere else. I can see why recruiting must be very easy for Windsor, not just for the reputation but because researchers will get that intellectual property. I'm wondering what your answer would be to the critic who would say, “Why should my federal tax dollars be funding a group that will end up giving a private benefit to an individual?”

[Tobi Day-Hamilton]

I think we have to look at it from a different perspective. We are enabling the researchers to create technologies that will have huge societal impact, that will potentially give back to both taxpayers and to the university.

Let's take Mike Lazaridis as an example. Mike Lazaridis has invested $100 million of his own private dollars in the Institute for Quantum Computing. He's a great example of giving that investment to the institute and matching that with private money so that we can give back again.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

But again, he's giving his own money, investing in that, so it's private giving for a private gain. Why should taxpayers be asked to subsidize research when ultimately there is zero guarantee that it will be developed fully and commercialized fully to the benefit of Canadians?

[Dr. Martin Laforest]

Thank you for your point. I think this is where we reinforce the importance of creating that ecosystem in Canada that will foster and nurture commercialization, so that when you have something that can be commercialized, you don't go to Silicon Valley or to Europe to commercialize it. You come to Canada so that the economic impact happens in Canada.

This is what we're creating with Quantum Valley. If somebody has an intellectual property that has some value based on the research they have done, the company will be created in Canada. The investment will come from different sources, VCs, but that will remain in Canada and the job creation will happen in Canada.

[Dan Albas, Conservative, Central Okanagan—Similkameen—Nicola, BC]

To that point, though, I don't think there is any agreement that says they have to do that. They get to keep it for themselves. Again I go back to the same common point. If they're expecting public money to fund that research, and there is a portability, we hear time and time again at this committee that we are fantastic at certain elements of research but that the gap from discovery to actual economic activity is huge. To me, this seems to point to the reason. It's because people will go to places where they are better capitalized, where they can take that discovery that they now own the intellectual property to. They take it to Silicon Valley.

Anyway, those are my concerns, but I do appreciate your presence and I do appreciate your answering this question.