Finance Committee on Feb. 15th, 2017

[Dr. Ilse Treurnicht]

That's right.

Part of our marketplace idea is to try to build more connections.

You will also see our recommendation around future skills, whereby we really are trying to bring together not just governments but also the private sector as well as the non-profit sector and other skills agencies to collaborate in defining what kind of skills are required, experiment and test to try some new approaches to building skills that are relevant to this fast-moving economy, and in the process find some better partnerships to support people through the different career transitions that will be inevitable amid the changes that are happening in our economy.

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

Mr. Sabia, what do you think?

[Michael Sabia]

[Inaudible--Editor]

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

Thank you very much for getting that on the record. I think it's going to be very important for us to keep the very important points you've raised in mind.

What would you recommend, if you were in our shoes, as concrete actions to create in a short order the connective tissue we need to have so that we can get the growth and get the mentorship and the scaling up that we need to have in Canada? Given that we have a vast geography and a small population relative to others, so that we don't have the same density, what short-term or medium-term actions can we take to encourage, or what steps can we take to get to that point?

[Michael Sabia]

One thing for sure is that the proposal we've made with respect to creating what we've chosen to call “innovation marketplaces” is one concrete thing the government can begin to do to bring people together. As Ilse has said, one of Canada's challenges here is that if you look at our performance in commercialization relative to that of, say, the United States, it's night and day. The commercialization of research and its success in the United States comes out of a variety of factors, but they have succeeded.... In their case, it's both geographic and sector-specific or problem-specific.

Certainly everybody knows about Silicon Valley, everybody knows about Pittsburgh, everybody knows about Boston, everybody knows now the beginnings of some interesting things in and around New York, where that connectivity has happened, where universities and research and capital and entrepreneurs are finding ways to connect.

That's really what Silicon Valley is about. You're seeing some of the same things happening in places in Israel. It's happening in a variety of places around the world.

Anything we can do to bring people together and put them in the same room to focus on the solution to specific problems so that it's not just chit-chat—because that's not going to get anybody anywhere.... The idea behind innovation marketplaces was to have specific problems that need to be solved, problems that are important for business, so that businesses come to the table with receptive ears to hear about innovative ideas.

The notion of the government is not of the government solving the problem; it's of the government creating a context whereby people can sit in a room with a specific issue that is an issue for business, so that business comes to the table, as I say, with the right mindset. That's what needs to be done.

I'm sorry to say this, but this is something that takes time. This is about building muscle reflex; this is about building different standard operating procedures.

Let's be honest. I'm not going to make any friends when I say this, but there are many people in the academic world who think that commercializing research somehow debases the pursuit of truth. I'm not signed up for that. I think that if you can commercialize research, that's probably a pretty good thing.

There are other people who say that's crass. Well, okay, but that's a cultural factor. That's not going to go away tomorrow. It's something that's going to have to be worked on over years and years.

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

Okay—

[The Chair, Liberal, Wayne Easter]

I'm sorry, Greg—

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

[Inaudible--Editor] ...as well, just so that he could answer part of that and elaborate.

[The Chair, Liberal, Wayne Easter]

The time is up. I hope we'll have time for one more question from each of the parties.

There is a point that I do want to make. The part of your report that I got the most calls on, both positive and negative, was the agrifood sector— in a very positive way from the agriculture community in general and from industry—in emphasizing that's one of the industries with potential, but there was some concern from the dairy industry about what you mentioned in your report. I don't think that was your intent in any way, and I do note that your report is based on the Conference Board study. I would suggest that you gather some facts from the Dairy Farmers of Canada. Their concern is that this will again open up an attack from those who don't like the supply management industry and who, I would suggest, use quite a number of what you could call “alternative facts”.

Also, on your point on productivity here, keep in mind that the dairy industry is number one or two in 7 out of 10 provinces. In 2015 it was a $19-billion industry in terms of the GDP. This report talks about productivity. In terms of our productivity per cow, we have the cutting edge in technology in our dairy industry in Canada. We are second to none. Our Holstein breed has the most productive dairy cattle in the world. Our production has increased 130% over the last 40 years. In the United States, it's 116%. In New Zealand, which is always held up as the example, it's an increase of 49%.

The last point I would make is that we have an industry here that is healthy and that doesn't depend on direct subsidies. It should be noted that in Australia, a bailout package of $578.8 million for the dairy farm industry was just announced. As well, the EU just announced its bailout package of one billion pounds. A little while ago, the United States announced a $40-million buyout package for the surplus of cheese, and that's on top of the up to 31¢ a litre that they already directly subsidize their industry with.

I'm putting those facts on the record and saying to the advisory committee that wherever this information comes from in the Conference Board of Canada, you should balance it with some from somebody who's in the industry. I wear supply management on my sleeve, and I'll admit it.

Turning, then, to—

[Michael Sabia]

May I respond?

[The Chair, Liberal, Wayne Easter]

Yes.

[Michael Sabia]

I want to be really clear on this point. You won't find in any of the documents we issued, and certainly not in the one on agrifood and the importance of identifying key strategic sectors, a recommendation with respect to supply management. We were quite clear in not making a recommendation about it.

Why? Because it is, in and of itself, a highly complex subject. It's not something that you can leap to conclusions about one way or the other. It's something that requires a lot of intensive study in and of itself.

Our focus in making the recommendations that we did was actually a bit different from that. What we're trying to encourage government to think about, or people in general to think about, and all of you to think about, is more around issues of how Canada can move up the value chain.

How can Canada, in the agrifood sector, do more value-added processing than we do today? About 50% of our agricultural exports have some processing component, but 50% don't. Because that processing is good in terms of creating value and creating jobs, what more can we do there? What more can we do in terms of enhancing the technology and being more technologically sophisticated in the agrifood sector? What more could we do creatively around branding Canada as a source of nutritious, safe food in a world that's hungry?

Our focus was on what other trade agreements we could enter into that would give us access to hugely important markets for Canadian agricultural products, such as China, India, and Japan. Our focus was on what more we can do to take this industry that has so much potential, clear its path, and encourage it to grow as fast as it can and to export as much as it can.

Hold onto your hats on this one, but we export less in terms of agricultural products than Holland. Now, you can take your hat off to the Dutch. They have a very small country, but it's a very small country that's managed to marshal its resources and build an extremely capable agricultural sector. What we're saying is that if the Dutch can do it, why can't Canada do it?

[The Chair, Liberal, Wayne Easter]

Those are valid points.

Mr. Deltell.

We'll go to three five-minute rounds. We'll run a little past the five o'clock end time.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Thank you, Mr. Chair.

I want to invite you to the next Conservative Party leadership debate. You have an interesting point of view to put forward and share.

[The Chair, Liberal, Wayne Easter]

Will you let me on the stage? I'd love to debate your man from Quebec.

[Gérard Deltell, Conservative, Louis-Saint-Laurent, QC]

Of the 14 candidates, 13 share your point of view.

Mr. Sabia, I'll go back to you.

Earlier, you said that new products must be conceived and created. However, those products must also be sold, which isn't easy.

I'll give you a historic anecdote. The Lumière brothers invented the cinematograph in 1895. One year later, in 1896, Louis Lumière said that, other than a few technical applications, their invention had no commercial future.

Goodness knows that, 125 years later, we can enjoy all the commercial virtues of the cinematograph invented by the Lumière brothers. However, this means that we aren't able to market something simply because we've invented it. As the saying goes, we should stick to what we know.

More specifically, you mentioned earlier that Canada's future in certain sectors must involve innovation, technology, education, knowledge and high technology. We fully agree on this matter. However, how can we attract the best creators in the world to Canada, individuals who excel in their field, and keep them here if the taxes are very heavy in comparison with our main trading partner and competitor, the United States?

[Michael Sabia]

Do you want to answer this question, Ms. Treurnicht?

[Dr. Ilse Treurnicht]

Okay.

[The Chair, Liberal, Wayne Easter]

Go ahead.

[Dr. Ilse Treurnicht]

Obviously, we have to have a competitive tax environment to create that environment, but we also need a rich field of opportunities for people to come to. Typically, they would move to Canada in fields such as technology, knowing that they're not just coming for one opportunity but that there are opportunities they might move to beyond the first entry point. We need to create that rich, high-performing innovation ecosystem and couple it with quality of life, communities, and health care, because even talented human beings still make very basic human decisions about where they want to live.

I will tell you that from my window today, I feel incredibly optimistic about this. The talent we see wanting to come to Canada today is beyond anything I have seen in the past. The government is already paying attention, particularly to our first set of recommendations, which focused on that rapid track—opportunities for those with highly specialized skills to come in and work with our highest-performing firms. I think there's a general recognition in the sector, as well as among governments, that this is really important.

We then have to do the work of building vibrant communities that will make them want to stay here. I think that's what we do very well, so I'm optimistic.

[Michael Sabia]

I just want to add a comment.

You're certainly well aware of this issue, but I want you to assess the current situation in Montreal. Obviously, as Quebecers, we pay taxes that are, let's say, significant.

That said, I think Montreal is currently booming. New companies are being developed and all sorts of entrepreneurs are coming to the city. At this time, the establishment of new companies in Montreal is truly remarkable. How long has this phenomenon been going on? It hasn't been for 20 years, but maybe for five, seven or eight years.

Obviously, I'm talking about companies such as Moment Factory, Hopper Inc. and all sorts of other small businesses. In reference to Ms. Treurnicht's comments, Montreal is an attractive city on a global scale. Why? Because the city is very diverse, full of opportunities and offers a good quality of life. All these factors help create a vibrant city. I completely understand your point of view. You're right. The tax and taxation level issues are obviously important, but they're part of a much more complicated larger picture.

[The Chair, Liberal, Wayne Easter]

Mr. Grewal and Mr. Sorbara, you're splitting your time. Who's first?

[Raj Grewal, Liberal, Brampton East, ON]

It looks like I'm first. Thank you, Mr. Chair.

Mr. Sabia, one of the recommendations states that there are policy barriers and that over-regulation is impacting economic growth in Canada. You also recommend foreign direct investment in Canada, but a lot of that goes against existing regulation. It's very complicated in certain industries such as telecom, as you know, to get foreign direct investment into the country.

What do you think the government could do relatively quickly? With your experience as the former CEO of a major telecom, please use current examples that could help bring more foreign direct investment into Canada. That will lead to more jobs in Canada, and it will lead to more economic growth in the country.

[Michael Sabia]

Look, we haven't been specific about individual regulations, etc. We've been more concerned about encouraging government to take stock of what it's doing from a regulatory point of view and, in fact, to take stock of what it's doing from a programmatic point of view as well. When you look across the lot, you see there are something like 50 different government programs focused on innovation. Sometimes you can have too much of a good thing, and maybe if there were fewer of them and they were better focused, you would have more impact. We're hoping that government will take on that challenge, clean house a bit, and align these things better with what needs to be done.

On the regulatory side, we're basically saying pretty much the same thing, which is to try to review...because some of these things, some forms of regulation, are necessary. Take, for instance.... I'm not suggesting this is necessary, but what I'm suggesting is to take a sector that you and I know a bit about, which is telecommunications, or banking.

Canada has today a set of rules around ownership structure in those sectors. The reason it does is that they're complicated sectors. They have roots in Canada as a relatively small country beside the largest economy in the world and a very globally preponderant culture that emanates from the United States. There's a whole host of factors that go into a public policy decision about whether or not a particular sector should have some kind of constraints on foreign ownership.

I think the public policy decision is more complicated. It requires a reflection on a set of factors that is broader than a relatively limited or focused one on this or on that. It requires a broader picture, because these are complicated issues.

The second thing, just continuing on a bit about whether it's in telecom or other things, is that it's important for Canada not to be too much of a boy scout. If as a country we think that America is wide open to foreign investment, that's just wrong. America is not. There are all kinds of hidden barriers that exist there. Again, I'm not suggesting that's wrong. I'm saying that it reflects the public policy choice. The Department of Defense in the United States plays a very important role in stimulating technological innovation in the United States, and it has for years.

It's not like the world is this completely free-trading and open place. Look at the Europeans. There are all kinds of hidden barriers. I won't name individual countries, but across the European Union there are a lot of similar kinds of issues.

As Canada thinks through issues like telecom or banking or other kinds of regulations that are there, yes, it's a much broader, more complicated thing that has to be thought through.

[The Chair, Liberal, Wayne Easter]

A quick question, Francesco.