Finance Committee on March 10th, 2020

[Bill Grandy, Director General, Programs, Atlantic Canada Opportunities Agency]

A couple of examples are Verafin, which would probably be a familiar firm. It just received the largest venture capital investment of any firm in Canada. It was an early client of the AIF and it repaid all that money.

Ocean Nutrition is another example of a major manufacturer in Atlantic Canada that has really grown up and made a substantial economic impact resulting from the benefits of research with institutions and commercial companies.

[Sean Fraser, Liberal, Central Nova, NS]

Excellent.

The innovative communities fund, through ACOA, is one that I see the benefits of daily. One thing I really appreciate about it is that it helps individuals or groups take part in an economy by strengthening the communities that might not otherwise be able to. I'm thinking of the CACL investment or the farmers' market in the community of Antigonish. The CACL project enables adults with intellectual disabilities to take part in the economy by being employed in a commercial kitchen or a small manufacturing facility. The farmers' market investment helps small producers not only take their product to market, but potentially get their products online to sell to a bigger market.

Can you talk about how this innovative communities fund is able to allow folks to take part in the economy on a scale they may not otherwise be able to?

[Daryell Nowlan]

The innovative communities fund, as the name may imply, is a program that's targeted at communities. The agency invests in the neighbourhood of $40 million a year. It's largely targeted at rural communities, outside of what we consider to be the major urban centres in Atlantic Canada. It works with community groups that do everything...like in the kinds of projects the member mentioned. In the example he used around the farmers' market, it allows farmers to bring their products to sale. It can help local community infrastructure, which can help support local and domestic tourism activities. It can help community groups take advantage of the assets they have in their community and to try to do something with them.

[Sean Fraser, Liberal, Central Nova, NS]

The accelerated growth service is exciting to me for the Atlantic region. We typically don't have firms that are of a scale that can compete in the global marketplace. In my own community of New Glasgow, Stark International is taking part in the initiative.

I'm wondering if you can showcase how this particular initiative can pour some gas on the fire to help good businesses become global businesses and hire more people in communities in the Atlantic region.

[Bill Grandy]

In Atlantic Canada, we have 92 clients that have participated since the start of the accelerated growth service. It's a whole-of-government approach that really focuses on the growth of those companies. We're continuing to work with companies in the region to build that pipeline. When companies demonstrate that growth potential, we go in and work with them as a whole-of-government approach. We're starting to see the results of that.

[The Chair, Liberal, Wayne Easter]

Thank you.

We're turning now to Mr. Ste-Marie, and then to Mr. Julian.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Thank you, Mr. Chair.

Good afternoon, ladies and gentlemen. My questions are for Mr. Davies.

Thank you for your presentation. When your department provides support to an economic sector or an industry, do you have an internal mechanism to assess and calculate the economic benefits, and evaluate the return on investment?

[Mitch Davies]

Thank you.

I think the most straightforward way to answer the question is to use an example. I would take aerospace as a significant industry, in which we've had long-standing involvement through a number of programs over the years, and I would trace this industry's existence in the country back to a number of interventions, different policies that have taken place over the years. We now have an industry that has a $25-billion GDP. There are 200,000 people working in that industry. It's an industry that's particularly important, in that Canada is now fifth in aerospace ranking as a global nation in aerospace. It's very hard to be in that club. You can see it's challenging. This is a very competitive, very contentious industry. It's fairly challenging in the marketplace, and the kinds of products and services that they produce require very complicated, high-tech value chains.

There are a lot of big companies involved, and you hear their names, but there are a lot of small players that are all part of the value chain that go along and create a lot of benefits, which is why that job number is so large. These sophisticated export industries add a lot of value to the economy along the way because there are a lot of other companies that get brought in along the process.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

So you would say that the support your department provides to the aerospace industry benefits the economy and is an investment that pays off in terms of jobs and value. Is that correct?

[Mitch Davies]

That's correct, and also I would argue that because this industry is so contested, in fact, in countries where it's very strong, it's supported very significantly by those governments, often largely through their military expenditures, which does bring down and make much more technology come forward, which eventually has a civilian application. Our industry is obviously more oriented toward civilian exports, but we don't operate necessarily with that sort of industrial base that's supported by, for example, the Department of Defense in the United States. You'll see programs, very direct, that are providing support for research and development in that area because we're trying to essentially provide a playing field for our industry that allows them to stay competitive.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

In this regard, you've just given the example of the United States model, where research and innovation in the aerospace sector is done first in the military sector and can then be used in the civilian sector. In Europe, there are support measures for the civilian sector instead.

The Canadian aerospace industry is calling for a comprehensive support policy rather than piecemeal measures, as we have seen in recent years.

Is your department considering a more comprehensive policy to support the aerospace industry?

[Mitch Davies]

I acknowledge, actually, a very significant report. The hon. Jean Charest, with the aerospace industry, produced a report on the state of the aerospace industry seeking a number of areas of support from governments and also a direction to the industry. We're very open. We work with the Aerospace Industries Association. We actually, at the last Paris Air Show, announced funding for an aerospace innovation network, which was very well received by the industry.

I also mentioned the strategic innovation fund, which is the instrument we use to support large-scale projects that support the industry. I would say this is actually embedded into the innovation skill plan at all levels. We also produce each year a report on the state of the aerospace industry in conjunction with the industry players, as it's an area of important focus for our department.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

I'll end with a quick question.

In your opinion, is the federal government, through your department and other departments, doing enough to support the aerospace industry, compared to what other countries that dominate the industry are doing?

[Mitch Davies]

It's an interesting question. I just looked the other day and the U.S. Department of Defense's request for its budget for research and development for this coming fiscal year is $100 billion, so I would say we're absolutely doing the full measure that we can do to support projects, important projects, research and development in the future, and also we're working with an industry that in fact is undergoing a very significant restructuring. The players in the industry are changing. We see now that Airbus is in care of the A220, the program out of Mirabel, which now really has traction. They're selling that aircraft. They're making those planes there. We're very hopeful to see that expand, and obviously we're there to be open to work in partnership with them as these important programs continue.

[The Chair, Liberal, Wayne Easter]

Thank you very much.

Mr. Julian, you have six minutes.

If anybody else has another point they think should be raised, just tip your hand and I'll catch you.

Go ahead, Mr. Julian.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

Thank you very much, Mr. Chair.

I'd like to thank the witnesses for being here today.

We talked about several types of business subsidies, tax credits and financing. I think there was a lot of public interest in the issue of business loans. I am talking primarily about loans made through Export Development Canada's Canada account. For example, we are talking about $2.6 billion for Chrysler and a similar amount for General Motors.

First of all, what are the criteria for granting these loans?

[The Chair, Liberal, Wayne Easter]

Are you asking about the criteria for loans from Export Development Canada?

I doubt if that's in your bailiwick, but can you answer that, Mr. Davies?

[Mitch Davies]

Mr. Chair, that's correct.

You would want to speak to officials with responsibility for Export Development Canada.

[The Chair, Liberal, Wayne Easter]

Is there anybody from finance who can answer that question? We can send a note to EDC to get it answered if necessary.

All right, there is no one.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

We have already discussed the Canada account with the Department of Finance. It is indeed the Minister of International Trade and the Minister of Finance who approve these loans through the Canada account. So I'd like to know, first of all, what the criteria are for these loans.

Next, what criteria is the Minister of Finance using to determine that the amounts loaned are uncollectible? We are talking about billions of dollars. Do you have any information on that?

How do you decide that a loan is lost and you won't ask for it back?

[Mitch Davies]

Mr. Chair, that question....

[The Chair, Liberal, Wayne Easter]

I think they're in the same position as before. As it relates to EDC, we may have to invite them if this is the line of questioning, because I don't think any of the officials here. I see finance shaking their heads as well. We may have to handle that question in another way if we can, Mr. Julian.

Mainly, we're talking about corporate subsidies here, not loans through Export Development Canada.

[Peter Julian, NDP, New Westminster—Burnaby, BC]

The problem is that it becomes a grant.

If we're talking about—

[Pierre Poilievre, Conservative, Carleton, ON]

I have a point of order. I think Mr. Julian is right. The EDC loans to foreign buyers and so on can be seen as subsidies. At the very least, one could make a very strong argument this is a subsidy, otherwise the foreign buyer of the Canadian exporter's product would get it from a private lender.

I think it is a fair question.

[The Chair, Liberal, Wayne Easter]

We don't have anybody here from government. We can invite somebody from EDC to come to answer this question. There are a number of witnesses who have said they can't come.

I operate in the potato industry, and I know that if it weren't for EDC, we wouldn't be in some markets with potatoes, which return good investment back to Canada. If you wish, we can try to invite EDC.

Can we stick to questions that these folks can answer?