Government Operations Committee on May 27th, 2024

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[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Thank you, Mr. Chair.

I think all of us are talking about trying to improve the competitiveness of our regulatory system, to improve the competitiveness of Canada versus other parts of the world and other jurisdictions and to lessen the cumulative burden of regulation.

You know that old adage about asking for forgiveness rather than permission? That's happening right now with AI and a lot of new ventures and the notion of sandboxes to try to permit the use of different sources before securities commissions and others take on regulatory matters relative to those issues.

I'll look at the 2008 financial crisis. Had it not been for some of the regulatory impediments, if we can call them that, that had been established in Canada, we wouldn't have weathered that tremendous world situation, in which Canada was somewhat protected, certainly in the banking sector, and hence in our business sector, to the extent that we were able to recover much more quickly in manufacturing and in real estate.

I appreciate your discussions around voluntary standards versus government regulations. I appreciate the notion of relieving regulatory authorities, permitting more, simplifying methods of accelerating some of the work we do and reducing the regulation. It promotes uniformity in some of those standards, improves responsiveness and encourages those very industries to participate in the establishment of those standards, thereby avoiding duplication, hopefully, as we go forward. This is all with the sense and the notion of facilitating and promoting competitiveness.

In my previous life, I worked very closely in a co-operative securities regulator to try to permit all parts of Canada to participate in a uniform system and to reduce some of the competitiveness and duplication and improve our overall costs. Those who held back were Quebec and Alberta primarily. We had a passport system to try to facilitate some of those engagements.

I have three questions.

My first one is for Shaena Furlong. This is in regard to foreign direct investment.

Canada is pretty much at the top. We've slid, it says, since 2019, but we still rank as one of the top destinations for foreign direct investment because of our low tax rate and our stability, our predictability, our legal system and our adaptability. Canada has been sourcing foreign direct investment of late, contrary to the opposition party, which is opposing some of those investments that are coming our way in the automotive sector specifically, but we need to improve scaling and monetization. We are certainly competing against the U.S. for some of this.

I want to understand. I know Michel Girard was asked this question, but I want to ask you specifically about the importance of having an arm's-length regulatory system, one in which you don't interfere with the Ontario Securities Commission or with the Bank of Canada or with any of these bodies that are there to protect all of us from interference.

Can you comment on that, please?

[Shaena Furlong]

Thank you for the question.

Absolutely I agree that a strong regulatory framework and a Canada that is relatively free of corruption are absolutely necessary for strong foreign direct investment.

We do get concerned when we see record sell-offs on the TSX. Even our own pension plans are invested largely in other jurisdictions. We need Canada to be attracting foreign direct investment, not just with public incentives but also because there's certainty in our business environment and investment is relatively safe.

We also need to see that growth in industry outside of real estate. Absolutely, housing is very necessary, but we have seen a lot of investment in Canada, and specifically in the Lower Mainland in British Columbia, centred on the real estate industry. We would like to see a lot of job creation.

[Charles Sousa, Liberal, Mississauga—Lakeshore, ON]

Actually, that's a great point.

B.C. has established a lot of small cap business, and that's critical, especially in the formation of new ventures. Of course, we now have a lot of innovation superclusters developing across Canada, which are putting us at the top.

Can you share with this committee the embedded costs of carbon pricing that have been established by international bodies? We have trading partners and we have trading agreements with many other jurisdictions. If we don't participate in a carbon price internally, we're going to face it externally. Can you share your thoughts on that?

[The Chair, Conservative, Kelly McCauley]

I'm afraid I have to cut you off because Mr. Sousa did not leave you any time, but perhaps we can get back to it in another round.

I'll just let everyone know that I know we've left a lot of questions hanging. I welcome you all to provide the answers in writing to our clerk, and he will make sure they go out to the committee.

We now go to Mrs. Vignola for two and a half minutes.

Go ahead, please.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Thank you very much, Mr. Chair.

Mr. Girard, in my former life, I was a teacher. I taught economic issues and English. There are expressions in French and English that are not at all the same, but they are sometimes translated word for word. It sometimes seems like English is a translation of English. I'm sorry, but it had to be said.

When we talk about sandboxes, as in the expression “economical sandboxes”, we're not talking about sandboxes or sand pits.

[Michel Girard]

Right, they're not sandboxes.

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

Some of the people listening to us are business people. When they hear “sandbox”, they have no idea what we're talking about.

In addition, “sandbox” can be defined in a number of ways. Can you comment on that?

[Michel Girard]

Thank you very much for that great question.

These are obviously not sandboxes where people throw things at each other. “Regulatory sandboxes” are places where people experiment. They experiment with various approaches to complying with an act. That's how it works for regulations. People try to figure out how to comply with legislation. That's what this is about. It allows regulatory authorities to start the conversation and invite people to experiment. Prototypes are developed and tested, and results are analyzed.

Is that explanation clear?

[Julie Vignola, Bloc, Beauport—Limoilou, QC]

It was already clear to me, but I wanted it to be crystal clear for everyone.

You've been talking about consultations and partnerships since the meeting started. Basically, you're saying that people should stop working in silos. When we talk about regulatory modernization, we sometimes get the sense that people want to return to a kind of pure economic liberalism.

I don't think that's what you're advocating. You're promoting a new economic-social-procedural paradigm. I'm not sure how to translate that.

Is that right?

[Michel Girard]

That's exactly right.

We're here today because we're concerned about the impact of digital technologies on people and on our democracies.

The reason we want to set standards to reduce these negative effects is that we don't want to go backward. We want these products and systems to be safe. In other words, we don't want them to endanger our physical and mental health.

[The Chair, Conservative, Kelly McCauley]

Thanks.

Mr. Bachrach is next.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

Thank you, Mr. Chair.

This is a question for Ms. Furlong.

I found the points around net direct foreign investment interesting, because there are two components here. There's the amount that Canadian firms are investing in other countries and there's the amount that firms from other countries are investing here in Canada.

There are two aspects to my question.

First of all, Canada is home to some 60% of the world's mining companies. I think that has to do with our unique treatment of those companies, either tax-wise or regulatory-wise, and it seems that skews the number quite significantly.

The second point is that you noted direct foreign investment in real estate, which I think has had, when it comes to residential real estate, a really detrimental effect on the price of housing and the housing crisis in the Lower Mainland. If we're to see more direct foreign investment in real estate through things like real estate investment trusts, in my mind, that would be something that runs counter to our national interest.

Should we be looking to other metrics to describe the health of our economy? It seems like these are two inherently problematic aspects of using net direct foreign investment.

[Shaena Furlong]

Thank you for the question, Mr. Bachrach.

As I mentioned, we would like to see that foreign direct investment occurring outside of real estate as well. We have seen quite a bit of money flocking to the real estate sector, especially in residential real estate, because returns have historically—in the past two decades—been very strong and more certain, with less regulatory oversight than, honestly, industries that are very job-creating.

We would like to see that investment in industries that are creating Canadian jobs and employing people and generating a greater GDP for the country.

I think foreign direct investment is one metric that we should be looking at, but if even Canadian pension plans are seeing greater returns from other jurisdictions, we would like Canada to be competitive and attract that investment here. We have quite a few companies that could be scaling and we may be able to attract more.

[Taylor Bachrach, NDP, Skeena—Bulkley Valley, BC]

I have two seconds left here, but if I understand you correctly, if Canadian firms and Canadian pension plans were investing here in Canada, it would in fact increase our net direct foreign investment, the ratio, because fewer Canadian firms would be investing outside the country. To me, that seems like a much more beneficial approach to look at, as opposed to trying to encourage more foreign firms to be investing in our country, which comes with some of the drawbacks we've mentioned.

I know I'm out of time, Mr. Chair. Thanks for your forbearance.

[The Chair, Conservative, Kelly McCauley]

Thanks.

Again, Ms. Furlong, maybe you can provide us with a response in writing.

For the last two rounds, we'll go to Mrs. Block and then Mr. Kusmierczyk.

Mrs. Block, go ahead, please.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much, Mr. Chair.

In my last intervention, I made an observation regarding the current government's propensity to introduce very vague or deeply flawed legislation, leaving a lot of the heavy lifting to the bureaucrats when it comes to introducing regulations that actually get less scrutiny by the public or by stakeholders than legislation does.

Ms. Furlong, I'm wondering if you are aware of the requirement for federal organizations to apply a small business lens to proposed regulations to identify and take into account the needs of small businesses when designing regulations. Are your members also aware of that requirement? Do they have the opportunity to provide to the federal government that small business lens?

[Shaena Furlong]

Thank you so much for that question. I was not aware of that requirement, but I will be doing more research on that and I look forward to learning more.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you.

Mr. De Thomasis, I appreciated some of the suggestions or solutions you provided in your opening remarks, including not only the free trade zones but also the trusted carrier solution or the fast pass solution. Could you perhaps explain a little bit more about that and about whether there are other jurisdictions that do in fact have those solutions available to industry and businesses?

Can you also comment on the targeted regulatory reviews whereby the TBS and regulators are required to seek stakeholder input on a set of themes to develop regulatory road maps that propose changes to the legislative, regulatory and policy regime?

[Tony De Thomasis]

Sure. Thank you.

We're familiar with the trusted carrier program through our work with the automakers and different OEMs. They have a program through which the carriers are verified as digital carriers. They have all the verifications done on the front end so that they don't have to stop at customs or various points along the border for verification of their loads. They do this in the Windsor area on a daily basis for the movement of finished vehicles back and forth across the border.

We think there could be programs similar to this for other verified carriers. You could be pre-selected for the movement of goods back and forth across the border. It could be used for goods other than vehicles, such as steel, aluminum and steel coil. It would help to expedite the movement of these goods and increase our competitiveness in that space.

As far as the free trade zone is concerned, we do have a designation in the Windsor area as a free trade zone, but I don't believe it's being fully utilized. There are some significant challenges in terms of different types of commodities that we handle at Morterm, such as steel, aluminum and steel plate. We would like to have that designation looked at once again to see if we can incorporate some of the different commodities that we handle and how we can encourage the movement of those goods under that free trade zone.

With regard to your last question, I'm not aware of the regulations of the CBSA, I believe it was, or anything to that effect, so I couldn't answer that question. My apologies.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

Thank you very much.

[The Chair, Conservative, Kelly McCauley]

You have a minute left.

[Kelly Block, Conservative, Carlton Trail—Eagle Creek, SK]

I'm good.

[The Chair, Conservative, Kelly McCauley]

We'll go back to Mr. Kusmierczyk, please.

[Irek Kusmierczyk, Liberal, Windsor—Tecumseh, ON]

Thank you, Mr. Chair. I do appreciate that I get a chance to follow up on some of my previous questions and have a bit of extra time.

Speaking with our businesses, our small businesses and our cargo hubs is really important just to get feedback in terms of how we can improve things, make things more streamlined and take some of the administrative burdens off our small businesses.

A couple of months ago, we brought the trade minister, Mary Ng, and the ambassador of Canada to the U.S., Kirsten Hillman, down to Morterm to listen to some of the challenges that Morterm and other shipping hubs and transport hubs face. In that meeting, you mentioned some of the administrative hurdles that you face. Some of it is as simple as making some changes in some of the paperwork to free up that trade.

Can you expand a little bit on some of that low-hanging fruit, some of those small changes that could be made to help free up trade and reduce some of that red tape and those barriers for businesses?