Industry and Technology Committee on Nov. 17th, 2025

[The Chair, Liberal, Ben Carr]

Good morning, everyone.

I hope everybody had a wonderful constituency week. I know how valuable it is for us to get home to see our constituents and maybe even our families. Welcome back to Ottawa.

We're continuing our study on productivity here today. This is the 14th meeting of the Standing Committee on Industry and Technology.

All witnesses have completed the required connection tests in advance of the meeting.

I'll give a reminder to witnesses and colleagues that if your earpiece is plugged in but is not on your ear, please just place it down on the sticker in front of you to protect the health and well-being of our interpreters, who work so hard on our behalf.

Colleagues, we have two hours with witnesses today, in two separate panels.

Appearing virtually with us today is Professor Michael Veall, who is the director of the productivity partnership project. From Food, Health and Consumer Products of Canada, we have Michael Graydon, the chief executive officer, and from the Information and Communications Technology Council, we have Namir Anani, president and chief executive officer.

Gentlemen, each of you will have up to five minutes for your introductory remarks. If you start to see me erratically waving, it probably means that we're getting close to time, and I'd ask that you do your best to summarize.

We'll enter into a pre-allotted amount of time, based on the proportion of seats distributed across the table from political parties represented.

With that, Mr. Veall, I'll turn the floor over to you for up to five minutes for your introductory remarks.

[Michael R. Veall, Professor, As an Individual]

Thank you, Mr. Chair.

I am grateful for the invitation.

By way of introduction, for 13 years I've been director of a research project called the productivity partnership, which has promoted the analysis of Canadian productivity data at the firm and workplace level.

Being a politician is one of the hardest jobs in the world. Thank you for doing it. I've appeared before parliamentary committees before, and I understand there is partisanship. I am thankful to live in a country where partisanship is allowed, but I am no expert in short-term politics. I hope to add my two cents to your reflections on the long-term direction of the nation.

Perhaps most importantly, concern for productivity needs to permeate every aspect of government to promote a higher standard of living and to pay for government programs. For brevity, I'm going to be very presumptuous and simply state a few things that I think Canada should and shouldn't do. There will be no silver bullets.

First, Canada needs to act with urgency, but let's not panic. By the measures I judge most reliable, Canada is doing about the same as our comparator countries, except the U.S. While Canada must do better, some of the story is that the U.S. has exceptionally fast measured productivity growth compared to almost all other countries.

Second, as an example of panic to avoid, let's not mess with the international investment of pension plans, especially the Canada pension plan, a success story. While it's important that Canada improve its overall investment climate, when the U.S. government subsidizes a specific industry, that is not a reason for the Canadian government to subsidize that same industry, at least in the long term. The U.S. is big; taking it on directly is seldom in Canada's interest.

Third, the U.S., and not just President Trump, is likely to continue to create conditions such that firms that want to sell in the U.S. will consolidate their operations in the U.S. That makes it harder for Canadian plants to operate at scale. Knocking down interprovincial barriers remains vital to making the Canadian market as big as possible.

Fourth, tariffs on imports increase prices in Canada. Use tariffs as sparingly as possible.

Fifth, and probably a non-starter, GST/HST is the most efficient tax Canada has, because it encourages saving and hence investment. Increase it and lower other taxes.

Sixth, some think we should not worry about greenhouse gas goals. This is a more complex issue than I can cover here. On one hand, Canada needs at least to postpone the electric vehicle mandate as an especially expensive CO2 reduction method, but also, if we do too poorly in meeting our Paris Agreement targets, it may affect our ability to form trading relationships with other countries to diversify our trade.

Seventh, if we want to grow GDP per person, we would do better by focusing on fewer and more highly skilled immigrants. We also do better if all of us work until older ages. While some of that is happening, Canada is still one of the few countries in the world that has not raised the age of receipt of public pensions, even as, wonderfully, life expectancy continues to rise.

Finally, eighth, as a more targeted point, government needs to continue to become more productive and make its interactions with Canadians more productive. An example would be to speed the arrival of automatic personal income tax returns for as large a percentage of the population as possible.

Thank you very much for your attention.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Veall.

Mr. Graydon, we'll go to you next for up to five minutes.

[Michael Graydon, Chief Executive Officer, Food, Health and Consumer Products of Canada]

Thank you, Mr. Chair and honourable members. I appreciate the opportunity to appear before you today.

FHCP members make about 80% of the everyday goods sold in grocery stores and pharmacies from coast to coast to coast. We employ more than 350,000 Canadians in nearly 10,000 facilities, making us Canada's largest manufacturing employer. However, despite being the largest manufacturer employer in Canada, we're rarely part of the national conversation about manufacturing competitiveness. That, I think, is a missed opportunity.

Studies by organizations such as the C.D. Howe Institute show that business investment per worker in Canada is only about half of what is invested per worker in the United States. That gap reflects the higher operating costs, regulatory drag and uncertainty that discourage investment and innovation.

According to the Canadian Federation of Independent Business, companies spend more than $51 billion a year meeting regulatory requirements. Much of that burden stems from Canada's outdated regulatory system. It is often too prescriptive and has not kept pace with advances in science and technology. Most consumer, health and packaged food products must be reformulated for the Canadian market, even when they are already approved by trusted jurisdictions. This duplication drives costs, delays innovation and prevents Canadian facilities from achieving the scale needed to compete internationally. Regulation should reward innovation rather than create duplication.

Within these challenges, though, lies enormous opportunity. About 55% of the products found in the centre aisles of grocery stores are now imported, mostly from the United States, even though many of these goods were once made here in Canada. Over time, manufacturing capacity has quietly migrated south as companies consolidated production and captured efficiencies in markets with lower costs and faster approvals. The capability still exists, but the investment environment does not encourage expansion.

We are not an industry in crisis, but we are approaching a tipping point. The slow erosion of capacity we have seen over decades is becoming harder to reverse, and each year that passes makes recovery more costly and less likely. A recent FHCP member study found that 23% of our members expect to remove products from the Canadian marketplace within the next two years because the cost of doing business here has become unsustainable.

Canada's agri-food sector recorded a $60-billion trade surplus last year, but our full potential is diluted by fragmented interprovincial trade and logistics bottlenecks. Our ports and rail corridors remain choke points for manufactured goods, and the rail system's duopoly leaves producers vulnerable when disruptions occur. Budget 2025 makes an important start by committing new investments in trade and transport infrastructure, but to turn that promise into real-world gains, those dollars must flow into increased port capacity, freight rail competition and logistics systems that support Canadian manufacturing. Addressing these challenges is essential to boosting productivity and reliability across the economy.

Medium-sized manufacturers face distinct hurdles in scaling up. They carry enterprise-sized regulatory and compliance burdens but SME-sized access to capital. Recent global research shows that while Canada has hundreds of promising agri-food start-ups, mid-sized firms are falling behind global peers in technological adoption because public investment support has not kept pace. Without targeted help, Canada will miss the productivity gains our competitors are realizing through automation and advanced manufacturing.

Tax policy must play a central role. Budget 2025's new productivity superdeduction and enhanced capital cost allowance are significant steps in the right direction. Together, they make Canada's cumulative manufacturing tax incentives slightly more competitive than those in the United States. These measures will help de-risk capital investment decisions and encourage companies to modernize and expand here at home.

If government can continue to reduce the barriers, modernize regulation, upgrade infrastructure and sustain a competitive tax environment, Canada can begin to repatriate lost manufacturing. Converting even part of the 55% of imported centre-store goods into domestically produced products would create thousands of new jobs, strengthen regional supply chains and drive productivity growth in creating a level of food sovereignty that we have not experienced for many years.

This is a window of opportunity for Canada to translate its innovation and trade strengths into long-term leadership, but that window will not last forever.

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Graydon.

Mr. Anani, you have five minutes.

[Namir Anani, President and Chief Executive Officer, Information and Communications Technology Council]

Good morning.

Thank you, Mr. Chair and honourable members. Thank you for the opportunity to appear before the committee today to discuss one of the most pressing economic challenges facing Canada: our ongoing productivity gap and the need to boost national competitiveness.

Members of the committee, at a time when the global economy is rapidly changing, it's essential for Canada to fully affirm its potential and its leadership.

These remarks reflect the role of my organization, the Information and Communications Technology Council, as a centre of expertise for the digital economy through our research, policy and capacity-building programs.

According to the OECD, Canadian labour productivity is less than in nearly every other G7 economy, and the gap continues to widen. My remarks today focus on practical steps to boost productivity, strengthen innovation, and support workers and businesses across Canada.

To close this gap, Canada needs a cohesive productivity and competitiveness strategy that focuses on five key pillars.

First is the adoption of accelerated technology: Incentivize investment in digital infrastructure, automation, robotics and data-driven innovation, including through strategic government and industry programs such as defence spending. Use government procurement and funding to create national demand pull for digital, backed by enhanced investment tax credits that lower the cost of upgrading operations, and accelerate the depreciation for digital and green equipment so that firms can write off tech investments faster, improve cash flow and modernize more easily.

In parallel, support the transfer and scaling of digital best practices from leading adopters to lagging sectors to speed the spread of proven solutions and lift overall productivity. Certainly, the federal budget goes a long way toward achieving those with the productivity superdeduction.

Second is skills and workforce readiness. Talent is the cornerstone of any high-performing economy and the driving force behind innovation and global competitiveness. Achieving this will require scalable upskilling initiatives, stronger partnerships between industry and academia, and inclusive pathways.

Equally important is building AI literacy and digital acumen early in education, ensuring that future generations are prepared to lead in an increasingly technology-driven world. The federal government, through its budget, has put some steps forward to achieve that agenda.

Third is commercialization as a driver of competitiveness. Canada ranks among global leaders in R and D quality and early-stage innovation, but we still struggle to turn these strengths into market-ready products and globally competitive firms. Boosting competitiveness requires a sharper focus on commercialization, IP retention and scale-up, backed by a program similar to the U.S. government's small business innovation research program; a refined SR and ED regime that rewards commercialization and Canadian-held IP; a national scale-up fund for later-stage growth; targeted tax credits for digital and clean-tech adoption; and mission-driven procurement in areas like health, defence and clean infrastructure to create demand for homegrown innovation.

Innovation-ready regulations are fourth. Regulations shape innovation, and clear, predictable rules are key to long-term investment. A voluntary AI code of conduct is a good start, but in order to commit capital, expand operations and grow trade and FDI, businesses and investors also need certainty about what is acceptable. As the EU and countries like the U.K. move toward risk-based AI models with supervised sandboxes to safely test new technologies, Canada has an opportunity to evolve in a similar direction.

Fifth is competition for competitiveness. A more competitive domestic market is essential to boosting Canada's overall productivity and global competitiveness. Enhancing competitiveness to reduce barriers to entry, curb anti-competitive practices and encourage the formation of new firms would help drive innovation, lower costs and accelerate technology adoption. A more dynamic market environment will push firms to invest, innovate and adopt new technologies faster, strengthening Canada's position in a global value chain.

Finally, by moving decisively on these five pillars—accelerating technology adoption, investing in skills, scaling innovation, modernizing regulation and sharpening competition—Canada can unlock a new wave of growth, opportunities and shared prosperity. If we act with urgency and purpose, Canada can emerge as a world leader in innovation-driven, inclusive and resilient growth.

Thank you for the attention. I look forward to your questions.

[The Chair, Liberal, Ben Carr]

Thank you very much, witnesses, for your introductory testimony.

Mr. Guglielmin, the floor will be yours for six minutes, sir.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you, Mr. Chair.

Thank you, witnesses, for your testimony. Thanks for being here. It's a very important study. As we all know, Canada ranks among the lowest in the G7 countries for productivity.

A lot of the stakeholders I've spoken to recently talk about how hard it is to attract capital investment. I believe StatsCan had a report in September that said we have had the sharpest decline in our productivity in three years.

Mr. Graydon, I was wondering if you could please outline again for us the scale of your membership. How many jobs and facilities do they represent, and what share of the grocery market?

[Michael Graydon]

We have about 350,000 employees in manufacturing. There are almost 10,000 facilities across the country. Our members alone represent about 80% of the volume. This is a $114-billion industry. It is material in regard to its economic impact here in Canada.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Last month you appeared at the agriculture committee and agreed that single-use plastics policies and front-of-pack labelling together could add $15 billion of costs to your sector.

Are these policies acting as a tax, or at the very least an impediment to food manufacturing in Canada?

[Michael Graydon]

They are restricting capital investment, absolutely. It's part of that regulatory rigour that exists that just adds billions of dollars of costs.

We have provided government with some potential solutions, such as using digital labelling rather than having to go in and actually change physical labels on a regular basis. There are technological solutions to these issues, but regulations continue to change, and they come at us fairly rapidly as well.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

What does that mean for grocery prices and for where your members choose to invest?

[Michael Graydon]

For grocery prices, unfortunately, some of the inflationary impact that you're seeing is an implication of the regulatory costs and the environment of the consolidated retail market in the grocery field.

We're going through quite a transition of recycling costs in this country. Close to $2 billion a year is now on the shoulders of manufacturers in taking on the responsibility of recycling in each jurisdiction or each municipality in the country. Those expenses weren't there two years ago. When you have billions after billions after billions, it's going to have a negative impact on affordability.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Does the single-use plastics ban risk disadvantaging Canadian exports? Would you say that it acts as a trade barrier?

[Michael Graydon]

It does, especially with the United States, which has no interest in single-use plastics.

We have a member that sells single-use juice containers. The American retailers and American consumers will not accept paper straws. Fortunately, the government has allowed us to produce plastic straws for the purposes of export only, so there's not an impact, but those are the sorts of situations. When our regulations aren't aligned with those of our largest trading partner, the implications can be quite significant.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Do these rules push production and jobs to foreign markets?

[Michael Graydon]

If we hadn't had the opportunity to get a reprieve from the government, it would have meant either the closure of this plant in Quebec or the repositioning of it into the United States, so yes, these rules do have implications for capital investment and manufacturing.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

You have also said, “When I speak to FHCP members, I hear the same story: Regulations are outdated, inflexible and out of step with many of our trading partners. Canada's regulatory environment is more prescriptive and restrictive than most of our competitors.”

Can you give the committee some specific examples of what that looks like in practice for food products?

[Michael Graydon]

Sure. Let's use the example of fortified flour.

Flour in Canada, no matter what the product, must be fortified. That requirement doesn't exist in the United States, and it certainly doesn't exist in Europe. While the additives in the fortification of flour in bread may be good for young consumers, I'm not quite sure that it's that important in a chocolate chip cookie.

Again, another member with a fairly significant capital investment here in Canada was looking for the opportunity to be able to export to Europe, but because of the fortified flour issue, they were not able to use that manufacturing capacity. Kudos to Health Canada, which allowed us to get a reprieve on that, but again, it's short term.

These are some of the things. Fortified flour, from a scientific perspective, isn't of any value at this particular juncture, especially across the board, but it is restricting our opportunities for global trade.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

You mentioned that the cost of investing and bringing products to market here in Canada outweighs the benefits. What does that mean in practice, in terms of actual decisions for your members?

[Michael Graydon]

Well, there are a few things.

One is that the cost implications mean that they're going to raise their prices to protect their margins, so there's an affordability issue.

The other is just the variety of products available to the Canadian consumer. Mid-volume to lower-volume products fill out a category in regard to choice, but there's no hope of making any sort of profit. You sell those goods at a loss. It's those types of things that are starting to disappear, so consumer choice is going to be impacted quite significantly.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

You did say that your industry is facing $53 billion of regulation requirements and that 23% of your members want to leave the Canadian market.

[Michael Graydon]

Well, it's not necessarily 23% leaving the market. That's the reduction in SKUs and products that they offer to the Canadian consumer.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you.

Madam O'Rourke, the floor is yours for six minutes.