Industry and Technology Committee on Nov. 17th, 2025

[The Chair, Liberal, Ben Carr]

Thank you.

Madam Dancho, you have five minutes.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

Thank you, Mr. Chair.

I want to pick up a bit on what Mr. Gullo was talking about.

You mentioned investments in research and development, both public and private. We have some of the lowest in the OECD. I believe we also rank quite low in the OECD in terms of IP. We have a big IP leakage issue, particularly to the U.S., but not exclusively to them.

We invest a lot, perhaps not relative to other countries, but it's in the billions overall in research grants, R and D tax credits and the like. I've been surprised to learn that we actually don't keep a lot of what we create, even though Canadians create a lot of really interesting, cool things.

I want to just set you up to give a bit more detail on your thoughts on this issue and how it impacts productivity.

[Michael Gullo]

I fully agree with the information you've provided, and I think it underscores the severity of the situation. It's clear that our innovation input isn't matching the output, even in sectors where we enjoy a relatively competitive market share globally.

Look at our mining industry, for example, where we have many companies headquartered in this country investing elsewhere. Our IP challenge is most acute in a sector like this, as an example, where you have Chinese dominance of over 70% of the IP that's out there, while Canada is hovering at around 2%. There is a real dysfunctional aspect to how we're going about capturing this aspect.

A couple of reasons come to mind, broadly. We're just investing less, as my colleague, Theo, opened with. In the resource sector specifically, over the last 10 to 15 years, the level of investment has really slowed down. That's really limited our ability to produce more, to go after global market share and to be more competitive at an international scale.

We've also missed out on the opportunity to really go after different value-added aspects of the economy, whether that's in the tech space, in advanced manufacturing or in other fields. We haven't been bold and aggressive in doing that. Part of the problem is that when you don't have a marriage between those different elements of the economy, there really isn't a very clear technology-to-market strategy. Despite having excellent research centres and despite having a substantive amount of money going into R and D, there is really that missing bridge piece from translating those technologies of the research efforts into commercial opportunities.

Frankly, with the broad-based membership that we have, we do see success stories in other parts of the world. In the U.S., they have an exceptional ARPA system, whether it's on the defence side with DARPA or on the energy side with ARPA-E. These are real places where companies can go and work with the best research institution that the U.S. has to offer and really take some risks on developing new technologies and finding a very clear pathway to bring that technology to the market, first through their own operations and then being able to deploy that at scale and even sometimes as an export service.

[Raquel Dancho, Conservative, Kildonan—St. Paul, MB]

I'll give the same question over to Ms. Donald.

I appreciated your opening analogy about the fast-food chain. The workers making the burgers are the labour force and then the number of burgers they make are sort of the productivity. I immediately thought of that movie, The Founder, which talked about McDonald's and how McDonald's was really the fast-food chain that revolutionized burger-making with new technologies and the most efficient path to do so.

Just building on what Mr. Gullo said and on that analogy, can you elaborate perhaps on your expertise on the issue with productivity, IP and development in Canada?

[Frances Donald]

I think sometimes we conflate the terms “growth,” “investment” and “productivity.” Of course, they're all very related to each other, but you can have growth without investment. It could be consumption-led. It could be the government spending a significant amount of money. It could be wealthy households spending a significant amount of money. You can even have investment that doesn't lead to productivity gains, and we've seen plenty of that in Canada.

For example, our housing sector has had plenty of investment, but it's not a high-productivity sector, and what we're witnessing in the United States right now is that there has been a significant amount of investment in, for example, data centres and AI development that has boosted growth in very real ways but has yet to produce the productivity responses to that, and that's because investment is step one, but the type of investment that you make matters. Do you have the skills to then use that investment and generate productivity gains from it, and are those productivity gains going to be sustainable over time?

I view these as three separate questions that are all interlinked, and as the Business Council has highlighted, there is a strong link between investment and productivity, but it's not a silver bullet towards those productivity gains. It needs to be in the right places, and clearly, when we think about the types of investments, then a focus on AI and these new technologies would be a core area.

To return to some of my prior comments, there are two ways we can address productivity, and we should probably be doing both. One is to fix the areas where productivity is broken—I've mentioned construction, for example, and housing and manufacturing—and the second is to focus on where the areas of productivity will be in the future, and those probably have to do with AI services and technology in Canada. Those will be the productivity areas of the future, and we want to make sure that 10 years from now, we're not talking about trying to fix productivity in our AI sector.

It's dangerous, I think, to link all of these concepts as though they're the same. There are steps of pass-through from investment to productivity to growth, and you have to follow those steps.

[The Chair, Liberal, Ben Carr]

Thank you very much.

Ms. O'Rourke, you have the floor for five minutes.

[Dominique O'Rourke, Liberal, Guelph, ON]

Thank you very much, Mr. Chair.

Mr. Argitis, you said that for more than a decade Canada has not been investing at the pace required, so can you help me understand? We had COVID, which was a major challenge and created a lot of pent-up capital investment, but then when that investment should have flowed, we had major global supply chain issues and wars breaking out, so then we thought, “Okay, it's coming now,” and now we have these unjustified American tariffs that are very challenging for many sectors of the economy.

I'm curious to understand, because despite all those challenges, Canada has the second-largest foreign direct investment stock-to-GDP ratio among the G20, and last year, Canada had a record foreign direct investment of $85.5 billion, which was up 36% from the previous year—our best performance in a decade.

Barring those challenges, there were still some good stats but nothing to make us rest on our laurels; there's still a 40-year challenge on productivity. This budget's going to invest in ports, roads, electricity, critical minerals and AI. We're going to improve SR and ED. We're going to increase the research investments. We're going to look at talent attraction. We're looking at newer, stronger trading relationships, including a signed deal with Indonesia, which is the world's fourth-largest economy. We have the productivity superdeduction. We're investing in modular housing.

What is missing here? When you say Canada has not been investing at the pace required, are you talking about the Government of Canada, or are you talking about the business community?

[Theo Argitis]

I'm talking about private investment. The environment is not there for.... We see it in capex data. I mean, you talked about foreign direct investment to Canada, and I'm happy to talk about that as well.

You're right. Canada is an interesting situation, because we actually do draw in, relatively speaking, a healthy amount of foreign direct investment compared to other peer-type nations. We have a more open flow of capital than, maybe, other countries. That applies both coming in and going out. We've had a lot of money coming in. We've had much more money going out. When Canadian companies are the ones that are exiting the country to invest abroad, primarily in the U.S.—much of that investment is going to the U.S.—that suggests something.

You're right. Canada has done decently in terms of drawing in some foreign direct investment, but much more has exited the country.

I look at just the capex data, the business investment data, that you see every quarter in the quarterly economic accounts. We're going to get the latest numbers at the end of this month, I think. We have seen stagnating business investment in Canada over the last 10 years, starting in the resources sector in 2015 with the price of commodities falling. We did see the initial, large reduction in business investment in Canada, and we just haven't really recovered very quickly since then.

It's particularly stark if you look at it as a share of investment per worker, for example—you know, investment per capita—and—

[Dominique O'Rourke, Liberal, Guelph, ON]

Just in the interests of time....

What's missing from what is proposed? There are a number of measures. What will help us get to that?

[Theo Argitis]

As I said earlier, what would help is a bit more ambition, whether it's on the tax side, the regulatory side or even the infrastructure side—just some more ambition. To go back to the budget you mentioned and many of the things you mentioned....

I mean, I agree. I think there are many positive things in the budget, but once you're in a situation where you're trapped in a certain kind of circumstance in Canada, the perceptions of Canada as a place to invest are very negative. You need something to break out of that trap. You need a bit of a big bang in policy for companies, whether foreign or domestic, to really change their perceptions about Canada as a place to invest. You need a bigger type of bang.

[The Chair, Liberal, Ben Carr]

Excuse me, Ms. O'Rourke. Unfortunately, your time is up.

Mr. Ste‑Marie, you have the floor for two and a half minutes.

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

Thank you, Mr. Chair.

Ms. Donald, are innovative companies properly funded?

Can you talk about traditional financing, venture capital and venture debt financing?

[Frances Donald]

Thank you for the question.

The topic is a bit outside my area of expertise. I would need some time to think about that.

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

Okay.

[Frances Donald]

What I can tell you is that there are a lot of good examples in the United States. They started by offering public funding. Using various techniques, they transferred the matter of funding to the private sector. That's one thing the U.S. is doing right.

That said, I could send you more details later.

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

Great.

You can send us your answer in writing, of course. We would appreciate that.

I'll ask the Business Council of Canada the same question.

Is there any room for improvement when it comes to funding innovative businesses?

What's your view on traditional financing, venture capital and venture debt financing?

[Theo Argitis]

It's also not my area of expertise. I can come back with a response for you as well, if you'd like.

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

Okay.

[Michael Gullo]

Mr. Ste-Marie, maybe I'll just weigh in on one small area that I think can help answer the question you're trying to explore. When I've looked at this, I've landed in a spot where the solution is somewhat institutional.

Right now, there isn't a great partner for the private sector, in terms of government, to de-risk emerging opportunities, to have a collaborate approach and to align on investment strategies for R and D, and then to bridge that into daily operations.

The previous government promised a new innovation corporation. We haven't seen that. STDC is a story that's already played out. There aren't a lot of institutional arrangements, and I think this is a lane that is really wide open. When thinking about an advanced research agency for this country, we have a bit of a model on the defence side, with Borealis, which I think is starting to spell out the theoretical possibilities of what can be accomplished. Something that scale, though, could be truly transformational.

[The Chair, Liberal, Ben Carr]

Thank you very much.

As a reminder to members and witnesses, if you intend to send subsequent information to the committee, it has to go through the clerk—not directly to a member but to the clerk—who will then distribute it. Thank you.

Mr. Guglielmin, the floor is yours.

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

Mr. Argitis, you've written that permitting, impact assessments and packaging rules all add complexity, and that Bill C-5 risks creating an emergency fast lane for a few select projects while the rest of the economy essentially remains in gridlock.

From the Business Council's perspective, has the government actually reduced regulatory complexity yet, or are we mainly adding new structures on top of old ones?

[Theo Argitis]

The way we think about Bill C-5 is that it's better than nothing. We haven't seen much movement on major projects in Canada for a while. We would prefer that the first best solution would be to get rid of the constraints on investments—the ones you're talking about—and to allow the private sector to decide how it's going to invest its capital, rather than the government essentially picking winners and losers. Having said that, we think it's important that we actually do get some major projects built, and if the government chooses to move ahead in this manner, we think that it's better than nothing.

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

If Bill C-5 and the Major Projects Office focus mostly on a small number of projects but don't improve the underlying approvals system or permitting system, does that actually help us attract investment?

[Theo Argitis]

I think it will do something, for sure. These projects can be important projects. Michael knows the specifics of the projects better than I do. We want to see infrastructure projects being built in Canada. As I said, we prefer legislation that solves the problem rather than bypassing the problem. Canada needs more infrastructure, and Canada needs more investment, so that's how I....

[Michael Gullo]

Maybe I could just add to my colleague's remarks. We're happy to send you some follow-up material on this, because we've done quite a bit of writing about major project approval and permitting processes prior to Bill C-5 and post Bill C-5. We're big believers not only in the principle of “one project, one assessment”, but also in taking it further to say, “one decision”.

We have a bit of a narrative on how to get there, which requires a very different level of collaboration between federal and provincial governments, recognizing that provincial governments, in most cases, have the jurisdiction over many major resource projects.

We also have some ideas on how the Impact Assessment Act can be retooled so that there is a different approach for the broader economy that's trying to figure out its footing outside of the Bill C-5 structure at the moment.

There are some ideas we can share around the project list regulations, such as increasing thresholds so that, by default, more is going through provincial systems than federal systems, and really starting to unpack a lot of the complexity and redundancy that has been holding back major project potential in the country for years, unfortunately.