Industry and Technology Committee on Sept. 24th, 2025

[William Robson]

It's probable that the environment for natural resource investment in Canada has been worse than in the United States, in a way that has affected investment performance. What I've been talking about over last 10 years.... Many of you will recall, some with a fair amount of pain, that there was a big collapse in the price of oil in 2014, so fossil fuel extraction everywhere in the world suffered at that point, including in Canada, but one of the starkest points of contrast between the United States and Canada since then is that the resource industries in the United States have come back far more than in Canada. I mentioned there are some difficulties in comparing the two economies—the structures of the energy industries are different—but it's very striking that Canada did not recover the same way the United States did.

I think that if we could get some of the problems that are afflicting major projects out of the way, we would certainly see a better performance there. Those are very high value-added and capital-intensive industries, and they do affect machinery and equipment investment as well, so I think that would make a difference.

[Ted Falk, Conservative, Provencher, MB]

By “problems”, do you mean—

[The Chair, Liberal, Ben Carr]

Mr. Falk, we're 50 seconds over now, so I'm going to move to the next speaker.

Mr. Bardeesy, you have six minutes.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Good day, Mr. Robson. It's good to see you in this new context for me.

I want to start with a follow-up question on the comment you made on the U.S. corporate tax changes. Since then, the U.S. seems to be pursuing a model of state capitalism, which I don't know if we've seen in western countries, by continuing to drive down corporate tax rates but also taking shares in companies, doing very aggressive mercantilist work to try to repatriate investment. Generally, what do you see as implications for Canada in this, what appears to be a new, emerging model?

[William Robson]

U.S. aggressiveness on the trade front and in some of the ways that you have mentioned is concerning for a variety of reasons. I don't think some of the state capitalism that is being undertaken on this almost ad hoc basis, it seems, is necessarily going to work out very well.

When I talk about potentially doing something on the tax side, one of the reasons that I tend to focus in that area is that there are things we can do that will have reasonably predictable effects. For example, if we were to cut the top corporate income tax rate to try to restore our tax competitiveness to what it was before the U.S. tax changes, I'm fairly confident that it would have the effects we want. If we were to have a temporary investment tax credit, again, I'm fairly confident that it would have predictable and positive effects.

If we try to outmuscle the U.S. when it comes to subsidies or taking these ownership stakes in companies, I fear that we will not be able to make very good choices. I don't think they're making very good choices. I think that will take a lot of time, produce a lot of friction and produce a lot of lobbying and other types of things that are a bit wasteful from an economic point of view. I would much prefer for us to react to some of the things the U.S. is doing with instruments that are more neutral in their application and that are easier to implement with confidence so that they will have the effects that we want.

I know we're not ready to talk about cuts in corporate tax rates at the moment—it doesn't seem to be the right atmosphere for it—but we know what that would do. It's easy to design, and it's a lot better than deciding that we're going to take a stake in one of the big tech companies, for example.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

You mentioned the relative investment in capital between the U.S. and Canada. One of the areas in which we have a relatively large endowment of capital is through our pension plans. I know you've done lots of work on pensions in the past. Do you have a view on the role of Canadian pension plan investment in the Canadian economy?

[William Robson]

I would love to see Canadian pension plans invest more in Canada. If I may speak for them, I think they would be very happy to do so.

The difficulty they face is that many of the assets that are most attractive for them to invest in are not easy to come by in Canada. It makes a lot of sense for a Canadian pension fund to invest in the types of assets that Canadians, including Canadian pensioners, will use themselves. It makes a lot of sense for them to own airports that Canadians and Canadian pensioners are flying through. If we have toll roads, toll bridges or other types of infrastructure that pay a return, Canadian pension funds would love to invest in that as opposed to investing in other countries, especially in countries where they don't understand the environment as well or where there may be political risks. It's a great hedge for them.

I would like to see more of that kind of investment. I think the best way to attract it.... The federal government could do something here in the airport area, for example, in the short run. That's a very good way of thinking about how to boost investment here and attract capital of a kind that will be very happy to invest here at home.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Do you see any high-capital, stable return projects that could be on the table around the corner? There's a lot of conversation in Canada, and we have a proposal around high-speed rail. Is that the kind of project that could attract pension plan investment along the lines that you're discussing?

[William Robson]

It could. High-speed rail is very attractive. It's also a little risky.

Pension funds like to do things that are a little safer when they're first getting into an area. The sorts of things that are very attractive to them—and we have some examples of this already—are electric utilities. Water isn't such a big thing for private investment in Canada, but it could be. We are going to need a lot of investment in water—drinking water and sewers—in the coming years.

I mentioned airports already, but I'll just underline it, because that's an area that the federal government has some control over.

There is a lot of potential for pension fund investment in Canada. I don't know if your question was inspired by some of the proposals that have been made to restrict foreign investment by our pension funds. We've had regimes like that in the past with foreign investment restrictions. I wouldn't favour that. If there's interest on the committee's part, I can elaborate on why.

[Karim Bardeesy, Liberal, Taiaiako'n—Parkdale—High Park, ON]

Thank you.

I know we're doing a tour of a number of issues here, and I appreciate your engagement on them.

I'm going to switch briefly to talent and IP. You mentioned that IP and intangibles are in an asset class that we need to be generating more of in Canada as well, and Canadian firms face pressure from abroad to relocate or to sell their IP. Generally, what role can federal policy play in keeping and attracting talent in this country?

[The Chair, Liberal, Ben Carr]

Just give a quick, concise answer, please, Mr. Robson.

[William Robson]

Thank you. I'll quickly say there is a lot of concern about the difficulty of developing a lot of these applications in Canada. For the sake of giving a quick and concise answer, I'll say again that I would look at the tax system. On both the corporate and the personal side, a lot of the talent that flows south of the border is doing so in response to the fact that they get to keep a lot more of the return on their investment in the United States, and that matters to people who are in that line of work.

[The Chair, Liberal, Ben Carr]

Thank you very much, Mr. Bardeesy.

Mr. Ste‑Marie, you have the floor for six minutes.

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

Thank you, Mr. Chair.

Mr. Robson, thank you for your participation. Your comments are very interesting.

My questions will be on the low productivity of Canada's manufacturing sector compared with other countries.

What's your analysis of that?

What would be the barriers that keep producers from investing more in state-of-the-art equipment and production technologies?

Do you have any potential solutions to remedy the situation?

[William Robson]

Yes, in focusing on machinery and equipment investment, I'm acutely conscious of the competitive pressures that we face there and the need to upscale. We will always have manufacturing in Canada, but if we don't have a good endowment of tools per worker, we're going to do low value-added stuff. We don't want to be making T-shirts; we want to be making the machines that make the T-shirts or designing the software that runs those machines.

It's clear, from the low investment rates I was referring to, that businesses are hesitating to invest in this type of capital in Canada. It's very concerning for many of the industries that are under pressure as a result of U.S. protectionism. There are certain things that we cannot very easily do anything about. I wish our negotiators on the Canada-U.S.-Mexico agreement every success in the world in maintaining our market access.

One of the reasons that I focused on, for example, an investment tax credit as a potential response to this pressure is that—I'm repeating myself, and I apologize, but the point is worth making—it's a tool that we know how to design and that we know how to use, and we can have a lot of confidence that it will do something helpful.

There's a recent survey from the Canadian Federation of Independent Business—so that's smaller than some of the businesses that we would also like to see tooling up in manufacturing. Interestingly, the highest number ever in their survey cited the cost of capital equipment as an obstacle to their plans. Perhaps we can do something on the tax side to make it easier for them to afford to tool up.

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

Thank you.

More broadly, there are many key areas across all sectors of the Canadian economy that seem to be exploited by subsidiaries of American companies. Let's take the example of Ontario's automotive sector, the major contractors or the oil and gas industry.

Would that explain why productivity is lagging for those sectors?

My hypothesis is that research, development and innovation would be done more within the parent companies. For example, productivity-enhancing technologies would be applied more in the United States before being exported to Canada.

What do you think?

[William Robson]

I share the concerns of many, and perhaps your question reflects this, on the difficulty that Canada has in retaining head offices and head office functions.

When I talk to people who work for multinational companies and ask them what it is that attracts them to Canada, they cite a number of positive factors. They cite the quality of the workforce, they cite the rule of law, and they cite the predictability of policy. We have lots of assets, and that's one of the reasons that you see as much activity by multinationals here in Canada as you do.

When it comes to the head office functions, I think there's a bit of a critical mass issue for us. I apologize for not attempting to say that in French. We do not want to see the professional services going south of the border, and as it becomes easier for people to work remotely and for functions in different companies to be spread out, I would like to see Canada doing what it can to retain talent. In Quebec, in Ontario, in several other provinces, we have top marginal personal income tax rates that are over 50%. I think when you get over 50%, you're sending a strong signal to somebody who is wondering where they would like to deploy their talents. It's not surprising to me that we see some head office functions moving to areas where the bite on that extra dollar earned is a bit less.

I don't think we can go down very far. Both politically and economically it would be difficult to do, but it would be very nice to see that top rate get down below 50%. Very often, including in Canada, when we've contemplated tax reform, people have said that when you get over 50%, that's psychologically and economically damaging.

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

Okay, thank you.

I have one last question on another topic.

I get the impression that there are a lot of innovative small businesses—by which I mean start-ups in various leading-edge sectors, or small or medium-sized businesses, or SMEs—that are very often sold to larger American companies as they grow. That might suggest that higher productivity is being shifted to the United States.

What are your thoughts on that?

[William Robson]

I have already expressed the concerns that I share about the movement of some of these high-value jobs south of the border. Most of the income in the economy flows to labour. We would like more capital owners, including Canadian pension funds, to be reaping the returns from investment, but, when I focus on investment per worker, it's because that is the key driver of higher wages and better living standards for people.

I would love to see the pie sliced a little differently, so that Canadian owners of capital, Canadian entrepreneurs, are getting a bigger slice of pie. If we have higher investment per worker, I guarantee that the workers themselves will benefit from it, because they earn most of the income in the economy.

I would start with looking at those investment numbers. I said in my presentation how critical I think it is to watch those numbers. If this committee is successful in its work, we will be talking about better numbers than that. If we do not get those investments per worker numbers up, I fear for the future of manufacturing in this country. I fear for the future of wages in this country, and I fear that we will continue to lose talent.

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

Thank you.

[The Chair, Liberal, Ben Carr]

Thank you, Mr. Ste‑Marie.

Mr. Guglielmin, you have five minutes.

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

Thank you, Mr. Robson, for being here. I appreciate your time.

I want to turn to the energy sector, which is key to Canada's economic recovery. The C.D. Howe Institute's September 2024 report highlights a decline in investment per worker in the oil and gas sector compared to the U.S., citing less favourable regulatory environments since 2015.

Just yesterday we learned that TC Energy, a Canadian company, is investing $8.5 billion in energy infrastructure; however, unfortunately, that's in the United States. Additionally, the Parliamentary Budget Officer warned that policies restricting Canadian energy production could reduce GDP by $20 billion annually and cost tens of thousands of jobs by 2032.

How do regulatory and policy uncertainties around energy restrictions affect Canada's ability to attract and retain capital investment? What are the implications for productivity and economic growth?

[William Robson]

I will repeat something that I said in response to an earlier question about the very capital-intensive nature of natural resource industries. When you have high amounts of capital per worker, you pay very high wages. You alluded to this already, so I'll say that the knock-on effects from investment in natural resource projects, including oil and gas extraction, are considerable. One of the reasons that machinery and equipment investment has been weaker in Canada than in the United States is the amount of machinery and equipment that is used in the fossil fuel sector and in the energy sector generally.

I would like to see us do a more thorough revamp. Bill C-5, as we call it, is sort of addressing in a piecemeal fashion some of the obstacles that face individual projects, but there's no question in my mind from talking to industry executives, as you do, and you will know this, that they see that Canada has been a very difficult environment to operate in.

For those who are interested in the details, the structure of the industry is different. One of the reasons the United States was able to rebound faster from the oil price collapse is that there's more fracking there, and there's more quick turnaround stuff, whereas we have the oil sands, which are, by their nature, more like baseload, if you like that comparison. The United States has moved ahead quickly on LNG, and we have not. I think we can see some comparisons with our performance versus that of the Americans. The world wants our fossil fuels. We will need them for a long time to come. It makes sense for us to develop those resources more fulsomely than we've done over the past decade.

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

Thank you for your response.

We just heard in response to your previous question how the opportunity will be decimated for future manufacturing growth and jobs if we don't correct our productivity, and investment is an issue. What immediate policy actions would you recommend to help reverse Canada's productivity and investment challenges and ensure that we can share in a future of economic prosperity?

[William Robson]

I have mentioned taxation several times already. I'll come back to it again for the reasons that I've already mentioned. It's a tool where, if you turn the knob in a certain direction, you can have a fair amount of confidence that you'll see a certain result. Many levers of economic policy are not as straightforward as that. I don't think Canada is ready for any kind of thoroughgoing revamp of the corporate tax system. It takes a long time to talk about that and to get people comfortable with the idea. Ideally, you would have a federal fiscal situation that could tolerate some revenue cost, because it's a lot easier to do a tax reform if you can allow revenue to be a little softer for a few years. That way the losers don't lose so much compared with what the winners win.

I will go back to the suggestion of a temporary investment tax credit for the reasons I've already mentioned. It's easy to design. It will have quite predictable effects. If it's temporary, the fiscal hit will be temporary. Then you can recapture a little of what you gave up. I think that would help bridge the gap between where we are now and where we would like to be with a more competitive corporate tax system over time.

If the federal government is planning on spending billions of dollars in new subsidies of various kinds, I'd say forget all that stuff. It takes a long time to do. It's very politically complicated, and it gives rise to all sorts of lobbying. If you do something on the tax side, it's big, it's dramatic, it's more neutral, and you know it's going to have a positive effect.