Industry Committee on Nov. 9th, 2006

[Iain Stewart]

Do you want to take a shot?

[Dr. Eliot Phillipson]

I can provide a partial answer.

The Canada Foundation for Innovation, as I mentioned, funds research infrastructure. It is a co-funding model. We fund 40% of the capital of approved projects. The institutions who are our applicants have to find the other 60%, but in practice, in virtually all cases the province in which the institution is located provides another 40%. That leaves 20% for the institution or, very often, a private sector partner.

Over the years we have worked and coordinated our efforts better with the provinces. It is certainly one example of federal and provincial investing in the R and D side of the equation.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Okay.

When Mr. Taylor mentioned the automobile industry in all its facets, we understand the competition for a national auto plant is as fierce as it gets on a global basis, but for people who can find a niche in some form of parts manufacturing, is geography a limitation anymore, in terms of being able to do those kinds of things? Could it be done in just about any part of the country?

[Graham Taylor]

I'm not expert on the industry itself, but I would observe that a number of factors come into play choosing a location for an auto parts company. Proximity to your customer is important, but I think it depends on what you're making. If it's a complex high-end product, typically a closer proximity to your customer is more important, but if it's a commodity that can be shipped very cheaply, then it would be less important. The other things that come into play are the business environment and access to a good labour force with high levels of skills and that sort of thing.

I think geography is significant, but increasingly these companies are footloose, and they're moving here and there.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

Dr. Phillipson, when you talked about the critical dates for funding, how soon do we as a nation have to provide that stability, so that people who are working in these professions say that if the door closes I might as well go to another country and set up shop there, or take my kids and start them in school next year somewhere else?

[Dr. Eliot Phillipson]

It varies somewhat by program and by which funding organization we're referring to, but in our case, for the Canada Foundation for Innovation, I think that the institutions that are our applicants will be looking to the spring budget for an indication that our organization will be continued. As I've indicated, by the end of this year we will have essentially committed all our funds, and therefore they'll be looking to see whether there will be another competition in 2007 or perhaps early in 2008, because these sorts of infrastructure projects require a considerable amount of thought and planning and sometimes can be a considerable expense. Therefore the institutions will not begin to undertake conceptualizing and planning these sorts of projects if there's no indication that there's to be another competition.

[Ken Boshcoff, Liberal, Thunder Bay—Rainy River, ON]

It was mentioned that more or better are the two combinations. Is it always more government dollars and better tax regimes? Is that really the one-two combination, that we have to bite the bullet and do it? Is that what you're saying?

[Dr. Eliot Phillipson]

In the case of the higher education R and D, it's a question of maintaining the government support for the enterprise. As Iain Stewart indicated, Canada does extremely well in government public investment in university and college-type research, and we should be very proud of that, but it's not a one-time-only event.

It's like education and health care. You can't educate one group of children and then say there, we did it, and now we'll move on to something else. You can't say we delivered health care to this population, so we took care of health care, and now we'll move on. It has to be an ongoing commitment. I think the levels at which Canada has been committed have served us extremely well. We're not necessarily saying it has to be more and more and more. It's a case of maintaining a reasonable level of investment.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go now to Monsieur Crête.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chairman. I would also like to thank our witnesses for their presentations.

My question, which follows on from my colleagues, is primarily for Mr. Stewart, but I would also like to hear the views of the other witnesses.

The Canada Foundation for Innovation clearly stated in its brief that if its funding is not renewed, it will run out of money within a few months and will not be able to undertake any projects. The foundation is therefore asking for a long-term funding guarantee.

Mr. Stewart, I would like you to talk to us both about the important role that basic and cutting edge research will play over the next 10, 15 or 20 years and the government's contribution to research transfers. What is your view on this matter?

[Iain Stewart]

I think the government has recognized the importance of basic research. In the case of Eliot's organization, the last budget provided resources to the Canada Foundation for Innovation, which was a clear indication that this is something that they thought was important.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Mr. Stewart, your brief states that:

Unless it is known well in advance that additional funding will be available after this last competition, universities and colleges will find it difficult to undertake the planning of infrastructure projects whose design in construction may span several years.

Mr. Phillipson said that although the foundation received adequate funding in the past, the challenge now lies in insuring that this continues. I would like to hear your view on the matter. Henceforth, how important will this aspect be? Your brief speaks extensively of supporting the private sector. I would like you to tell me in what way cutting edge research projects, such as those carried out by the Canada Foundation for Innovation, Genome Canada or Precarn Incorporated, should be supported.

[Iain Stewart]

Just to reiterate, I think that the government is well aware of the importance of basic research. It is essential not only for the production of ideas, but also for the training environment it provides for young talent and creating the next generation of researchers and innovators.

The Canada Foundation for Innovation plays a key role in that regard, as do the granting councils. In the last budget both of those were recognized, along with the importance of indirect costs of research, which is really about providing a research environment for the universities as well and covering some of their overhead costs. The government recognized that this is an important role and put investments into all those areas.

As Eliot was saying, what's the appropriate level of investment? In fact, we have discussions in that regard about where you see this level of investment and how you sustain it going forward. Those discussions are not complete, and the government has not taken a decision. I don't want to contradict Eliot, because we're good colleagues and work together all the time. There was funding provided in the last budget. It's not that his bank account is completely empty. What he is really saying is there is an issue here about what the right level of funding is for us going forward and how we sustain that. The current competition that you have under way is of an order of magnitude that's quite large, so the question is how do you approach that going forward?

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Do you think that funding should be maintained at the same level as in recent years?

Is the government prepared to commit to maintaining investment levels for a period of five to 10 years?

Is this the approach that is being favoured in terms of cutting edge research in universities and other centres?

[Iain Stewart]

We're talking within the context of supporting basic research happening in the university context. I think the question you're asking is how will that continue, going forward.

We have a system that's almost an ecology of support. There are different kinds of programs that play different roles in supporting that research. We have infrastructure support for equipment and lab facilities and so on, such as Eliot provides. We have the granting councils that provide the direct costs and we have indirect cost programs.

The appropriate balance and delivery of those programs going forward is something that is being considered. How do you get the right efficiencies? How do the right synergies among these programs get organized? That discussion is not yet over, but to the extent that there is to be basic research, then these matters have to be tended to.

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

My question is primarily for Mr. Phillipson, but the other witnesses should also feel free to answer.

If long-term funding were not guaranteed after this competition, what would be the impact on cutting edge research?

[Suzanne Corbeil, Vice-President, External Relations, Canada Foundation for Innovation]

Allow me to answer the question. The CFI will fold in 2010 if our funding is cut. As Mr. Phillipson said in his presentation, our projects are sizable, require a great deal of time and energy, and are costly to plan.

University research would regress as a direct result. As we have said, it is important to know, with a degree—

[Paul Crête, Bloc, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

What length of commitment do you want from the government? Five years? Ten years?

[Suzanne Corbeil]

It is always a good idea to review projects after a few years.

That being said, we need an extension of at least five to 10 years so that we can see the full results of the projects that are already underway and already bearing fruit.

[The Chair, Conservative, James Rajotte]

Merci.

Mr. Taylor, we're over time, but if you briefly want to respond, you may.

[Graham Taylor]

Just briefly, the position of Precarn is continued support, and really the longer the commitment, the better. For basic research that is absolutely essential. That's really what our activity is based on. You have to continue to make that investment, but you also have to know whether you're getting a return on that investment, so you have to do other things as well, including helping the private sector take that stuff up.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Shipley, for six minutes.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Thank you, Mr. Chairman.

Thank you for coming out today. I find it really interesting. Actually there's quite a theme that's developed by all three of you. When I look at the array of projects and universities that are involved, it's quite amazing.

I'm impressed with the amount we are putting into research and development that takes us to the top of the G-7. I'm also then disturbed by what we do with that research and development. I find it to be something I wasn't aware of, but it certainly has become the role. When we're putting the billions of dollars into this research and development, actually then we're questioning the return on the investment we're getting on it. I want to know where your role is to improve that.

[Dr. Eliot Phillipson]

Thank you for that question.

Our mandate, given by Parliament, is to invest in university research, but we recognize that although knowledge in its own right is extremely valuable and leads to many unexpected economic, social, and environmental benefits, we think we can play a more active role in moving that knowledge into the commercialization arena, particularly in the area of knowledge transfer, knowledge translation. That's why in my remarks I indicated investing in programs facilitating that knowledge translation; in our case, that would be infrastructure. It occurs best, we think, in an environment in which the researchers, the private sector, and the financial sector are all interacting very closely.

It's been said that ultimately innovation commercialization is a social process. In other words, people have to be in reasonably close proximity and interact. With additional funding, that is one area in which CFI sees itself as potentially playing an important role. It is a narrow window, but as my colleagues have indicated, it's a window that is too early for the private sector, by and large, because it is still somewhat risky. Nevertheless, with the three sectors working together, we think there could be more of the knowledge translation, which will then ultimately lead to the commercialization.

[Bev Shipley, Conservative, Lambton—Kent—Middlesex, ON]

Has there been a start to developing that relationship? You talk about extra funding. Maybe part of what you do.... From my perspective, doing the research and development and not following through by having that plan in place to turn it into a return on investment for our industry and our country seems like putting money into one part of it and losing it on the other end. Likely what that will do is transfer to some other country, where they'll take advantage of it.

Without talking about more money--I mean, that seems to be the answer for everything--what can you do, or what have you done, to help facilitate that already, recognizing you already know there is a problem?