Industry Committee on Nov. 24th, 2006

[Dan McTeague, Liberal, Pickering—Scarborough East, ON]

Got it.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. McTeague.

We'll now go to Monsieur Crête.

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

Thank you very much for being here.

I’ll go through my questions quickly. My first question is for Mr. Graham and Mr. Ouellette.

What is your assessment of the future of Calgary Economic Development’s initiative on the construction industry? How can it be expanded? Mr. Ouellette talked about the possibility of using an Industry Canada program. I would like to hear your thoughts on this.

My second question is for Mr. McDougall. How can we enhance your Innoventures Canada I-CAN model so that we can take on a more appropriate share that is more in line with the successful countries on the graphs that you showed us?

My last question is as follows. Mr. McCallum, like the other speakers, talked about intellectual property. Are we currently taking enough action in this area? And what concrete measures could we take?

[The Chair, Conservative, James Rajotte]

Mr. Ouellette, do you want to start?

[Peter Ouellette]

Yes, thank you.

In terms of my comment earlier, east-west trade is something that we're not comfortable with in Canada. We've grown up with a tremendous amount of north-south involvement. What are the benefits? In Quebec particularly there's a very strong structural fabrication industry. That is what is required here to support the capital investment we have in Alberta. The Quebec region particularly has a stronger contribution than most of the other provinces. Because it is strong in that area, there's a tremendous amount of opportunity.

I can qualify that by saying that in New Brunswick, just in the last six months, $35 million of structural steel business has been contracted. The expectation is that this will grow to $100 million by January of next year. That is sustainable, based on the amount of capital.

So there is value. It's been proven.

[The Chair, Conservative, James Rajotte]

Mr. Graham.

[Bruce Graham]

I would echo those comments and only add that it has traditionally been the strengths of the federal government to help companies expand their markets abroad with the representation they have internationally. One of the unique assets that are available within market is the economic development networks that are here. I can speak for Calgary in that this business is very much done on a relationship basis. The greater the opportunity to put business face to face, the greater the chances are to create business opportunities.

There's a natural network available here that I think federal and provincial governments can tap into. Economic developers are the last mile of that network, and this initiative that we're doing with Quebec City is proof of that.

[The Chair, Conservative, James Rajotte]

Mr. McDougall.

[John McDougall]

The I-CAN group of partners brings basically a special, unique infrastructure that is very large-scale, very industrially oriented, quite unique, and not duplicated elsewhere in the country. The challenge is that it isn't recognized as a national resource; it tends to be recognized either as a provincial or a regional resource.

The first and most important thing would be to have the federal government acknowledge that this is an important part of our innovation system and allow us to participate in the national scheme. In that respect, if this committee were, for example, to support the idea of some modest funding, perhaps $1 million over three years, or something like that to help us knit this capability together, that would be very helpful.

The second thing is that by our nature we're currently ineligible for many of the federal programs that support the R and D system--the CFI, Sustainable Development Technology Canada, NSERC, and so on. The eligibility to be able to bring some of that support a little downstream would be very helpful.

I was listening to my colleague talking from Flexxaire's point of view. For example, there are programs that I know are being looked at--both TPC and IRAP--where I-CAN might in fact become a very useful partner or even a manager for that program, to help get it a little further downstream and more effective in helping companies.

[The Chair, Conservative, James Rajotte]

Mr. McCallum.

[Jonathan McCallum]

In reference to the intellectual property and protecting it, I see two components to that. The first component is getting the protection. The second component would be enforcing that protection.

Most of my experience has been in getting that protection, and that's in the way of patents. I think encouraging companies to pursue that and pursuing it as we get into a global market.... You need to protect your rights in other countries, and it gets costly. You have the European Union, the United States, Canada, Australia, and Japan. A lot of these areas require patent applications in each of those areas in order to protect your market. Ways of encouraging that are helping to support it and partnering with the companies on doing that.

Regarding the second component as far as protecting it is concerned, enforcing, unfortunately I don't have a lot of expertise there, but I see that as being a key part. I think a lot of that would happen at the borders when product is imported. I see that as being a key component, but I don't have a lot of expertise in that regard.

[The Chair, Conservative, James Rajotte]

Thank you, Mr. Crête.

We'll now go to Mr. Carrie, for six minutes.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to thank the guests for being here today.

I actually have about three pages' worth of questions. I've been trying to figure out which ones to ask for my six minutes, so I'm going to get right to it.

I come from Oshawa, and other members here are from Ontario, and manufacturing in the auto sector is the heart of the entire economy. We were in Windsor yesterday, and they said this isn't just a problem, this is a crisis, this is an emergency, and we have to do something. We've heard of problems, as you were saying, about these knock-offs. We've heard of patent protection and we've heard of problems with commercialization.

The first question I'd like to ask the panel is this. How do we fight these unfair offshore subsidies and their trading practices, where other governments allow these things to go on that are really hurting our manufacturers?

Number two, I want to talk about the relationships across Canada. I know there was a recent trade mission from Ontario to Alberta. You mentioned your program with Quebec and the partnering in that regard. It's so important, because we have different areas that could be manufactured and there's a real shortage here. There might be layoffs in Ontario. What are your comments on helping those two things out?

[The Chair, Conservative, James Rajotte]

Mr. McDougall.

[John McDougall]

I almost hate to be a lead on this one, but your comment about Oshawa is interesting. I happen to be the chair of something called AUTO21, which is the national centre of excellence for R and D in the automotive sector. So we've been very concerned about these. But we also do business as the Alberta Research Council in China.

The point I was alluding to in my opening statement was that emerging economies are very aggressive. They are copycat economies. China currently is largely a copycat economy. It doesn't mean they can't make great quality as they do so, and they can certainly run around and gobble up IP and have no bones about it. There's very little, practically, that this country can do to prevent that happening, other than to keep banging the drum about how inappropriate it is.

But in my experience, the economies going through it used to be Japan, then it was Taiwan, then it was Southeast Asia, and now it's China, and so on. They do tend to flow along through a very common path. So the first step is that you have to keep the noise up so that they view it as at least a bad thing to do, notwithstanding the fact that they may continue to do it.

The second thing I think we need to remember is to be careful in managing our relationships with these countries so that in fact, if at all possible, we're allowing them to copy the last generation rather than this generation.

The third thing we can do is to make sure we're innovating rapidly, which means helping our own companies to stay in the forefront and be creative, because that's the only way, at the end of the day, you're going to stay ahead. The point has been made that the stuff moves around the world at the speed of lightning.

[The Chair, Conservative, James Rajotte]

Mr. Ouellette.

[Peter Ouellette]

When you compare China, for example, with what we have in Canada, there's no question that we have a lower cost of energy and we have better material costs. So how can they possibly be producing products and landing into North America at such low prices?

Obviously everyone goes to the labour component. If we have automation, in those products that are highly automated the percentage of labour is small. Even though the cost of labour is very, very small, it ends up being less significant.

I think we have to defend our borders against unfair trade. We've done that in the steel industry, and we need to do it now in more products downstream, because the Chinese have moved off the steel industry international trade and are now moving into the secondary products. We have to be sure that we can evaluate, under a constructed value model, what the costs are in each country.

[Colin Carrie, Conservative, Oshawa, ON]

Would you be able to provide us with some written recommendations—I know you don't have a lot of time now—about how we would go about doing that?

[Peter Ouellette]

Very much so. It's well documented, on how to do constructed value analysis, and it is a technique that's used in Ottawa with the evaluation. But yes, per manufactured product, that can be done.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much.

[The Chair, Conservative, James Rajotte]

Mr. Graham.

[Bruce Graham]

Just to comment on the cross-Canada trade opportunity, I think it has been an overlooked opportunity up until lately. A lot of the attention to this has been generated through what's happening in the energy sector. What we're discovering, particularly with this Quebec relationship, is that the opportunities are actually outside of the energy sector. This is in building products.

I think the activities that the Province of Ontario is doing are great steps, and we did similar efforts back into Ontario in June of this year. I think what's unique and different about this approach is that it's a sustained effort. We have a person in market for six months, with targeted efforts and results, and it's being supported and funded, in part, by the manufacturers that are participating.

Our interest in doing this, in part, is that we look at our friends in America as friends. We look at our colleagues across Canada as family, and we see a real win-win national opportunity that can emerge from this type of activity. It makes us all stronger by gaining best practices and understandings. Many of these relationships are happening between companies that are in the same business. It's not a customer-supplier relationship in many cases; it's actually companies that are in the same business, learning and working together.

[The Chair, Conservative, James Rajotte]

Thank you.

Last then, we'll go to Mr. Svendsen briefly.

[Mel Svendson]

We've been competing against China in our industry for about 25 years, and as Mr. McDougall said, the best success we've had has been to stay at least one step ahead. That isn't always easy. As I pointed out with golf clubs and the ability to clone, it's a whole new industry that's focused in China.

So I think we've seen our Prime Minister focus on human rights here recently with China. That's probably not a bad place to start in some respects. But I think we have to work harder at higher levels, not just here but with our peer group in the developed nations, on saying there must be respect for intellectual property. That's a focus we must take.

They know it, and our colleagues in the U.S. know it. So it's not something that's ignored. Yet you can bring golf clubs in at $150, and nobody stops you.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Svendsen.

Thank you, Mr. Carrie.

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