Industry Committee on April 10th, 2008

[Colin Carrie, Conservative, Oshawa, ON]

Thank you very much, Mr. Chair.

I want to say, actually, how proud I am of you gentlemen for the work you're doing with Industry Canada and how proud I am to be associated with Industry Canada. I actually had the opportunity to go out to speak to the research community about how well received this science and technology strategy is.

Mr. Stewart, you talked about how we have this sustainable economic strategy, multi-year. Other governments in the past, and I think everybody's guilty, has been pouring a lot of money into it without a rudder, so this strategy has been received very, very well.

You touched on some of the issues we hear out in the field, like some of the problems with venture capital. You mentioned the EDC getting $75 million in the budget. You touched on commercialization. Now that the government has unveiled the overall science and technology strategy, I was wondering if you could comment on how the government is successfully implementing the science and technology strategy, kind of putting the meat on the bones of this strategy.

I will let you know, Mr. Chair, that I will be splitting my time with Mr. Stanton.

[Iain Stewart]

Thank you very much.

The way in which this strategy is being made real is through a series of initiatives that have been announced in Budgets 2007 and 2008, and presumably as a multi-year framework it will continue to steer against those three advantages.

In total, the past two budgets have announced about $2.3 billion of initiatives that support these advantages. It's being made real as the government's long-term plan through these specific actions in the advantages I was trying to touch on a little bit earlier.

It's also a whole of government activity. Within the government there is a mechanism for coordinating a science and technology activity; it's an ADM committee on science and technology that includes all departments and agencies that have an interest in this area. It was tasked through the science and technology strategy to coordinate this activity, to engage Environment Canada, Health Canada, International Trade, the granting councils, all the players. So that group is overseeing the policy commitments within the strategy and the progress against them.

[Colin Carrie, Conservative, Oshawa, ON]

Is that external?

[Iain Stewart]

That's an external advisory council that is providing advice from that whole of government perspective, as you identify. The committee I'm referring to is an internal government committee to coordinate the science and technology strategy delivery. It's the responsibility of an ADM committee on science and technology against those policy commitments, so it's related but a different entity.

[Colin Carrie, Conservative, Oshawa, ON]

Thank you.

[The Chair, Conservative, James Rajotte]

Mr. Stanton, you have about three and a half minutes.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you, Mr. Chair.

Continuing in a similar vein, while we were undertaking our study of the service sector, we learned from a couple of witnesses--I can't remember their names--that on this question of Canada's performance, particularly in the area of engaging the business community in research, Canada has not been nearly as successful in seeing business' share of overall research, as compared, say, to the OECD. I think we rank at about 54%, and the norm in the OECD is around 68%.

I wonder if you could mention what components of our strategy are really aimed at mobilizing the business community more effectively.

[Iain Stewart]

The most important aspect of the strategy that speaks to that is right up front, and it's about getting the right business environment so that companies want to be innovators, so that you're encouraging companies to invest in R and D and bring innovations to market.

As we understand it, from the literature and from practice, it comes down to ensuring we have a competitive marketplace.

Mr. Dicerni was referring to the fact that we have a panel out there that's looking at the extent to which the Canadian marketplace is a competitive marketplace, that's encouraging the stimulation of innovation, and secondly, that we have a climate for those companies that want to be innovators that encourages them to invest in innovation. The SR and ED tax credit, as was mentioned, is one of the most generous tax credits available within the OECD. It's a very large program. It's the single largest program the government has to encourage R and D in Canada. That competitive environment and an environment that's conducive to investment in R and D are critical.

But then when you get the companies that need special expertise, that want to have the brightest young minds brought into their company to become part of their business line and part of their team, you need to have bridging mechanisms. It's hard for companies to know where to find the expert in a certain area who could really help them with their business strategy, and so on.

So there are some programs around that. On the private sector side we have IRAP, the industrial research assistance program. It has about 260 points of service across the country, and it's meant to work with companies to help them with their technology development plans so they're able to bring their new ideas to market.

If a company wants to connect with the university research community, Budget 2007 created a number of interesting programs in that regard. The centres of excellence for commercialization and research have so far created 18 centres across the country.

There is the business-led networks of centres of excellence. It's a bit of a mouthful. That brings together a consortia of companies that want to work with the universities around a shared technological problem. It could be something that companies have on their 10-year horizon, so it's a little too out there for their short-term commercial needs. But as a group, as a consortium, they can share their resources with the university network around what they need to solve for their collective competitiveness 10 years out.

So there are those kinds of bridging mechanisms.

Those internships for young students are very important. Budget 2007 put out 1,000 internships a year so that people in a graduate program doing research of some kind or another can be supported to go and work with a company for a term or two to learn from their perspective how R and D happens in the private sector, but also to bring the new ideas and technologies into those companies so that technology transfer happens on legs and these young people come in with the latest ideas from the fields they're studying.

Those are some of the mix of things in the strategy around encouraging commercialization.

[Bruce Stanton, Conservative, Simcoe North, ON]

Thank you very much. It's great to have you here today.

[The Chair, Conservative, James Rajotte]

Thank you very much, Mr. Stanton.

We'll go to Ms. Nash, please.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Thank you, Mr. Chair.

Good morning to the witnesses from Industry Canada. It's a pleasure to see you again, and it's great to finally be starting our study on science and technology.

I have a couple of general questions, but I want to ask you a specific question, Mr. Stewart, about the tax credits that Canada is offering. You said that our current program of tax credits is the single largest tax credit in the OECD.

Do you think we need to expand that tax credit, or is it already doing its job as it is?

[Richard Dicerni]

The Department of Finance, in the previous budget, said they would look at it, so they had a series of consultations about the tax credit. They talked to a number of folks about it and I think made some small modifications to it.

Iain can add to that, but the holder of that public policy instrument is the Department of Finance, given that it's a tax measure. In the context of your committee's work, you might want to invite somebody from the Department of Finance to come and talk specifically about the tax credit.

[Peggy Nash, NDP, Parkdale—High Park, ON]

I guess my question is, if it's the largest of the OECD—

[Iain Stewart]

One of.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Okay. You said it's the single largest tax credit—

[Iain Stewart]

It's the single largest Government of Canada program. That $4 billion a year is larger than other government programs to support innovation in Canada.

[Peggy Nash, NDP, Parkdale—High Park, ON]

All right. Thank you for clarifying that. I thought what we were offering was more generous, dollar for dollar, than—

[Richard Dicerni]

If you take all of the granting council support, it doesn't add up to the tax credit as a government expenditure. You can have direct expenditures and tax expenditures.

[Peggy Nash, NDP, Parkdale—High Park, ON]

Yes, of course.

So on a policy level, then, is this our most effective tool, or are there other kinds of tools around taxation that we should be looking at?

[Richard Dicerni]

The feedback we get from various people is that in a basket of public policy instruments ranging from the NRC's IRAP to the work of the granting councils, to the venture capital that the Business Development Bank has to bridge products to the marketplace, tax credit does play a significant role in that basket, but you need to have all the other elements to make it work.

[Iain Stewart]

Absolutely, it's a mix. Different businesses have different needs. Most businesses benefit from the SR and ED program. It's very popular. But there are these other initiatives as well that play important roles.

[Peggy Nash, NDP, Parkdale—High Park, ON]

How do we measure how well we're doing? We see some of the fruits of our innovation, such as the successful launch of the Radarsat-2 satellite, Dextre, robotics. We see companies that are very successful, such as RIM, and we say, yes, this is good Canadian innovation. But how do we measure how well we are doing and how we stack up compared to other countries?

[Richard Dicerni]

I think that's a very good area or question to explore, and many other countries struggle with a similar question; that is, what are the indicators, what are the metrics you could use?

Where we've ended up is that if you want to get a sense of the effectiveness or usefulness of your investment, you have to look at a basket of indicators—for example, citations per capita. If you're looking at the pure research part, how many of our Canadian researchers get citations? At the other end, how many patents per capita get produced?

The U.K. is going down the same path of having a multiplicity of indicators.

I don't have one specific one, because as you were alluding to, there are a number of inputs.

If you recall, in the context of your study, people from Genome Canada, which the government has been funding quite significantly, have their own set of performance measurements.

So what we prefer to do is look at a basket of indicators and take stock, but there's no equivalent of GDP or inflation, that you measure inflation in the following way. There's no equivalent single metric. I think most OECD countries are working on this.

The last point on that is that I believe—Iain, you were closer to this—the OECD as a secretariat is indeed looking at this, was working on the project factoring in how different countries went about measuring effectiveness of investment. Where are they at?

[Iain Stewart]

It's an international endeavour to try to answer that question. The OECD is leading that exercise and we're participating.

[The Chair, Conservative, James Rajotte]

Thank you.

We'll go to Mr. Simard, please.