Industry Committee on May 2nd, 2013

[The Chair, Conservative, David Sweet]

Good afternoon, ladies and gentlemen.

Welcome to the 67th meeting of the Standing Committee on Industry, Science and Technology.

Welcome, Minister Paradis and Minister Bernier. You're talking about the main estimates.

I want to briefly introduce those who are with Minister Bernier and Minister Paradis: John Knubley, the deputy minister; Marie-Josée Thivièrge, assistant deputy minister, small business, tourism, and marketplace services; Iain Stewart, assistant deputy minister, strategic policy sector; Mitch Davies, associate assistant deputy minister, science and innovation sector; and Susan Bincoletto, chief financial officer, comptrollership and administration sector.

Minister Paradis, will you begin your comments? Then we'll go to Minister Bernier.

[Christian Paradis, Conservative, Minister of Industry]

Thank you, Chair.

Hello to all the members of the committee.

It is a pleasure to be here today.

I see that time is flying by. A lot of work was done this past year. I would like to bring you up to speed on that work and on the Department of Industry's priorities. We can obviously talk about the measures that will follow from economic action plan 2013.

The issues concern, first, strengthening the manufacturing sector; second, stimulating business innovation; third, promoting entrepreneurship and venture capital; fourth, improving market frameworks; and, fifth, supporting the digital economy. That has been adopted and it is ongoing. Work is under way. I will be pleased to give you more details on that.

I am here with my Deputy Minister John Knubley, Ms. Bincoletto, who is Chief Financial Officer at the Department of Industry, Ms. Thivièrge and Mr. Stewart. Feel free to ask us questions. We have the necessary people to answer them. We will do it to the best of our ability.

Mr. Chair, after several consecutive years of uneven economic growth, the entire world is still at a crossroads. As the government, we will continue our efforts to navigate this turbulent global situation and to promote job creation, economic growth and long-term prosperity for Canada.

Our efforts have produced results. No fewer than 465,000 jobs have been created, exceeding the peak reached before the recession. That has been the strongest employment growth of the G7 countries during this crisis. In addition, Canada's real GDP is well above pre-recession levels. This is the best performance in the G7.

We will continue investing in growth drivers, job creation, innovation, investment and skills. We remain determined to keep taxes low—which will probably not displease my colleague here on my left—and return to a balanced budget.

In terms of today's meeting, Industry Canada will be allocated $1.16 billion through main estimates in 2013-14, which will directly support our jobs and growth agenda. In addition, subject to the will of Parliament, Industry Canada and the industry portfolio will implement measures put forward in economic action plan 2013 and associated priorities.

One of Industry Canada's priorities is to help manufacturers succeed in the global economy. Let's note that manufacturing accounts for 1.1 million jobs across Canada, generates 13% of the Canadian GDP, and conducts almost half of the R and D performed in Canada. Key areas I will highlight include the automotive, aerospace and space sectors, defence procurement, and advanced manufacturing.

As you remember, Prime Minister Harper announced last January an additional $250 million over five years for the automotive innovation fund.

In March, our economic action plan announced ongoing funding to sustain and improve the strategic aerospace and defence initiative, with $110 million over four years to create an aerospace technology demonstration program, and forthcoming consultations on the creation of a national aerospace research and technology network. These measures would strengthen Canada's position as a global leader in the production of aerospace and space goods and services.

Our economic action plan 2013 also committed to reform the current procurement process, develop key industrial capabilities, and consider ways to target industrial and regional benefits. These actions will promote export opportunities and help ensure that all major procurements include a plan for Canadian industry participation.

Industry Canada will also work with the Federal Economic Development Agency for Southern Ontario in order to develop world-class manufacturing initiatives, supported through a five-year program beginning in 2014, for an amount of $200 million.

The government's venture capital action plan was announced in economic action plan 2013. It is a set of measures designed to enhance promotion of the Canadian venture capital system. Funding of $60 million over five years will be allocated to support business incubators and accelerators and to expand their services. In addition, $18 million over two years will be allocated to the Canadian Youth Business Foundation to support our young entrepreneurs. The Business Development Bank of Canada will also be making additional investments in firms graduating from business accelerators and will establish new entrepreneurship awards. Businesses, in many cases, suffer shortages when they start up. Some projects are squeezed. This form of funding will therefore be accessible to our businesses.

Innovation is an important factor that we continue to enhance in order to promote growth, improve productivity and raise our standard of living.

Last year, I told the committee that Minister of State Goodyear was directing work on our response to the recommendations made by Tom Jenkins's expert panel. We have acted on those recommendations. In budget 2012, we committed to paying $1.1 billion over five years to double support, for example, for the IRAP, the industrial research assistance program, to make the business-led networks of centres of excellence program permanent and to recentre the mandate of the National Research Council in order to focus it on demand and to make it more business-oriented.

In action plan 2013, we have also announced additional support in this field in the form of funding for our granting councils, such as the NRC and Genome Canada. I know that you have looked at that in greater detail with Minister Goodyear.

Another major priority, in addition to keeping taxes low, cutting red tape, and promoting fair tariff trade, is strengthening our marketplace framework policies, which set the conditions for companies to compete, innovate, and invest. We also introduced changes to our investment review process, including guidelines for state-owned enterprises, timelines for national security reviews, and the threshold reviews under the Investment Canada Act.

Following the passage of the Copyright Modernization Act last year, we are continuing to improve our intellectual property protections. We recently introduced, as you know, the combatting counterfeit products act.

It is still important to promote a world-class digital economy. In the next stages, we want our future innovation to be driven by digital technologies in order to support this digital economy and make Canada a digital leader. We have taken several essential measures such as adding a digital component to the NRC and refocusing the mandate of the Business Development Bank of Canada. A digital technology adoption program is now offered through BDC. The 700 MHz spectrum auction, which will be held by the end of the year, will stimulate a lot of activity in the digital economy.

I am determined to move forward with these measures and issues, to examine ways to strengthen the digital economy, support digital skills, encourage technology adoption by business and promote access for Canadians. I know the committee is currently examining this question, and I will be delighted to review the work it does.

Mr. Chair, I believe that, by focusing on the priorities I have outlined here today, Industry Canada and the government will help enhance competitiveness and support our government's goal, which is to create jobs and stimulate growth for all Canadians.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Paradis.

Now to Minister Bernier.

[Maxime Bernier, Conservative, Minister of State (Small Business and Tourism)]

Thank you, Mr. Chair.

I am pleased to be here with you this afternoon.

This is an opportunity to speak about my portfolio, small business and tourism.

I am here today with my associate Marie-Josée Thivièrge, Assistant Deputy Minister, and Mr. Stewart. I want to thank them for being here.

I would also like to take this opportunity to share with you the important work that this government has been doing to support two areas of great value to this country: small business and tourism.

As many of you know, I am from Beauce, a region that has been nicknamed the kingdom of business in Quebec. I am a proud Beauceron. These resourceful and ingenious business people have engineered the success of the Beauce region.

It is an honour for me to advocate the interests of Canadian entrepreneurs. I do so by sitting at the cabinet table and by meeting entrepreneurs. In a way, my role is to represent them at the table where the government's decisions are made.

As you know, small and medium enterprises are important. They represent 99% of businesses in Canada and contribute to more than 40% of our country's gross domestic product. SMEs create half of all private sector jobs.

I meet with business men and women in my riding and elsewhere in Canada. When I go door to door in my riding, or elsewhere in Canada, and when I hold round tables with entrepreneurs, I always tell them the same thing. I tell them, quite simply, thank you. I thank them because they are the ones who create the jobs and the wealth and who have enabled Canada to emerge from the last global recession, the financial crisis that we experienced in 2008.

What do small business entrepreneurs say to me in return? They're saying always the same thing. There is too much government on the back of businesses and too much government in their pockets.

The goal of our government is first to establish a business climate that enables businesses to grow. For that reason, we have made it possible for entrepreneurs to keep their money in their coffers so that they can carry out their development projects and create wealth. We have lowered the small business income tax from 12% to 11%. We have established a tax credit for entrepreneurs to encourage them to hire new employees, and we have cut red tape. Entrepreneurs told us that the government was on their backs too much and that there was too much regulation and red tape.

I was fortunate to chair a commission, with some of my parliamentary colleagues and people from the private sector, for the purpose of submitting a report to the government. Through my colleague Tony Clement, President of the Treasury Board, the government decided to act on all of our recommendations.

Entrepreneurs told us about more than 2,300 irritants that they had to overcome every day. Those irritants come from more than 18 federal government departments and organizations. We listened to entrepreneurs, and we can tell you today that more than 40% of the recommendations are now in effect. And the others will be within the year.

The main recommendation of the Red Tape Reduction Commission has already been implemented. It is the one-for-one rule. If the government wants to introduce a new regulation, the government needs to scrap an existing one. Our government believes that this new rule will turn off the tap on government red tape so that entrepreneurs can spend their time growing their businesses, not growing the government.

We have also established partnerships with 9 provinces, 3 territories and more than 650 municipalities in order to offer the BizPal program. That program, which is called PerLE in French, provides Canadians who want to start up a business with a website that posts all the administrative requirements of the federal, provincial and municipal governments.

There is a lot of traffic on the site, and it is very useful for current and future entrepreneurs. We hope that Quebec will soon be the tenth province to take part in this very popular program.

We also have a very good partnership with the Canadian Youth Business Foundation, which has helped over 5,000 young Canadians start their own businesses.

Our government will always support job creation in Canada. As you know, I am very proud to work closely with Canadian tourism industry stakeholders. The news about the tourism industry is good. That industry is growing this year and has had 13 consecutive quarters of growth since the last global recession.

Tourism spending in Canada, which represents money spent on airline tickets, hotel rooms, restaurants and so on, reached a record $8.1 billion last year, a 4.2% increase over 2011. The number of jobs in the tourism industry also rose 2% to 614,600 last year.

Last October, I launched the Federal Tourism Strategy, which is outlined on the government's website, to support this important sector. This very simple strategy addresses the concerns of tourism industry people by eliminating sector irritants so that the industry can grow even more quickly in the next few years.

One important point is that we have established a steering committee, chaired by Assistant Deputy Minister Thivièrge, as part of this strategy. The committee meets regularly with industry stakeholders to assess progress on the strategy, but also to ensure that government as a whole and the various departments and ministers involved view the tourism industry as a priority.

Let me give you an example. My colleague the Hon. Jason Kenney, who is Minister of Immigration and whose cooperation is important, has considerably increased the number of visa processing centres around the world in response to a request by the tourism industry. If we want to attract more foreign tourists to Canada, we have to make it easier for them to obtain a visa. The number of visa processing centres has therefore risen to 130 in 95 countries. Last year, Canada also issued nearly one million visas, a record number.

We will continue to promote Canada to foreign tourism markets. In February, I had the honour to travel to India with the Canadian Tourism Commission and its President and CEO Ms. McKenzie to attend Focus Canada-India 2013, an event organized by the Canadian Tourism Commission to promote the Canadian tourism industry to Indian buyers. I can tell you that the number of tourists from India and China has risen again this year. The Canadian Tourism Commission's mandate is to focus on these high-potential emerging markets over the next few years.

In closing, I want to tell you that I am available to answer your questions. Thank you for inviting us to take part in your proceedings.

Thank you.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Bernier.

Before we go to questions, I want to ask you, members, if you're going to ask questions with regard to the report on plans and priorities, to please refer to the sections. If you have it electronically, it has page numbers, but the witnesses don't have page numbers on theirs. So please refer to the section and it will be a lot easier and more efficient.

Also, after 5:30 the officials will remain here. Those members who don't have to travel—I know some do—will continue to have access to the officials and we can continue our rounds of questioning. As well, the last bus apparently leaves here at 6 p.m. We're asking them to hold it so that there will be a bus here for any member who needs one.

We'll go now to the rounds of questions. The first round is seven minutes.

Mr. McColeman, you have seven minutes.

[Phil McColeman, Conservative, Brant, ON]

Thank you, Chair.

Thank you, Ministers, for taking time out of your very busy schedules to be here and to give us the outline and update that you have.

I'd like to focus in on small business because that was may background for 25 years. I was a business owner in the construction industry prior to coming to Ottawa. I frequently hold business round tables and economic round tables leading into our budgets, and I hear exactly what Minister Bernier has articulated in terms of red tape.

Another area of concern that I hear frequently is the duplication that adds cost to running a small business. In the case of my part of the country, which is southwest Ontario, there are provincial—I would call them—policies that require certain things in the development industry as well as in the construction industry, and they are duplicated at the federal level in many departments.

Is your department working with provinces and territories, maybe not working with but at least making sure that where there is duplication there is a hard look to see whether it is absolutely necessary?

I'll give you an example. A raw piece of land that is zoned properly for building often requires some environmental studies, heritage studies, at the provincial level. These are duplicated at the federal level. When you apply at the federal level, they tell you, “We will not accept the report that you gave to the provincial government. Start all over again. Do it all over again.” Hence, taking a piece of property that is properly zoned for an industrial development may take as many as five years to bring on stream.

I cite that as a real-life example and to ask you to please comment. There's not only the need for a great reduction and simplification of red tape and the processing, but also of these duplication items.

Minister Bernier.

[Maxime Bernier, Conservative, Beauce, QC]

Merci.

Before answering your question, I want to correct myself. In my introductory remarks I said that the spending coming from the tourism industry was $8.1 billion. It's more than $81.9 billion. That's the money that is spent in the tourism industry in a year. So it is not $8.1 billion, but $81.9 billion a year of spending in the tourism industry. I'm sorry about that.

Concerning your question, you're absolutely right. It is why we have this website called BizPal. It's very simple, and I encourage the members to google “BizPal”. You'll see all the regulations that a business person has to comply with when they want to start a business. If you are in the food industry or restoration, or things like that, you have all the industries. If you're living in London, Ontario, you'll be able to know all the regulations that apply to you as a person who wants to start a new business—at the municipal level, at the provincial level, and at the federal level. Sometimes there are a lot of regulations.

When we did our consultation when I was chairing the Red Tape Reduction Commission, business people told us, “It is great if you reduce red tape at the federal level, but why not speak with your counterparts at the provincial level because there are a lot of regulations there also?” My answer was very simple. We don't have jurisdiction over the provinces, but I assured business people and Canadians that we would be in contact with our provincial counterparts to do the same thing.

I know that in B.C. they are making a lot of effort to reduce the red tape that they impose on their small businesses. I hope some provinces will take our report and try to implement the same kind of report at the provincial level.

But you are absolutely right. As you know, time is money. The less time a business person spends working for free for government, he will have more time to work for himself and create wealth and jobs in this country. Our goal is to do our best at the federal level, but at the same time it's to be sure that the provinces are able to do the same. We need the willingness at the political level in each province. I'm pleased to see what's happening B.C., and I hope the other provinces will follow our lead.

[Phil McColeman, Conservative, Brant, ON]

Thank you.

Minister Paradis, in picking up on the idea of small and medium-sized enterprises, you mentioned the promotion of entrepreneurship, and you alluded in your comments to a couple of initiatives that would deal with awards and promote incubators.

Can you go into a little more detail on the focus that budget 2013 puts on this area, and the emphasis that we have in making sure we not only grow but also keep the existing small businesses healthy, and give them a platform for growth?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

This is very important, and I think we have to combine 2012 and 2013 in terms of budgets. In 2012 we announced a venture capital fund of $400 million, and it will soon be announced how it will be managed.

What is interesting about the small and medium-sized enterprises, and what I see everywhere in the country when I hold round tables, is that there are a lot innovators here. Having angel investors in capital is something that's okay, but when it gets to the time to commercialize, when it gets to the time to go through the commercialization process, people usually choke because the angel funds are exhausted. Now, this is where people need some money.

What was interesting in the last budget was that there will be this venture capital fund from 2012. But on the smaller scale you will also have this $60 million available over five years, which was announced. These funds will be available to these enterprises to get further. What is interesting, too, is that there is $100 million that was allocated to the Business Development Bank of Canada. This will be dedicated to helping enterprises that are coming from an incubator or accelerator. Where there was nothing in the past, now the federal government is filling the gap.

[The Chair, Conservative, David Sweet]

Thank you, Minister Paradis.

Sorry, time is always our enemy.

Now we'll go to Madam LeBlanc.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you, Mr. Chair.

Mr. Paradis, the NDP has introduced a motion calling on the House to review the Investment Canada Act. We presented another one in February 2012 to define the net benefit test. Those two motions were adopted with the support of all parties. Clauses 136 to 145 of Bill C-60 to implement the budget make major amendments to the Investment Canada Act.

Are you going to ask the committee that a full, in-depth review of the Investment Canada Act be conducted in committee?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I think the measures we have taken are substantial. We followed the guidelines, which are a very important tool in the act, in making our announcement on December 7. The point at the time was to clarify the rules on foreign state-owned enterprises.

Now, as we have explained, we propose in the act to establish thresholds. From $344 million, we will phase in increases to $600 million, $800 million and $1 billion, except for foreign state-owned enterprises, for which the threshold will be $344 million.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much, Mr. Paradis.

Are you going to request that a full, in-depth review of the Investment Canada Act be conducted in committee?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

I just answered that question. We are satisfied with the changes we have made. The net benefit test is clearly established in section 20 of the act. Six sub-classes must be considered. That is very broad.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much, minister.

Will the government be holding consultations to assess the impact of all the amendments it has made to that act in the past four years?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

That is what we do constantly. The round tables that my colleagues and I have held across Canada are an example of that. The Prime Minister, the Minister of Finance and I always gather information on that subject.

I can tell you that the clarification of the rules that we announced has been very well received across the country. I can also tell you that Canada is still viewed internationally as a country open to foreign investment.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Last May you announced that the threshold was $330 million based on the value of the assets of an enterprise, and that it would increase to $1 billion in four years, based on the business value in subsequent years. You just mentioned that.

Far fewer transactions will be covered by the Investment Canada Act and subject to the net benefit for Canada test.

Has the government seriously assessed the impact that the higher thresholds will have on the Canadian economy, particularly on Canadian companies?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

Absolutely. Reports were submitted to the government, the report on competitiveness and that of Red Wilson, which was drafted by well-known economists and competent analysts. We are implementing those recommendations.

Notification will obviously have to be issued for every proposed foreign investment in Canada. As you said, there may or may not be a net benefit analysis depending on the threshold. However, every investment will also be subject to national security rules. We legislated those measures into law in 2009.

[Hélène LeBlanc, NDP, LaSalle—Émard, QC]

Thank you very much. I would like to hand the floor over to my colleague Mr. Harris.

[Dan Harris, NDP, Scarborough Southwest, ON]

Thank you, Ms. Leblanc.

Minister, the 2008 spectrum auction generated $4.25 billion in revenue for the federal government. Scotia Capital is estimating that the upcoming 700 megahertz auction will generate $2.6 billion.

The federal government has not yet released any estimates as to how much revenue it believes or anticipates the government will make with the upcoming auction. Will you let us know today how much the government anticipates making from the upcoming auction?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

First of all, when we talk about the spectrum, it's not in terms of target revenues. We announced the rules last March. We have a floor price. I don't know it by heart, but I could track it down for you.

The floor price is established in a way that makes sure Canadians get their fair share from this public good. Then after that, of course, the market will compete. This is the way it works.

[Dan Harris, NDP, Scarborough Southwest, ON]

Certainly, if the officials could provide it to the committee later—

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

It was announced, and it is in the public domain. I will be happy to follow up.

[Dan Harris, NDP, Scarborough Southwest, ON]

Is the government planning to invest any of this revenue in telecommunication infrastructure improvements?

[Christian Paradis, Conservative, Mégantic—L'Érable, QC]

That has not yet been determined. We are active as we speak.

We also announced new infrastructure funds, new money. Some telecom projects will likely be eligible. I guess the responsible way to manage is to set a target and get there but also to see what the needs are in the meantime.

We are very confident that the 700 megahertz spectrum auction will provide a good opportunity to get more competition given the policies that were put in place.