Industry Committee on May 21st, 2013

[Paul Halucha]

I'm not 100% certain, but fairly sure they've not been modified, that in fact they were part of the Foreign Investment Review Act that was rescinded in the early 1980s and the Investment Canada Act was created. I believe they were transposed from the one act to the second one, but if it would please the committee, we could come back with a firm answer on that.

[Dan Harris, NDP, Scarborough Southwest, ON]

That was my understanding as well. I asked the question because in 2008-09 we had the then minister of industry, Tony Clement, after the deals to reject the takeover of potash and MacDonald, Dettwiler and Associates came out and said there needed to be a thorough review of the act. But recently we've heard time and time again from the government that those six provisions are enough, even though they haven't been changed, and yet ministers on successive occasions have said, in fact, it wasn't enough and there needed to be a review.

“Exceptional basis” that the Prime Minister put into the lingo in December was specifically for oil sands development. Is that correct?

[Paul Halucha]

That's correct.

[Dan Harris, NDP, Scarborough Southwest, ON]

So any large mining takeovers that involve similarly sized companies that did not specifically operate in the oil sands would not be subject to that kind of a restriction. Is that correct?

[Paul Halucha]

I wouldn't characterize it as another restriction, but you're correct that the exceptional language of the policy statement in the fall would not apply to a mining company.

[Dan Harris, NDP, Scarborough Southwest, ON]

So that would exist for future developments in, say, the Ring of Fire or in the territories. They could have just as large an implication on Canada's resource sector as, certainly, the oil sands.

In your opinion, has “exceptional basis” been defined?

[Paul Halucha]

The “exceptional” only has not been defined.

[Dan Harris, NDP, Scarborough Southwest, ON]

Okay.

In 2009, again, when the previous deals were rejected on potash and on MacDonald, Dettwiler, there was another term that was added, again I say into the lingo, which was “strategic assets” and “strategic industries”. To your knowledge, has that been clearly defined in the act or by the government, or by Industry Canada yet?

[Paul Halucha]

To the contrary, not only is it not defined, it's not an operable concept in the act at all. I always thought that the concept of strategic industries or strategic resources was used more in public commentary to ascribe an importance to an economic asset, and I think it makes sense there because it's easy to communicate. But in the context of the act, it doesn't have any grounding in any one of the six factors, so it's not an operable concept in the regime.

[Dan Harris, NDP, Scarborough Southwest, ON]

Does the fact that these terms are being used but aren't operable in the act, as you say, provide more or less clarity to potential investors looking to invest in Canada?

[Paul Halucha]

To the extent that the public debate in Canada has an array of concepts around it?

[Dan Harris, NDP, Scarborough Southwest, ON]

We have “strategic assets” and “exceptional basis” being used as terms, but they're not operable within the act.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

On a point of order, Mr. Chair. I'm not clear on what he's asking.

Is he suggesting that every single time someone uses a new piece of terminology we should change the act? Is it that any time some commentator introduces a new term, the act should be changed? It sounds like that is what he's suggesting.

[Dan Harris, NDP, Scarborough Southwest, ON]

Well, I think when the commentator—

[The Chair, Conservative, David Sweet]

Hang on just a second, Mr. Harris.

It's not a point of order, but I will keep the clock stopped and if Mr. Harris would like to explain that, then he can do so without his time elapsing.

[Dan Harris, NDP, Scarborough Southwest, ON]

Any regular commentator, no, but when the Prime Minister of Canada and the Minister of Industry add new terminology to the words being used, and when they say they're not going to accept any more foreign takeovers, except in exceptional circumstances vis-à-vis the oil sands and state-owned enterprises, or previously, when the Minister of Industry saying that industry, like say, MacDonald, Dettwiler and Associates and potash, are strategic assets, this adds uncertainty.

Certainly when you have the Prime Minister and the Minister of Industry bringing it into the lingo being used, then it should reflect a government direction and that changes are forthcoming, but we see many years later, potentially, that it's not there.

[Mike Lake, Conservative, Edmonton—Mill Woods—Beaumont, AB]

That's ridiculous, Dan.

[Dan Harris, NDP, Scarborough Southwest, ON]

Oh, do you think it's ridiculous?

I think Canadians want an answer to those and business wants an answer. They want clarity in the act when they're looking to invest in Canada, and this government has done a very poor job of doing that.

[The Chair, Conservative, David Sweet]

Thanks, Mr. Harris. I allowed you to respond. I'm going to start the time now.

Mr. Halucha, go ahead.

[Paul Halucha]

Concerning the term “exceptional”, I would make the point that we undertook an analysis, and the Prime Minister did reflect in his speech what “exceptional” meant and why the oil sands were identified as a sector requiring this additional policy statement. The analysis was on the number of market entrants, the ease with which companies come into and out of the oil sands sector, and the small number of companies actually in the sector right now.

We have about 15 companies effectively controlling more than 90% of the production in the oil sands. The fact is that it's principally, commercially, private sector oriented right now, which makes it very different from oil projects under development internationally, where more than 90% of oil at the international level is already owned by states or by state-owned enterprises. For Canada, the oil sands were exceptional. As well, he made the point that the proper development of the oil sands around private sector principles would bring dividends to all Canadians in terms of increasing the wealth and GDP of Canadians.

So there was an exceptional nature to it.

[Dan Harris, NDP, Scarborough Southwest, ON]

By comparison, how many different companies are operating in mining in Canada at present?

[Paul Halucha]

Yes, we did that analysis as well.

There are two factors about the mining sector. First, many of the companies are actually quite small, lower than the threshold, so a lot of them would only be reviewed under national security grounds. Our analysis showed that many wouldn't even be captured, and second, there—

[Dan Harris, NDP, Scarborough Southwest, ON]

Current thresholds or the new thresholds?

[Paul Halucha]

I believe we looked at the current thresholds, and we found that in fact there were a lot more companies active in there. You didn't have the same kind of consideration where you had 15 companies and therefore a relatively small number, so that if you had two or three transactions, fundamentally the tenor of the sector could move from being principally private sector oriented to state-owned, and that was the overwhelming condition that made it exceptional.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Harris.

We're on to Mr. Bezan.