Industry Committee on May 21st, 2013

[Paul Halucha]

Sorry—at least three in a row.

[Brian Masse, NDP, Windsor West, ON]

I think that's the point my colleague was mentioning with regard to the way the process is going.

What other countries have exceptional designations? Have we looked at what other countries have done? Have we looked at the United States, Australia? Has there been a review? What exceptions do they have?

[Paul Halucha]

It's challenging to do a review of the foreign investment regimes of other countries, principally because many of them are focused on national security. Canada is not completely alone, but we're in a relatively small crowd in terms of having an economic review desk. Trying to find out what happens behind the scenes of a national security review in the United States is extraordinarily difficult.

[Brian Masse, NDP, Windsor West, ON]

Do other countries have designated exemptions, like oil or mining, or like in Australia?

[Paul Halucha]

Yes. The United States has an exhaustive list, and many other countries put out lists of sectors that are of concern.

[Brian Masse, NDP, Windsor West, ON]

Okay. So it's more common, then, to have multiple exemptions. What other types of industries are you aware of that have those exemptions?

[Paul Halucha]

Well, for example, in the U.S., there's the defence industry, and I think ports, and all kinds of transportation infrastructure. In terms of the U.S. list, it's actually sometimes easier to find sectors that aren't there. They have a very exhaustive interpretation of national security.

I would note that many other countries are also considering how to adapt their foreign investment review regimes in the context of increased activity by state-owned enterprises. For example, in Australia in the last couple of years, they have developed a definition of state-owned enterprises.

The U.S. has added a definition of state-owned enterprises. For example, in the U.S. now, they have a requirement to finish their reviews within 30 days. They have to go quite high up in the policy chains in Washington to get an extension for the additional 45 days. We understand now that in fact all transactions involving SOEs automatically trigger that second review period.

There is definitely a consensus in other countries that they want to pay attention. In that context, I think Canada is not exceptional.

[Brian Masse, NDP, Windsor West, ON]

With regard to China Minmetals, which started a lot of this, there was a lot of concern expressed at that time about labour laws and environmental laws. That was back in 2004. What in this current bill and in the legislation do we have to protect workers over here or to also have a lens on the environmental and labour laws of those state-owned enterprises from China and other countries?

[Paul Halucha]

There's nothing explicit on that.

[Brian Masse, NDP, Windsor West, ON]

Yes. That's unfortunate, because even in the United States that has been addressed and has been examined as well.

With regard to the moving of up to 50%, when we get to a billion dollars we're going to be doing 50% fewer reviews. Is that 50% less of the 30%, or is that from the original target?

[Paul Halucha]

It's based, as I said, on a backcasting. It's looking at three or four years of transactions and then playing out with an economic model what the drop-off would be in the number reviewed had the billion-dollar threshold been in place in the past.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[The Chair, Conservative, David Sweet]

We'll now go on to Mr. Lake.

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

Thank you, Mr. Chair.

Thank you to the witnesses.

I've found this to be a very, very interesting committee hearing so far. It's good that Mr. Masse is here today, because as much as I've been listening to the opposition members talk about their desire to study the Investment Canada Act, it's interesting hearing a reference to Minister Clement—-his name is “Clement”, by the way, with no “s” at the end—and his request that the industry committee study this issue back in 2011, not too long ago.

I was actually on the committee. Mr. Masse was on the committee at the time. There might be a few other members here—I'm not sure—who were on the committee at the time. On the government side, we wanted to take a look at the Investment Canada Act, and I believe there were actually three members from the Liberal Party and two members from the Bloc who didn't want to study it, so Brian had the deciding vote on that. We argued vehemently for the—

[Brian Masse, NDP, Windsor West, ON]

On a point of order, Mr. Chair.

We wanted to actually study both the Investment Canada Act and the actual census act.

[The Chair, Conservative, David Sweet]

Mr. Masse, I think you know what I'm going to say.

Go ahead, Mr. Lake.

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

Yes, that's interesting because I actually remember we had about 15 hours of study, I believe, on the census up to that point. In fact, we came back for two full days during the summer to study that issue.

When it came time to cast his vote, Mr. Masse decided to cast it with the Bloc and the Liberals and against studying the Investment Canada Act as fully as we would have liked to study it. Of course, subsequently the NDP cast their vote to have an election right around that same time.

There's a little bit of a history lesson there, so it's interesting. I'm hearing a little bit of revisionist history from the NDP today as it relates to this. I just find that history interesting.

Also, there's the fact that we have taken steps to strengthen the Investment Canada Act. We've taken steps to address the national security issues. We've taken steps to strengthen transparency and accountability. We've taken steps to address issues around state-owned enterprises. For the most part the opposition parties have opposed those steps and measures as we've taken them.

So again, it's interesting to listen to the dialogue from the other side.

To Mr. Harris's point on terminology, it's ridiculous to put forward the idea that any time a commentator...and you were referring to commentators. The statements you were referring to were statements that were made by commentators, even if they're made by MPs from whatever party.

The fact of the matter is that sometimes when we're talking about legislation, we might use words that are not necessarily contained in the legislation. That doesn't mean you have to go back and actually introduce new legislation every time that happens. Quite frankly, if we actually did amend the legislation, you wouldn't vote for it anyway.

What I do want to refer to is section 20 of the Investment Canada Act. Actually, I'm going to go to section 20 because when we're having these discussions, and oftentimes when I'm on panels—because I've been on many panels with different members from the opposition parties—they create this idea that there's absolutely no criteria, or very vague criteria, for evaluating net benefit.

Paul or Matthew, I don't know which one of you wants to walk through the criteria. There are six criteria in section 20, and of course within each of those paragraphs of section 20 there are multiple criteria listed, I believe.

Perhaps you could walk us through the net benefit criteria in section 20.

[Matthew Dooley]

Sure, I'd be happy to do so.

As mentioned, there are six net benefit criteria set out specifically in the act.

The first is the effect of the investment on the level and nature of economic activity in Canada, including the effect on employment, on resource processing, and on the utilization of parts, components, and services produced in Canada. An example of that would be an investment that may result in increased production and investments at Canadian facilities, and result in opportunities for Canadian suppliers.

The second factor that the Minister of Industry is to consider is the degree and significance of participation by Canadians in the Canadian business. An example of this would be the number of Canadians who would occupy senior management positions following the investment.

The third factor is the effect of the investment on productivity, industrial efficiency, technological development, product innovation, and product variety in Canada. An example there would be an investment that brings new technologies or expertise to Canada resulting in increased productivity, or new goods onto the Canadian markets.

The fourth is the effect of the investment on competition within any industry or industries in Canada. Here, consideration can be given to the impact on concentration within an industry, and it can involve consultations with the Competition Bureau.

The fifth is the compatibility of the investment with national and provincial industrial, economic, and cultural policies. An example here would be consideration given to an investor's track record in upholding such industrial policies, such as employee health and safety standards.

The sixth is the contribution of the investment to Canada's ability to compete in world markets. Here, the minister would be considering how the investment could create operating synergies resulting in greater international presence.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Lake.

Now on to Mr. Stewart, for five minutes.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Thank you, Mr. Chair, and thank you to the witnesses for coming today.

I have more of a macro question, kind of a bird's eye view. I'm really thinking about the value of this act as a piece of legislation. I'm just wondering what would happen if we didn't have the ICA. If we could get out of the technical details of what we've been talking about, could you give me a sense of what the last five years or so would have looked like in Canada?

[Paul Halucha]

Are you asking if we had no investment review regime, how would that have affected investments in Canada?

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Yes.

[Paul Halucha]

You need to look at what the elements of the act are and what they provide.

The national security provision permits the government to review from a national security perspective and make a determination whether or not and then mitigate if there are any national security considerations. In the absence of a national security review, we would have no way of knowing what the impacts were on Canada, whether any national security risks increased in Canada as a result of a transaction.

[Kennedy Stewart, NDP, Burnaby—Douglas, BC]

Sorry, and so—

[Paul Halucha]

I don't have specific examples I can provide on that.