Evidence of meeting #71 for Industry, Science and Technology in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was capital.
A recording is available from Parliament.
Conservative
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Carmichael.
Mr. Regan, you have the last questions.
Liberal
Geoff Regan Liberal Halifax West, NS
Thank you very much, Mr. Chair.
I want to begin by polling the witnesses. If you don't mind, I'm going to say your name and ask you if you were consulted by the government with respect to the proposed changes to the Investment Canada Act.
Ms. Campbell.
Vice-President, Policy, International and Fiscal Issues, Canadian Council of Chief Executives
No.
Member, Foreign Investment Review Committee of the National Competition Law Section, Canadian Bar Association
No.
Economist, National Automobile, Aerospace, Transportation and General Workers Union of Canada
No, I wasn't.
Liberal
Geoff Regan Liberal Halifax West, NS
Thank you very much.
We heard from my friend, Mr. Carmichael, who mentioned previous testimony. The testimony we've had so far has only been from officials from Industry Canada a couple of days ago. One thing they testified to, amazingly, was that Industry Canada did not conduct any analysis to examine the question of whether or not the proposed amendments would actually restrict global economic interest in investing in Canada because of the difficulties that are presented by these amendments, and the uncertainty.
I'd like to begin by asking Mr. Assaf, what do you think of that response? Also, why do you believe the ambiguity around foreign direct investment is creating uncertainty among foreign investors?
Partner, Torys LLP, As an Individual
I think we do carry some risk by not undertaking an analysis of where the capital resides in today's world. This plays into one of the comments I made in my introduction, and which Mr. Stanford also talked about, as to whether or not we have enough capital in this country.
It is not about just having capital in this country. Again, it's about competition for capital. Wherever we don't see competition in Canada itself.... Canadians are not going to provide one another with capital or with capital on great terms just because we share a passport or residency. We have allegations in many industries in Canada—some are protected by foreign takeover—where we feel the cost to the consumer is too high.
We need to think about where we are in today's economy and about the shift of capital and markets from west to east. We need to be poised when we look at our history and what it is that we're able to look forward to in continuing to maintain our economic growth and our standard of living in a world of 7 billion people. It's a question of math, to a great extent, of understanding where Canadian companies are going to do business and where Canadian companies are going to get their capital.
That is why an analysis of where those markets and that capital reside in the 21st century is very important, as is also understanding precisely the message we're giving to the rest of the world when we make changes to our act that create uncertainty or an impression that we are not as open for foreign investment as we previously were.
Liberal
Geoff Regan Liberal Halifax West, NS
The government has been criticized for failing to appreciate the potential chilling effect of significantly changing our foreign investment rules several times in the past year as it was making controversial decisions.
The government has actually denied that there has been a decline in merger and acquisition activity, although we saw that in the first quarter of this year, as we saw reported this week in the Globe and Mail. or they're saying that it's due to global economic conditions.
Would you care to comment, Mr. Facey or Mr. Krane?
Chair, National Competition Law Section, Canadian Bar Association
Yes, I think there has been a bit of a slowdown in terms of the M and A activity. I don't think it's a result of changes in our foreign investment law that have come out, or our perspective, or the decisions that were made in December. I think it's probably reflective more of the global economic climate.
I would say this. I think the fundamental thing about the changes before you is that, number one, there is more uncertainty. We said that in our letter. There is a question: am I a state-owned enterprise? That kind of uncertainty does provide a bit of a chill. We get asked a lot of questions, such as, “Can we do this investment, or are we going to be mired down in six months of unpleasant publicity and problems?”
We're comfortable giving advice on it, but clients would like to know with some certainty whether the government agrees with that advice. That's why what we've said is that to the extent there's more uncertainty, it would be helpful to have some sort of process, some sort of protocol, to have an advance ruling on that, which I think is the same thing my colleague Ailish has mentioned as well.
Liberal
Geoff Regan Liberal Halifax West, NS
There's been no indication from the government that it will actually provide that. Is that right?
Chair, National Competition Law Section, Canadian Bar Association
I haven't sought that from the government and I don't believe we've seen that, although there has been an increased use of guidelines, I'd say in the last 12 months, from investment review.
Liberal
Geoff Regan Liberal Halifax West, NS
Mr. Krane, let me ask you what you think of this process. It provides us with...well, actually, it turns out that it's supposed to be two hours of hearing from any witnesses other than officials from Industry Canada as we consider the provisions in Bill C-60.
I guess finally, along with that, what should the committee recommend to the finance committee on these provisions?
Member, Foreign Investment Review Committee of the National Competition Law Section, Canadian Bar Association
I'm going to keep my response brief to say that an hour and a half does not do justice to the proposed amendments to the Investment Canada Act. There are still a number of questions that need to be considered regarding the drafting of the provisions, including the scope of the definition of “state-owned enterprise” and the potential retroactive application of the control-in-fact test.
On those two bases alone, I think this committee should consider further study of the changes to the Investment Canada Act. That would be my recommendation.
Liberal
Partner, Torys LLP, As an Individual
There is a disconnect today between what our national interest is in terms of foreign direct investment, and where and what I think a large portion of the Canadian population sees that trade-off.
What we're seeing also is that iteratively we are getting more strict and tougher. Each decision, each policy recommendation, each amendment to the act, over recent times primarily, has restricted something or made it a little more prohibitive. Each one has an internal logic that does make sense, but I think we do need to take another, more sober look at what foreign investment means in the modern world, in the 21st century, and looking ahead for this generation, and in addition to that, the transparency that is being conveyed, both to foreign investors to prevent this chill and overshooting the mark, and also to Canadians, to understand why it is that we are open to foreign investment and what it is specifically we wish to benefit from that. I think this broader discussion needs to be undertaken.
Conservative
The Chair Conservative David Sweet
Thank you, Mr. Assaf.
On behalf of the committee, I want to thank you. I know you're all very busy and your time is precious, so we want to thank you very much for your testimony.
We'll be suspending for two minutes, and we'll be going in camera to deal with the business at hand.
Thank you very much.
[Proceedings continue in camera]
