Industry Committee on May 5th, 2015

[Joe Daniel, Conservative, Don Valley East, ON]

Thank you.

Do you want to add something more?

[Shannon Glenn]

We've mentioned a number of tools. I'll just take a step back and mention a bit of a chapeau that can relate to disruptive technology directly.

The government released a revised S and T strategy in December of last year. There are a number of forward-looking commitments in there that relate to disruptive technology. The first one I mentioned is to have a balanced approach to both basic and applied research. Another one is to continue to provide record support for science and technology research. Another one is the concept of scaling support for business innovation programs, some of which we've already mentioned. There is a commitment to looking at the full impact and how those could be scaled up.

There's one in particular that relates to your question of bridging that gap that is sometimes called the “valley of death”. There is a program in the aerospace sector called the technology demonstration program. Currently it is only focused on the aerospace sector. It is competitive-based, non-repayable, and higher up in the risk spectrum. There is a commitment in the strategy to look at the success of that program, even though it's a relatively new program, and to consider potentially applying it in other sectors.

Certainly on the topic of people, there's the topic of having resilience and being able to adapt to change, so all of the talent programs are important too.

[Joe Daniel, Conservative, Don Valley East, ON]

I have one further question.

Have you come across big bang disruption? It's basically using existing technology and applying it in new and innovative ways so you can actually save money and save processes, etc.

A typical example would be diabetics and insulin users. If in Canada, for example, we supplied every insulin user with an insulin pump, we could probably reduce by billions of dollars our health care costs because of the kidney failures and the dialysis that has to go on. Is that the sort of thing that you would also look at?

[Gerard Peets]

The funny thing is that with disruptive technology there's the disruptive part, and that's where companies grow and other companies go out of business, etc., and then there's the technology part.

The disruptive part can apply to a lot of different things. It can apply to shifting business models. It can be triggered by external events. It could be triggered by demographics. For example, a lot of the disruption that we see in e-commerce is taking existing technology, for example, based on the Internet or based on mobile technology, and applying it to taxi cabs. We've already applied it to music.

I don't think of them so much as disruptive technologies as disruptive business models. That's one distinction. I think that they have things in common, such as the effect on business and the potential effect on jobs and opportunities. They also have things that are different, in the sense that you don't necessarily drive disruptive business models by driving technological development. A lot of what we're concerned with is in that sphere of driving technological development.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Peets.

Thank you, Mr. Daniel.

We'll now move to Madam Papillon, for six minutes.

[Annick Papillon, NDP, Québec, QC]

Thank you, Mr. Chair.

I have here an article that talks about what we're discussing today. It says that taxpayers pour a lot of money into R and D but don't get their money's worth. That's according to a report by Deloitte from a few years back. One of the things the report recommended was coming up with new ways to fund innovation. Public spending on R and D is equivalent to 0.24% of GDP. That's the highest share of any OECD country, second only to South Korea, which invests 0.34%.

And yet Canada is at the back of the pack when it comes to business spending. For every dollar invested by government, businesses spend just $4, the lowest ratio in the OECD. Just to put that in context, Switzerland ranks first, with businesses spending $60.

My question is simple. What can the government do to fix the problem and make up for the lack of investment by the private sector and universities?

[Shannon Glenn]

Thank you for your question.

The answers given previously highlighted the federal government's recent science, technology and innovation strategy. I can also elaborate on those areas in a bit more detail.

We can look at companies' performance.

My apologies, but I'm going to switch to English as this is a very technical subject.

[Annick Papillon, NDP, Québec, QC]

That's okay.

[Shannon Glenn]

The key metric that is often looked at is the business expenditure on research and development, the so-called BERD. You are right, that has been in decline, and most recently StatsCan has released a report with a further small decline. It is important, though, to nuance the interpretation of those results for a number of reasons.

First of all, innovation is not necessarily just investments in R and D. It is about a broader concept, a number of which Gerard has highlighted that relate to innovation on process and management capacity that wouldn't be captured in those metrics. Certainly the most recent figures for 2014 are only an indication of intent. They are revised frequently within the course of a year, and we look at those numbers regularly because one of the challenges in the innovation field is that there is an important lag effect between when an initiative is undertaken, or a bundle of initiatives, such as the work that was undertaken in response to the Jenkins panel, and seeing an effect in the economy.

Typically an expected lag can be on the order of about five years, two or three years for something to take effect, and then another two years to measure it. So the lag effect is also an important component, and what we hope to see is the effect of some of the more recently taken initiatives coming online, so to speak, and being visibly seen in the statistics around 2017-18. There's a lag, unfortunately.

[Annick Papillon, NDP, Québec, QC]

I'd like to discuss another relevant issue, particularly from a Canadian standpoint.

According to the report, Canadian businesses are more likely to adjust their spending based on government assistance than their American counterparts. In fact, that Canadian behaviour is attributed to a more cautious attitude towards risk management.

I'd like to know what you would suggest in terms of solutions, as far as that cautious approach towards investment is concerned. How can we work within our system to make sure that we aren't penalized in relation to our American counterparts?

[Shannon Glenn]

Culture and management capacity is an issue that comes up more and more. Numerous studies mention that aspect. The evidence is still anecdotal, but all the facts point to a cultural difference. The recent strategy addresses that, incorporating a new element aimed at improving that culture.

Of course, it's a long-term effort, given that an educational component beginning at childhood is necessary, since it involves a change in attitude. It's also crucial to address the issue at the post-secondary level, especially in business education.

The final component when it comes to the current management framework, the one that matters most from an adult standpoint, revolves around the tools that can be put in place, modified or enhanced to improve the situation.

I mentioned the Canada accelerator and incubator program, which focuses primarily on small and new businesses with plans for rapid growth. That kind of expertise and mentoring—mentoring is a large part of the services we provide to small businesses—can be made available to managers in any size business.

We also want to urge business schools to offer programs not just for university-age students, but also for managers and executives in the midst of their careers.

This is work that will span a generation, and we are just in the early stages. The role of the federal and provincial governments aren't entirely clear and have yet to be defined. I encourage the committee to examine that dimension.

[The Chair, Conservative, David Sweet]

Thank you, Ms. Glenn.

Thank you, Ms. Papillon.

[The Chair, Conservative, David Sweet]

Now we move on to Mr. Warawa for six minutes, please.

[Mark Warawa, Conservative, Langley, BC]

Thank you, Mr. Chair.

Thank you, witnesses.

I want to change the focus on disruptive technologies a little bit to how they impact people, not businesses.

When I was growing up, I was reading cartoons about Dick Tracy and his special watch where he could talk back to head office. A lot of these technologies we dreamed or fantasized about are here today. There are the movies Back to the Future and Back to the Future Part II. I think the second one was about going to the year 2015, and here we are. Some of the stuff they got right, and a lot of it was still far-fetched. We have seen so many changes and so quickly.

You touched on Kodak. My dream location is Hawaii, and Kodak had this beautiful facility where you could watch the hula dancers and stuff. Well, they didn't see the clear signals, and you highlighted in your presentation that there were clear signals. They didn't see what was happening. They weren't flexible. They didn't change, and they are gone.

What are the clear signals that the government needs to identify and react to proactively? There is a change; it is happening. Traditionally, and not just in Canada, governments react instead of being proactive. How does this affect Canadians? How do we protect ourselves against identity theft? It is a growing problem. As technology changes, so does.... Thieves are out there and putting Canadians at risk.

Where are the disruptive technologies creating risks that the government needs to deal with? Some of the risks are just inconveniences. For example, when I was a boy we shot films on a little.... You would wind it up, and you would shoot films. Super 8 is what it was called. Then you would have those converted to a Beta or VHS. There were some companies that had copyright, even if they converted it over 20 years ago. I had all these old films put onto VHS. Now I want to be able to watch that. Because this is old technology, I can't have it put onto a DVD or a memory stick, because it is copyrighted by a company that is no longer in business, a long time gone.

Where are the risks we need to address, change, and adapt to? Where are the risks for identity theft, which is a huge problem? Could you touch on some of those issues?

[Gerard Peets]

Let me make one general comment on that, and then Krista will jump in on the digital side.

I think the big risk is that disruptive technology is global. Disruptive technology puts people out of business and puts new people in business. The risk is if you are not involved with the game.

Canada is involved. For us, it is really the opportunity of staying there because, if something is developed and the standards are developed elsewhere, if all the technology and the supply chains are defined and developed in other countries, then we are in a position of trying to adopt and trying to play catch-up. We are naturally going to be there in many instances, but in others, where we have the ability, it would be nice if we could really nurture that ability so we can stay ahead.

Now in terms of the digital side....

[Krista Campbell]

Your question is at the heart of much of what government really needs to consider. If you think of what it's been into recently in digital privacy with respect to Bill S-4, there are some really important fundamental things government needs to think about with respect to the privacy of the individual and the frameworks in place to ensure both government and other interfaces, whether it's businesses, or charities, or third-party organizations, respect an individual's privacy. There needs to be clear rules that an individual, a consumer, or a citizen can understand with respect to they've gone online, they've purchased something, they've consented to this but not to this, and therefore, they have assurances and know their identity has been protected with these known sites.

With respect to things like cyber and ensuring that we have a secure set of infrastructure, that individuals have confidence that they're able to use the Internet for the right purposes and not be hacked, the government continuously works with international partners that look at the governance of things like the Internet and ensures that policies and practices are put in place that businesses can then commit to. We have disruptive technologies in certain areas like quantum, which could be incredibly disruptive once they are commercialized, that this committee will undoubtedly be running across in terms of a whole game changer for cyber and protection.

There are roles for government in thinking about supporting things like data literacy and consumer literacy when they are online. Financial services are one of the areas where Canadians are the most concerned. We have very strong provisions at some of the financial institutions within Canada for things like mobile payments and mobile wallets. So government must be continuously encouraging work in those areas so Canadians have security in terms of their identity, they have recourse, and they know that government is pushing the boundaries for these policies. But in many instances, as you indicated, it is government reacting to the changing environment and trying to stay up to speed with what's going on. It's very difficult and challenging to figure out where that next disruption is coming from.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Warawa, Madam Campbell.

I want to thank the witnesses for coming, and I'm going to let the witnesses go now.

We have a motion that Madame Papillon is going to present with agreement among the parties.

We want to thank you very much for your testimony, and I'm certain it will form the basis of how we choose to call witnesses to be able to form this study. Thank you very much, but while you're leaving we're going to continue with business.

Madame Papillon.

[Annick Papillon, NDP, Québec, QC]

Thank you, Mr. Chair.

I would like to propose the following motion to the Standing Committee on Industry, Science and Technology:

That the Standing Committee on Industry, science and technology undertake a study on the state of the tourism industry in Canada by June 2^nd 2015 and report its findings to the House.

As you know, this is an important industry. Globally, the tourism industry represents $1 trillion, and its strong growth is expected to continue at a rate of between 3% and 4% annually until 2030. In Canada, the tourism industry generates nearly 10% of jobs, and 618,300 of those represent direct employment—more direct jobs than in the oil and gas industry.

Every year, tourism accounts for $16.4 billion in export earnings and represents nearly 2% as a share of GDP. In addition to creating a large number of jobs, the tourism industry stimulates trade and investment, which, in turn, contribute to a better quality of life for Canadians. That means more dollars being spent in communities.

For all these reasons and because it costs relatively little to stimulate the industry, many countries have made tourism one of their economic priorities. Ignoring the global trend, the Canadian government has cut the Canadian Tourism Commission's budget over a number of years. In 2014-15, the commission's budget was down to $57.9 million. In just 10 years, it has lost nearly half of its budget, or 41.5%. And during that same period, Canada was one of the only top 50 travel destinations to experience a drop in the number of visitors from other countries.

According to the World Tourism Organization, between 2002 and 2013, the number of international visitors to Canada dropped by 20%, causing Canada to fall from 7th to 17th in the rankings. Furthermore, according to Statistics Canada figures released in July 2014, the number of unemployed workers was on the rise, while the number of people receiving EI benefits was shrinking. Changes made by the Conservatives to the EI program have reduced Canadians' access to benefits. In fact, more than 6 out of 10 unemployed Canadians don't receive EI benefits. The situation is of particular concern to the tourism industry, which requires a skilled workforce available during high seasons.

In a 2013 report, the Conference Board of Canada recommended changes to the airline industry, whose high taxes and base fares unfortunately make Canada a very costly travel destination. What's more, Canada requires foreign nationals wanting to visit the country for leisure or business to obtain visas. They need them in order to enter the country.

Although visas deter undesirable visitors, they can also discourage travellers going on vacation. According to a TIAC survey, Canada's visa application process is considered burdensome, intrusive and lengthier than those of its main tourism rivals, thereby discouraging potential visitors.

Whether in the form of financial support or just—

[The Chair, Conservative, David Sweet]

Ms. Papillon, I have to stop you there. Mr. Warawa has a point of order.

[Mark Warawa, Conservative, Langley, BC]

On a point of order, Chair, procedurally—and that's why I've raised a point of order—a notice of motion is to provide a notice of motion not to debate the issue. If—

[Annick Papillon, NDP, Québec, QC]

It's just a presentation.

[Mark Warawa, Conservative, Langley, BC]

I think this is now turning into a speech. It's no longer becoming a notice of motion. I think if my colleague across the way continues, it's no longer a notice of motion. It's a speech.

The reason that I brought this up is that we already have an appropriate way to deal with what the committee is going to be discussing, and we have made a decision as a committee to deal with disruptive technologies. Now, to diverge from that there's a procedure, and that would be to move into a portion of the committee where we would discuss what the committee is going to do, if we're going to change direction.

I think if the honourable member continues to speak it's no longer a notice of motion, it's a speech.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Warawa.

We had agreement for the presentation and I'm certain that Ms. Papillon is just about through her presentation here.

But, Mr. Lake, is this on the same point?

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

[Inaudible--Editor]

[The Chair, Conservative, David Sweet]

Just after? Okay.

Continue.