Evidence of meeting #13 for Industry, Science and Technology in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was need.
A recording is available from Parliament.
Liberal
Chandra Arya Liberal Nepean, ON
I have a very short time left. Specifically, what measures do you both think the Government of Canada should take that will be effective in the short, medium, and long term?
Director, Industrial Economic Trends, Conference Board of Canada
You talked about all the different programs that are in place. I think one of the biggest things would be to start assessing the effectiveness of those programs.
There are a lot of programs, and some of them are very effective. I think we need to start having better practices around learning what is and is not effective and focus on what is effective and maybe de-emphasize what's being less successful.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
I think we need to rationalize some of the existing programs that we do have and focus on the idea that some of the large companies out there are really an anchor. If you talk about services and talk about the value chain, those are what build the manufacturing capacity around this country, and we really need to think more closely about what we might do for some of those larger companies.
Liberal
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
Thank you for the presentations today. I certainly appreciated the information.
I'll just pick up from where Mr. Arya left off.
You talk about rationalizing, about looking at our existing programs. One of the frustrations I've seen since I got here is the lack of measurements, or at least publicly disclosed measurements, of the success. What are the measurements? How do we determine whether a program internally is effective or not effective? What criteria do we use?
Could you tell me the three most important criteria you would use to determine whether a dollar spent is worth it or not?
Director, Industrial Economic Trends, Conference Board of Canada
Different programs have different objectives, so it would have to be based on a particular program's objectives. If you talk about, for example, accelerators or those sorts of things, the questions would be how many businesses have you started, how much have they grown, and how many markets are they in?
It's about trying to find things you can quantify. Consider the SR and ED program. Broadly speaking, Canadian R and D has been falling over the last 15 years. I'd say that's a starting point; it's probably not being very effective at driving R and D.
I think it would have to be driven by the purpose of the program.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
Among the things we need to think about in the incentive programs that are out there for growing R and D and the relationships between post-secondary institutions and business is that we probably need to rethink our expectations of the return on an investment.
For instance, new science is important to do, and 30 to 50 years down the road, who knows what it might generate? It also allows us to accumulate a large number of really highly skilled people, but you're never going to be able to say how many things we have commercialized out of it. You're never going to be able to say how much money we actually made out of it. I think that's a wrong way of looking at it.
If you look at some of the incentives for smaller businesses—IRAP, as an example—then the example of how many grants were made, how many businesses were developed out of it, how many products were shipped, what our export ratios are.... Those are all good measures.
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
One issue I've heard about consistently in the manufacturing industry concerns energy costs. Obviously Ontario represents a large percentage of our manufacturing industry. We've seen skyrocketing costs over the past 10 to 12 years, with the last five years showing the most dramatic increases.
The innovation agenda that's being communicated so far from the federal government seems to be going toward similar investments to those that were made in Ontario in terms of renewable energy. The flip side of that investment in renewable energy, however, is higher energy costs.
Have you been able to rationalize what type of investment it would take by a government to not increase the energy costs while still maintaining the transition into renewable energy generation?
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
I may have a bit of an advantage, having worked in the energy industry for a little while. The reality is that the new generation of renewables is no more expensive than building new infrastructure for conventional fuels. The challenge is that it's expensive to build everything now. It's less about what the new generation costs are and more about what our long-term infrastructure for delivery of electricity is. We have a crumbling infrastructure in this country, and we have challenges surrounding interprovincial intertie. It's easier to send electricity to the U.S. than it is to send it across provinces. Those are certainly some issues we need to consider, because electricity can be produced in some provinces a lot more effectively than in other provinces and still meet the same requirements for GHG emissions.
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
One of the things that I have consistently heard is that the transition in Ontario away from hydro-electricity projects toward other forms of renewable energy has left us in a position where there is nowhere to go but higher energy costs. That creates an environment where it's much more prohibitive to get the job done.
In terms of access to capital, how do we rank against other jurisdictions? If you're starting a manufacturing business in the States or you're scaling up, how do we rank? Do you think we have a good record to date? Are there improvements that can be made? Are there opportunities we can take advantage of to provide more capital to those firms that are looking to scale up? What's the lay of the land?
Director, Industrial Economic Trends, Conference Board of Canada
Generally speaking, there's not a shortage of capital. We do have an active and effective small cap equity market in Canada, the Venture Exchange, which is successful compared with what you see in many other countries. Venture capital is less available here than in countries like the U.S., but it's also tied to the mix of products we're making here. We do have an effective crown corp in the BDC.
Conservative
Alex Nuttall Conservative Barrie—Springwater—Oro-Medonte, ON
Are you supportive of higher thresholds for equity crowdfunding, for peer-to-peer lending, those types of initiatives? Are those things you would see as supporting the free flow of capital within the marketplace?
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
The issue with capital in this country is more about risk than it is about the volume of capital that's available. I think you're opening a bit of a can of worms with respect to crowdfunding and the rules on disclosure. That makes things a lot more complicated for small businesses if they are attempting to scale up.
The real issue for most small businesses is at the scale-up stage, where there is a significant requirement for capital for things like proof of concept. Once they get past that, the scale-up becomes much easier.
NDP
Brian Masse NDP Windsor West, ON
Thank you, gentlemen, for being here.
Mr. Smith, just so you know, it's a regular occurrence for us to receive documents in just one language, given the shortness of time. So it's not your fault; it's just a process. We always insist on having them in both languages. This is not normal. I want to make it clear that it's not your fault that the document is not being circulated at the moment. We will be getting to that later on.
With respect to 3-D printing, I thought it was interesting that you talked about the process in terms of parts and service, that we could become a leader in that newer technology. When we have newer technology like that coming into play and there's a gap like that, what can Canada do to jump on that opportunity to get into that area, which will be growing industry in terms of servicing.... I think there will be a variety of 3-D printing, because it's still just in its infancy. So I'd like to learn about that.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
If anyone is listening right now, I think the first thing to do is to invest in an extrusion company, because that's going to be something big in the next five to 10 years. If we're going to jump on the technology, we need to tackle it from an intellectual property perspective, as the parts that are generated will be virtual instead of tangible and deliverable. You're going to see a disruptive shift in how those parts are distributed as replacement parts. For instance, if your washing machine needs a new seal or a new bearing, you're going to be able to print those on your own at home. What does that mean for local parts industries? It means that they need to shift their mindset into how they are producing their materials.
NDP
Brian Masse NDP Windsor West, ON
That's interesting.
Before I get into my second question, I want to thank the Chamber of Commerce for working with me on Bill C-221, the single-event sports betting bill. The elimination of crime and costs from that bill is one thing, but the jobs will also be very important in allowing this product to be chosen by provinces if they want to. It's been interesting to have the Canadian Chamber of Commerce and the Canadian Labour Congress supporting a bill. That's been very important to me.
One of the things I struggle with a little is that we talk a lot about small business and helping them, but we can't forget some of the larger businesses. Some of them now are foreign owned, so it's hard sometimes to justify some type of a subsidy or tax relief. I'm very much more for training, for example, or moving toward some type of environmental stewardship. Those are public policy goals, to support the infusion of some capital from us. But what's the case for us not to forget some of the larger organizations, even if some of them are actually foreign? What's the decision-making for R and D and stuff like that, which can help other businesses? I open that to both of you because I think it's important for us not to forget.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
We live in a global community. There are a multitude of branch plant businesses in Canada. There are also some fairly large businesses in Canada that have branch planted out to the rest of that global community. The decision-making that a large company or global company will make in entering a market or granting a mandate or making an R and D investment is largely about things like: What's the rule of law? Am I likely to be nationalized? What's the state of the currency? What is the skill level of the workforce in that country? Am I going to be close to market? What is the value chain close to where I'm going to be producing?
Those are the key factors that companies are thinking about when they make those decisions, and it's less about taxes and incentives. What does that do for this economy when we have large-scale businesses locating here, delivering a mandate here? In other words, they've decided to assemble new vehicles or assemble airplanes or make pills here. That means a very large investment of capital, and it means an investment in the services and the supply chain immediately surrounding that. Communities like Windsor or Oshawa, where those large plants are, are going to benefit significantly from having that investment there—and not just from that one company, but from all the smaller companies around them, and that's how those start-ups grow.
Director, Industrial Economic Trends, Conference Board of Canada
If you're talking about the issue of how companies make those decisions, it's an unfortunate truth that in some industries like aerospace and auto parts, they're more prone than others to look for government assistance of one sort or another. Rightly or wrongly, it's part of playing the game if we want to be in those industries. Broadly speaking, you start getting into the realm of picking winners when you're doing that: why are we focusing on this rather than that over there? Generally speaking, the research shows that picking winners is a poor use of government resources. But all of this is to say that I agree that it's a public policy trade-off. When you bring a large plant into a community, it can have very large spin-off effects for the community, so you want to make sure you're maximizing the benefits a community gets if you're getting into that game of helping them with their investments.
NDP
Brian Masse NDP Windsor West, ON
We're probably only in that game because of poor trade agreements that allow other states to offer incentives, either at the state level, the provincial level, or the federal level outside of Canada, because that's what's happening with the automotive industry.
NDP
Brian Masse NDP Windsor West, ON
With regard to energy and costs through government incentives, Mr. Smith, is it very complicated for companies to access some of the government incentive programs? Do these need to be simplified and still be accountable? Is there a better process so they don't have hire accountants and lawyers to get through the process.
Director, Intellectual Property and Innovation Policy, Canadian Chamber of Commerce
Anything to streamline the regulatory process or the procurement process is absolutely a good thing.
