Industry Committee on May 19th, 2016

[The Chair, Liberal, Dan Ruimy]

I call the meeting to order.

Welcome, everybody. Thank you very much for attending session number 16 of the Standing Committee on Industry, Science and Technology.

Today we have three guests from different organizations. From the Automotive Industries Association of Canada, we have Jean-François Champagne, président.

From the Canadian Association of Defence and Security Industries, we have Christyn Cianfarani. She's the president.

From the Canadian Cosmetic, Toiletry and Fragrance Association, we have Darren Praznik, president and chief executive officer. He brings with him Beta Montemayor.

As we we normally do, we'll go through each presentation and then we'll ask questions as a whole.

Why don't we start with Mr. Champagne?

You have 10 minutes.

[Jean-François Champagne, President, Automotive Industries Association of Canada]

Good afternoon, Mr. Chairman and committee members. Thank you for the invitation to take part in your study of the Canadian manufacturing sector. I'm very pleased to be here today on behalf of the Automotive Industries Association of Canada and its members, with more than 4,000 locations and branches across Canada.

Our association has represented the interests of Canada's automotive service and repair industry for 74 years. Our members are companies that manufacture replacement parts and manage the supporting supply chain, right down to parts stores and installers who work with the Canadian public. We do not represent companies that make or sell vehicles.

The automotive aftermarket, as it's referred to, is a $19.4 billion industry that employs approximately 400,000 people across Canada. Our segment of the industry represents approximately 50% of all employment and about half the overall value of the total auto sector.

There are over 23 million registered vehicles on the road today, and the average age of these vehicles is now just about nine years. We know that vehicles are being built better and last longer than ever before. This means our members are delivering an important service in every community across the country by keeping Canadians and their vehicles safely on the road.

Our sector is primarily made up of small to medium-sized businesses, and today our comments represent ongoing discussions with our nearly 850 members, big and small, on the topic of manufacturing.

Although at AIA we do have a diverse membership, manufacturers represent an important and complex segment of our membership. We continue to work with them to understand how and where they manufacture, their import/export behaviours, what innovation means to them, and which government programs they currently leverage to support their operations.

Last year AIA commissioned a study to look at the possible threats and opportunities to our sector brought about by the trans-Pacific partnership agreement. AIA's TPP impact analysis report was released in January of this year and helped our association understand our manufacturers' needs. This report was provided to you today in both official languages.

Overall, I'm happy to inform you that the TPP agreement is unlikely to have a great impact on the automotive aftermarket. Through this exercise, we've learned that most manufacturers of aftermarket parts have already moved their production to Asia. We have approximately 110 self-identified manufacturers in our membership, and with that, approximately 20 companies continue to manufacture on Canadian soil. That said, the remainder of our members still innovate here in Canada, and employ people in operations, marketing, finance, and sales. We have found the core manufacturing is now primarily offshore. Furthermore, the vast majority of this offshore manufacturing is ultimately brought back to Canada for branding and packaging and then sold throughout North America.

Our study also found that the volume of Canadian trade to countries other than the United States and Mexico is currently quite small. Hence, we expect little impact from the implementation of the TPP.

Of importance to this committee's study, I would add that our manufacturers will be more affected by other factors, such as technical innovation, exchange rate movements, and climate change initiatives.

With regard to technical innovation, the advancement in vehicle technology will fundamentally change how Canadians own and use vehicles, but, more importantly, it will fundamentally change how they get service and maintenance done on their vehicles. Telematics will become the new normal. The capacity of the aftermarket to access information to fix vehicles today is a direct result of the right-to-repair efforts that we waged about eight years ago. In fact, a member of this committee, Mr. Masse, was a key contributor to the ultimate access that our sector now enjoys.

Make no mistake: as vehicle technology moves in leaps and bounds, our sector is at risk of being excluded from accessing vehicle data and therefore providing consumers with little or no choice but to return to their dealership to get their vehicles serviced.

There's an enormous opportunity for innovation in vehicle telematics, without question. BlackBerry and Google are significant players in vehicle telematics and connected grid research, and so are members of AIA such as Delphi and Bosch.

Any efforts by government to support not only the research aspect but also to look at how vehicle data will be shared with parties other than manufacturers would be most welcome.

Before I move on, I would also like to add that innovation in the supply channel, such as Amazon's potential use of drones to deliver products, points to a near-future disrupter to our sector, thus requiring major study, preparation, and adoptions in order to survive. E-commerce is already changing how our sector's supply chain connects automotive parts with installers.

Another area of interest to AIA is the employment, recruitment, and training of the labour force within our sector. Our industry's most pressing concern is the lack of labour market information available. AIA is in the process of submitting a proposal to ESDC for funding to support a massive labour market study. Our industry will soon need to completely retrain its workforce as electric vehicles become more common and as technology evolves. Government approval of AIA's labour market study proposal would be very helpful to our manufacturing members.

The next topic I would like to speak about is product standards. Let me illustrate this issue using one key example.

On April 28, numerous voices across Canada, including AIA, called on the federal government to ban imports of products containing asbestos. In Canada there are few, if any, product standards for automotive replacement parts. Fortunately, the vast majority of players in the sector produce parts of equivalent-to-OE quality or even better without being forced to do so by any regulations. Nonetheless, we see millions of dollars worth of brake pads containing asbestos entering Canada every year. I'd like to be clear here: those brake pads are not being manufactured and produced in Canada, but simply imported. As recently announced, if the Government of Canada does move forward with its proposed ban on asbestos, this will support manufacturers and parts distributors who currently, voluntarily, choose not to produce or import asbestos-containing products.

This is only one example but it illustrates that members who choose to do the right thing are left on an uneven playing field when facing competitors who do not have minimum standards to meet.

As I noted earlier, AIA does not represent the automakers in Canada. However, I would like to state that strong OE assembly operations will still positively affect the aftermarket.

First, some of our members still supply into the OE operations, and many other AIA members may benefit from the business clusters that exist in and around those assembly plants. Continued opportunity for cross-sector engagement, such as through the Canadian Automotive Partnership Council, is imperative. AIA is also a member of the Canadian Manufacturing Coalition, so I will not spend time today going through all of the items those two groups will advocate on, but will lend AIA's support to their efforts, and I must take this opportunity to highlight that energy costs remain a constant irritant for our manufacturing members.

Lastly, I must mention that our members continue to raise concerns over patent and copyright infringement, as well as issues with counterfeit products entering Canada. This is of extreme importance to our members, and the government's leadership in combatting these issues will be essential to fostering a healthy automotive parts replacement sector that thrives on developing and building better products.

In closing, budget 2016 was a good step in the right direction. Innovation is key for our sector, although our members are not typically captured in current program funding opportunities. For example, the automotive supplier innovation program—ASIP—is reserved for OE suppliers only. To support manufacturing in the aftermarket, our members need access to smaller funding investments in the millions of dollars, not the hundreds of millions, and careful effort needs to be taken to ensure it is not difficult to navigate the red tape in applying for these programs. In many cases, our members seem to just have overlooked government programs, believing that they just won't qualify. We need to ensure that Canada's aftermarket is not an afterthought.

Thank you very much for the opportunity to speak to you today. I look forward to your questions.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Now we will move over to Ms. Cianfarani.

[Christyn Cianfarani, President, Canadian Association of Defence and Security Industries]

Mr. Chair, honourable members, ladies and gentlemen, thank you for inviting me to speak to you today to give you a Canadian defence industry perspective on manufacturing.

The basic message that I would like to leave you with is that the Canadian defence industry is a vital, innovative part of Canadian manufacturing that the federal government should be paying more attention to, especially at this point in time.

In the context of a Canadian manufacturing sector that's lost, to our knowledge, at least 400,000 jobs in the past decade due to fierce offshore competition, the size of Canada's defence industry has remained relatively stable.

This points to some resiliency in the industry, which is somewhat rare in the manufacturing sector. More importantly, it shows that the defence industry can grow considerably in one generation if the federal government makes the right choices and works in partnership with it.

By this I mean the growth potential for defence manufacturing is highly sensitive to federal government actions or inaction. Federal government policies and programs, especially procurement decisions, influence heavily, if not determine outright, our sector's growth path. I don't think you can say that about any other part of Canadian manufacturing.

To begin with, I'd like to give you a few numbers from a recent Innovation, Science and Economic Development and Statistics Canada survey of the defence sector to provide a high-level picture of what our industry looks like.

Of particular relevance to your committee's work is the fact that over 60% of the Canadian defence industry is manufacturing-focused. The Canadian defence sector accounts for over 63,000 direct, indirect, and induced jobs and generates $6.7 billion in gross domestic product annually.

The sector is export-intensive, with 60% of industry revenues coming from foreign sales. I hasten to add that this strong export performance takes place in a context of a highly protected and regulated international marketplace for defence goods and services. This is one of the reasons defence goods and services are exempt from the provisions of the WTO and NAFTA and other international trade agreements.

Almost all countries protect, promote, develop, subsidize, and favour their domestic defence industries for a combination of national security, sovereignty, and economic reasons. It's a reality that we need to understand.

As a result, when Canadian defence firms compete abroad, we're up against some formidable and often unpredictable forces, and yet those export numbers tell us that our companies do very well. I would suggest to you that our export success is a measure of our industry's innovative nature and the value for money that it provides, and that it is a barometer of the high-quality goods that Canadian defence firms sell into global markets.

Another special feature of the defence market is that, nationally, there is really only one client: the Government of Canada in general, and National Defence and the Canadian Armed Forces in particular. This is not the way the ideal free market is described in economics 101, where there are many buyers and sellers.

The ISED-StatsCan survey found that companies in our sector pay 60% above the average manufacturing industry wage. This is explained in part because our industry is innovative. Truly innovative firms have highly qualified and well-paid people working in them. Over 30% of the occupations in our industry consist of engineers, scientists, researchers, technicians, and technologists, and another 40% of our workforce are well-paid production workers.

That gives you a high-level picture of our industry. Now let me give you a little ground truth on the sector.

The Canadian defence sector comprises about 650 small, medium, and large firms. Some are Canadian and some are foreign. It's truly a pan-Canadian industry, with pockets of industrial strength in every region of Canada.

Shipbuilding and the associated marine industry are located on both coasts. Military aircraft maintenance, repair, and overhaul services and aircraft fabrication and structures are based in Nova Scotia, Quebec, and western Canada. In Ontario there are combat vehicles and related maintenance, repair, and overhaul, as well as airborne communications, navigation, information systems, software, and electronics.

It's also worth pointing out that two-thirds of Canadian defence firms have significant commercial non-defence business operations. Furthermore, a lot of defence products and services end up generating important commercial and civil technologies with spillovers into the broader economy.

That's the essence of the sector.

Today, the opportunity of a generation stares our industry and the Government of Canada in the face. Over the next 20 years, the Canadian defence manufacturing base has the potential to grow significantly due to the planned recapitalization of the Canadian Armed Forces. Shipbuilding and the fighter jet replacement program are the two largest pieces of this puzzle, financially speaking, accounting for at least $35 billion in capital equipment.

The Defence Acquisition Guide, the Canadian Armed Forces' 20-year plan, lists over 200 major initiatives. This is a huge opportunity, unprecedented in fact, to leverage defence assets in order to spur growth in the defence manufacturing base in Canada.

The leveraging of defence procurement was one of the key elements of the report produced by the expert panel chaired by Tom Jenkins. I was a member of that panel.

But how do we execute on this opportunity? I'd suggest to you that there are two key ingredients needed to grow defence manufacturing in this country.

First, we need to recognize that Canadian prime contractors, of which there are not that many, must be considered more strategically by the government in procurement strategies for these major capital projects. Domestically based primes are the firms that do the bulk of manufacturing in our sector. They own the intellectual property, which is essential to getting the kind of innovative, sustainable manufacturing activity and high-wage employment that we all want. The kind of advanced manufacturing we're talking about here is founded on intellectual property, research and development activities, design, and testing. It also includes complex systems integration of both hardware and software.

Second, we need to find ways to incentivize intellectual property transfer from foreign primes into Canadian firms so that those Canadian companies will also be able to engage in the kind of innovative manufacturing that comes with owning and exploiting intellectual property. Procurement strategies need to do more than just drive Canadian firms into supply chains, and the value of the supply chains needs to be better defined up front. We need to recognize that because the Canadian Armed Forces buy equipment so infrequently and purchase so few units, supply chain activity that is limited only to the domestic buy will not sustain the industry, let alone grow it. At a minimum, when foreign primes win Canadian contracts, Canadian firms need to be driven into the global supply chain of those foreign primes.

But we need to think bigger and more strategically than the existing suite of fragmented programs scattered amongst two or three departments, with little coherent direction. What we really need to do is develop a made-in-Canada defence industrial policy, tailored to our unique security requirements and domestic industrial capabilities. Virtually all of our allies have something called or resembling a defence industrial policy. Canada needs alignment at the political level to drive strategic thinking into defence procurement projects, using the tools we have to achieve the outcomes we want.

The moment to fix this policy gap and grow defence manufacturing is now. The government has simultaneously launched both a defence review and an innovation agenda. These two policy reviews need to be joined up to develop a Canadian defence industrial policy to build a stronger, larger, and more innovative Canadian defence manufacturing base.

The vision is ambitious, yet it is achievable. The time to act is now. Industry is ready to work with government on this. The Canadian defence industry recommends that this committee, in its report to government on the manufacturing sector, echo our call to develop a made-in-Canada defence industrial policy tailored to Canada's unique security challenges and economic opportunities.

I'd like to thank you all once again for the opportunity to appear before your committee today.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Finally, we will move to Mr. Praznik.

You have 10 minutes.

[Darren Praznik, President and Chief Executive Officer, Canadian Cosmetic, Toiletry and Fragrance Association]

Thank you very much, Mr. Chair, and members of the committee. I want to thank Mr. Masse, who, I understand, submitted our name as a proposed presenter here today. Mr. Masse reached out to our association last year on the plastic microbeads issue, and we were quite successful in working with him on the ban that is now being put in place.

I'm also pleased today to join Mr. Fergus. We worked very briefly together in another life, some 10 years ago, so I extend our congratulations on his election to Parliament.

As we are sitting with colleagues from the automobile industry and the defence industry, it is a little odd to be coming here from the cosmetics industry. I would like to tell you that I'm really 85 years old and I use great anti-aging products, but you wouldn't believe me. Still, use the products. I know I'm on the record.

[Voices]

Oh, oh!

[Darren Praznik]

I have a bit of a unique presentation for you today. Some of the themes my colleagues have raised also run through it.

When you look at cosmetics in Canada, we are a net importer of cosmetics and personal care products, but we are also a major manufacturer. That dichotomy presents some issues that I think many other consumer product industries have been struggling with, issues that government really has not had a focus on, though I think perhaps it's time that it did.

The reason for that dichotomy of being a major importer but also a significant exporter is rather simple. In the world of consumer products generally, in order to achieve economies of scale in production, you need to have a large volume. One of the disadvantages of Canada compared to the United States or the European Union or China is that we have 35 million people. The reality is that in the case of many products, to employ the best technology, to be able to get the economies of scale, and to have the production runs you need to be competitive, you cannot rely on just the Canadian marketplace.

Particularly for our industry, most of those facilities or manufacturing sites—I think there are 18 independent custom manufacturers, and several major brands that operate facilities in Canada—depend on getting a large enough volume through exports to be competitive. We have to understand that interest. It is in our interests, as a country larger than the Americas or Europe, to be able to move the products from those factories across borders into other jurisdictions in order to support those economies of scale. We must not only be competitive as manufacturers but must also have greater access to those markets than do our competitors in the U.S. and the European Union.

I want to focus for a moment on a very interesting area. I'm not here to ask for tariff reductions or other general policy requirements. If anything, what I'm asking you to consider is the role of regulation.

We're not talking about regulation to prevent safety. In fact, it's not about reducing standards at all. We're talking about alignment, because there are hosts of requirements.

Personal care and cosmetic products are regulated everywhere in the world. Every jurisdiction has some regulation to ensure safety, to review cosmetic ingredients as part of chemical management plans. We have those in Canada. We're regulated under the Food and Drugs Act under Health Canada, by the Environmental Protection Act under part of the Chemicals Management Plan, and by the Competition Bureau, etc. The jurisdictions we're exporting into also have their own regulatory requirements. Our difficulty comes in understanding that those safety departments are also market access departments. How they choose to regulate can make a big difference as to whether or not it's easy to move a product across the border.

Again, I'm not here to say we need a lessening of standards. Actually, it's quite the contrary. I'm saying we need an alignment of those rules. I've included some examples in the presentation.

It took us, on an international basis, over two years to get a common standard for lead contaminants of 10 parts per million, because we discovered that many Asian countries measure their ingredients as opposed to measuring the finished product that we measure in Europe, Canada, and the United States. If your regulators are measuring two different things, how do you align those standards? How do you produce for those markets?

Getting regulators to decide if we're going to measure inputs or finished products had to be resolved. Similarly, are we going to measure in centimetres or inches? The standard definitions that we apply to nanotechnology or any of these things become a fundamental basis of getting that alignment.

We looked at other things, including a simple thing like ingredient nomenclature. We have mandatory ingredient labelling for cosmetics virtually across the world. We use an international nomenclature language called INCI. The Americans have not accepted 57 out of some 10,000 terms that are in the INCI dictionary, one of which is water. The international word or INCI term for water is aqua. If you put aqua on your label, it's accepted everywhere except in the United States.

These little things can result in literally millions of dollars in extra cost in just trying to adjust labelling or trying to achieve common labelling, which means a common inventory management. Inventory management is really the cost for an exporter, because the United States is the only country in the world that insists on the word water, where everyone else requires aqua.

We've been trying to get the Americans to change that for more than 10 years, and it just goes nowhere. It's a simple little thing like that. Again, if someone doesn't know that aqua is water, it's not a health risk, but it adds millions of dollars in labelling costs.

There are other issues. Slight differences in labelling sunscreen warnings, for example, can make it more difficult to produce a product in Canada and export that package into the United States.

In terms of classifying products, in Canada we classify sunscreens as drugs or natural health products. We impose a host of drug rules. In the European Union they classify them as cosmetics with appropriate rules. This has led to a whole bunch of really unintended and unnecessary issues on moving sunscreen products across borders, again to the disadvantage of the Canadian manufacturer.

Manufacturing facilities and licensing are other areas. If you're making a therapeutic claim for a product in Canada, you're a drug. In the United States, you're an over-the-counter, OTC, product. Both jurisdictions require the inspection of your manufacturing facility.

That means Health Canada and the FDA have to come to your factory. They don't necessarily have the same inspection requirements. They don't have the same inspection schedules, and we can take you to facility after facility in Canada where they're being reinspected by two different jurisdictions with all the attendant costs of time, etc. If you're the Canadian manufacturer, you're bearing a much greater percentage of that cost in your product because you're exporting so much more.

These are the kinds of things that we believe governments have to make a priority. They have to find that alignment to make it easier for manufacturers in Canada to be able to move those products across borders.

There are a couple of other aspects that I'll flag for you in manufacturing today.

Modern manufacturing is really internationally integrated. If you're making cosmetics at a factory in Quebec and a factory in Ontario, you're moving ingredients from different jurisdictions. Sometimes it's your packaging. Perhaps it's a unique bottle or container from a different jurisdiction and you are assembling it here in Canada. You're buying your ingredients from different places, yet our consumers bureau still has a definition of “manufacturer” that is dependent not only on the last major transformation but on 51% in value, which can vary on exchange rates at any given time.

Yes, you don't have to put “made in Canada” on the product, but you do if you export it. In many supply chains a product made in Knowlton, Quebec, will get into the supply chain in the U.S. and re-emerge in western Canada, because that's the way the supply chain works. Rules of origin labelling can make it very difficult to be able to do that when, quite frankly, there's no need.

If you're that manufacturer and you're exporting 90% of your product, why would you stay in Canada if you can avoid some of that by moving across the border? These are the kinds of real unintended consequences of not thinking through our regulatory systems.

The last comment I would like to make that touches on this issue is that this is the age of the international consumer. The day when we regulated just for our country because we live here is gone. Canadians buy their sunscreen products when they're on holiday. They buy them in Canada. They can order cosmetics, sunscreens, or anything else from anywhere around the world.

There is no reason that regulators cannot align their regulations. Consumers are ahead of governments because they expect the product to be safe no matter where it's made. Whether they buy it Florida or Toronto or online, they expect it to be equally safe.

We would suggest to this committee that it's not just government policy to say that we need to align trade; it has to get down into the culture of our market access departments, such as Health Canada, Environment Canada, and the consumers bureau. At the end of the day, when some mid-level person in the department is talking to their colleagues at the FDA or the European Commission or in China or wherever, and they're discussing how they align regulations, they have to know that it's in the interests of Canada to have that alignment. It has to be a priority.

Thank you very much, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

Thank you very much, and the fun begins. We'll start with you, Mr. Arya, for seven minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

I thank all the witnesses for coming here.

Thank you, Christyn, for the excellent presentation you made. As you know, the defence and security industry is something I personally am interested in because of the potential for economic development. When Tom Jenkins submitted his Canada First defence procurement policy a few years back, if I remember correctly, he mentioned that the Canadian defence budget in the next 15 to 20 years would be bigger than the oil sands capital investment budget. That was when oil was still ruling, at $100-plus per barrel. Obviously, today the capital plans of the oil sands industry have changed, but the Canadian defence procurement budget is still there.

There are several things here. When I ran for my nomination, I made the promotion of defence and security industries in Ottawa one of my planks, because of the huge potential. As you mentioned, this sector pays 60% more in salary than comparable jobs, and these jobs will never get outsourced to China or India. Unlike the wireless and telecom booms and busts that we have seen in this city, the defence sector jobs do stay here. Especially in C4ISR—command, control, communications, computers, intelligence, surveillance, and reconnaissance—the industry has huge potential.

With regard to the U.S. defence budget, the R and D budget alone in this segment of the sector is $90 billion. Many Canadian companies don't know that Canadian companies are considered to be U.S. domestic companies for defence acquisition.

So thank you again for coming here. I just want to touch base with you on several particular points. We have discussed the industrial and technological benefits program. Can you in a few seconds throw light on how we can use ITB policy to promote innovation and a subsequent manufacturing sector here?

[Christyn Cianfarani]

The ITB policy, for those of you who may not know, was formerly known as the offset policy. Essentially it means that for every dollar we spend purchasing a defence good or service, a corresponding dollar gets spent in the economy. The challenge in the past was that the dollar wasn't directed anywhere specifically. We used a few systems, such as multipliers, to help it be directed, but the reality is that we had little influence over where that dollar was directed and what kind of job it went into.

Most recently, following 2014-15, the industrial and technological benefits program was introduced. When it was introduced, it was split into two pieces. One piece occurs prior to an acquisition being made and during the bidding phase of an acquisition. It's called the value proposition. Effectively, that is a tool to be able to direct work into certain sectors, segments, or types of work to be done in Canada. Suppliers or prime contractors are evaluated based on their ability to compete with other prime contractors. They are scored on that particular value to Canada.

The second piece of it is what I refer to as the “leftover” portion of that, the non-highly directed portion, which are the industrial and technological benefits. It's the remainder of the money. It too can be directed to certain sectors, segments, or types of things in the economy, depending on how aggressively we would like to use it.

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry to cut you off there. I have very limited time.

[Christyn Cianfarani]

Sure.

[Chandra Arya, Liberal, Nepean, ON]

Regarding the made-in-Canada defence industrial policy, if you guys are working on it and if you have developed some details on it, would you be willing to share that with the committee through the clerk?

[Christyn Cianfarani]

Well, right now we're in the stage of still talking with government about whether or not it would support the construct of a made-in-Canada defence industrial policy, so it's very early days. I was in Vancouver and pitched that to the Minister of National Defence.

Once we get moving, the idea would be that government and industry would work together to develop this policy.

[Chandra Arya, Liberal, Nepean, ON]

Okay.

You did mention that we have been spending quite an amount of money in different departments. DND is spending hundreds of millions on DRD, defence research and development, and in our innovation ministry we have the SADI program, but there is no connection between them. They are all almost independent.

I have talked to different ministers once or twice on how to bring the R and D investment that has been done in DRD work to the industry. Is there anything you would like to add to that?

[Christyn Cianfarani]

What you would do is set out from the top what strategically we want as a country. You'd be driving that into your defence procurement and also your R and D programs—so it is bigger than defence procurement—and you would connect the tool, like a value proposition tool, to your SADI program and say, “We are going to procure, on this procurement, things that we are developing under certain R and D programs.”

There are ways to do it even before you get it on an actual full-blown, very large-scale procurement. There are constructs that are used in other countries, like low-rate initial procurement vehicles, whereby you could buy a few things, test them out, and actually develop to the stage where you're looking to put them on a procurement. You connect those chains together. The tools are there.

[Chandra Arya, Liberal, Nepean, ON]

I am very glad that you also noted the Canadian-owned small-size manufacturing companies and how we have to just bring them online into the system.

You said there are about 650 small, medium, and large ones. How many do you think are in the large to medium sector there, especially the ones employing more than 250 employees?

[Christyn Cianfarani]

That's about—

[The Chair, Liberal, Dan Ruimy]

You have about 30 seconds.

[Christyn Cianfarani]

It represents only 20% of our membership. Now, the important thing is that, of our GDP base, those very large firms do 90% of the GDP.

[Chandra Arya, Liberal, Nepean, ON]

Probably you are more like the aerospace industry, where the 80/20 rule is actually the 93/7 rule. I think even in the defence industry, the medium to large ones are quite good in what they are doing.

[Christyn Cianfarani]

That's right.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to go to Mr. Dreeshen.

You have seven minutes.