Industry Committee on May 19th, 2016

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

Thank you to our witnesses today.

I had the pleasure to be on the public accounts committee when we went through the full life cycles of F-35s with the particular variant that Canada was looking at. Of course, the issue there was how many years a full life takes, whether we were dealing with the defence department, the PBO, or the Auditor General.

I've had a lot of interest in this particular area, looking at the concept of procurement and how we can develop a method so that procurement can be done quickly and seamlessly. Of course, I believe the secretariat that was set up was designed to make clearer what could be taking place there.

Also, with regard to shipbuilding, I had an opportunity to see the types of spinoff industries that are tied in on both our east and west coasts, so when you talk about 650 other industries that have an opportunity to be part of this, I think that's extremely important. As we tie into innovation, I believe that's something else we should be considering.

You did mention, Ms. Cianfarani, the need for defence and innovation to work together. Could you give me some concrete examples of what you see, and perhaps some of the advantages, as we look at different possibilities as far as procurement is concerned?

[Christyn Cianfarani]

Thank you for the question.

I would hesitate to go into the sausage-making of exact technologies. What I can say at that sort of parent level is that we do have a significant number of innovation programs, and I understand over the course of the last few days you've heard from even Stats Canada on a number of these programs.

There are some 60 R and D programs, I believe, ranging from small programs or tax programs like IRAP and SR and ED to very large programs like SADI and BCIP. Those programs right now I would say are disconnected from the procurements that are going to be going on in the future or the procurements that are going on today. We know that you have to start R and D probably five or 10 years in the past in order to have it ready for landing on a procurement in the future.

The challenge is that there is no coherent connection between those programs and a procurement involving the people actively working on the files. Let's say it's mapping and charting of the Arctic, and we want to develop or incentivize that technology in Canada through the Canadian surface combatant program under the ships program. That thinking right now, to our knowledge, isn't necessarily going on, that glue, so you have this disconnect in that you might be driving that dollar-for-dollar work into something that the country might not even be interested in.

If you don't incentivize the prime or signal the prime by saying we want that exact thing, then they will give you what they want to give you. They will effectively give you the leftover that their country doesn't want. That's where we see that decoupling. You're working on R and D in Canada and you're maybe not even buying it, and secondly, you're incentivizing primes to put money into certain aspects of the Canadian economy that's not even linked to your research and development programs.

That would be one of those examples.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

The other thing I'd like to speak about is some of the human resources that we have and the opportunities there.

Recently there was a Federal Court of Appeal ruling that determined that anyone whose name is on the Canadian Armed Forces Supplementary Reserve list was considered a public servant. That changes the dynamics as far as those individuals coming in as engineers or as technologists is concerned. We looked at the ruling and we tried to understand just what is taking place. I'm just wondering how you see this court ruling affecting Canada's long-term look into research and development as far as manufacturing is concerned.

[Christyn Cianfarani]

I think on the CBC I called it a lose, lose, lose.

It's lose for the active reservist who's looking for a job.

It's lose for the Canadian company that clearly would like to often employ previously or actively serving members for their knowledge and therefore feels there might be an impediment to employing one of those individuals because their intellectual property may be pulled back by the crown as they're serving. That is the juggernaut of the issue. As a public servant, your intellectual property during the time that you're working as a public servant is the intellectual property of the crown. That might mean that when you're working for a company, theoretically the intellectual property that you're developing for that company is now theoretically owned by the crown.

It's also a lose for Canada, because I don't think the crown wants to be clawing in intellectual property from companies. The crown isn't an expert in commercialization.

So it is a lose, lose, lose.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you.

The other question, then, is for our other two witnesses.

There was discussion about the fact that you are moving product across the line to the U.S., and we have a de minimis issue having to do with parts as they go into the U.S. They've now changed it from $200 to $800, I believe, and of course Canada is still at $20. That does cause an issue. I'm wondering if either of your industries are affected by that, because I think it is something that we will need to address in the future.

Jean-François or Darren, would you comment?

[Jean-François Champagne]

There's no specific information I have that I could share in that regard. It's something we could maybe look at it and provide more feedback on. I wouldn't be able to comment specifically.

[Darren Praznik]

I'll just add that this issue is slowly coming to the attention of folks in our industry. There are a lot of changes going around in the retail scene right now. Obviously online retailing is becoming a larger segment of the retail world, and certainly in our products. I think consumers are going to create a demand for a change in that de minimis.

Whether we like it or not, whatever our position, it is going to be an issue that will have to be addressed. We are just starting to see it raised within our association at this point, but I wouldn't offer any specific advice today.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Defence, would that...? I don't assume it would deal with you.

Thank you.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Masse, you have seven minutes.

[Brian Masse, NDP, Windsor West, ON]

Mr. Champagne, with regard to the aftermarket, I'm not sure everybody understands its importance and the ingenuity that takes place in it. We all were subjected to vehicle improvements and maintenance at the dealerships. We couldn't get the economy going, actually. It would have been extremely difficult, especially since some of your members operate in rural and other types of areas where we don't even have them.

My concern is related to what your industry is doing to prepare for a step forward in innovation related to, for example, cars that drive on their own. In the past some companies have treated us differently from what's provided in the United States; hence the legislation that we worked on, and the voluntary agreement by all parties on this matter.

What's your take on that, and what do we need to do to prepare? The driverless car is a big step forward. I think the preparation needs to happen sooner rather than later for us to be competitive.

[Jean-François Champagne]

That's a great question. Thank you very much.

As I alluded to in my original presentation, the car as it is today is evolving. How it's going to be owned and operated is going to change dramatically. I used the term “telematics” to refer to the disrupter in what's coming.

To answer your question specifically, we have to be prepared to service vehicles properly over their whole lifespan. As I pointed out, the lifespan of vehicles is increasing. We're building better vehicles. They're lasting longer. The capacity to service these vehicles....

You alluded to rural areas. The ability to service vehicles effectively coast to coast relies on the capacity of a technician, a service provider anywhere in Canada, to properly assess the condition of the vehicle, see what needs to be repaired, and perform the proper repair so that the vehicle continues to be safe.

The dynamic that plays out today, and hence the whole right-to-repair fight we had about eight years, is to ensure that not just the people who build the car and the people who sell the car through the dealership are able to access that information. It has to be the entire aftermarket. The key here is access to information and ensuring that vehicles, as they evolve over time, continue to provide access.

Today, essentially, when you drive your vehicle into a service bay, a technician will physically connect to the vehicle to get diagnostic information, programming information, and so on. As the vehicle evolves and telematics happen, the vehicle sends information dynamically over the air. A technician is no longer required to connect directly to the vehicle to gain that information.

As that information now goes into the cloud, for lack of a better word, it gets wirelessly connected. How the data gets directed to a service provider becomes the big question. This answers our concerns. As the way the vehicles communicate changes, we want to ensure that owners of vehicles.... Also, the ownership model might change, but we want to ensure that whoever has the ownership of the vehicle will have ownership of the data generated by the vehicle and will be able to direct that information to their service provider of choice, essentially allowing Canadians to make the right choices in who they want to service their vehicle and ensuring that the people who provide the service will have the right information so that we are able to repair these vehicles safely.

Let me add one more aspect that you pointed out. Today there is a broad network of dealerships, but they do not service all Canadians in all the rural areas. The aftermarket does. We are in every community across the country. For this aftermarket to continue to repair those vehicles, access to information is key.

Our action is to be here and to educate the government that access to information is key, ownership of that data by the car owner is key, and the capacity of that car owner to direct the information to whoever they want is also key.

[Brian Masse, NDP, Windsor West, ON]

I know that also improves our environment, lowers insurance costs, and keeps the economy going, because not everybody can afford a new vehicle all the time.

I want to move to Mr. Praznik right now. I'll get to defence in my next round of questioning, because I know I'm coming to a conclusion soon.

I was really surprised at the advance of the industry we have here in Canada. Your quest is to get rid of red tape. If we're able to limit those export barriers you're facing, will that guarantee or at least increase the chances for exporting the products of our manufacturing, which obviously means jobs?

[Darren Praznik]

I would like to say it's not so much about getting rid of red tape, but about aligning the dispensers.

[Brian Masse, NDP, Windsor West, ON]

Oh, that's fair enough. Good. Then I can drop the red tape issue.

[Darren Praznik]

Yes, and I would even put this forward. There are certain issues when we import product, and I don't think we're here to talk about those today; we're here about how we can encourage exports.

Often the role of our regulators isn't so much to change what we're doing here—although we have some of that to do—as it is to work with their colleagues internationally so that when we change a regulation or change a restriction on an ingredient, we arrange to do it at the same time in the same way. We don't want to create disruption out there.

We had a recent run-in over MI/MCI. If we are going to impose a new rule on something or have a new sunscreen warning system, can we agree at least among Europe, the United States, and Canada on what it's going to be?

Doing that would allow us to move to a common label, which means a single inventory management, all of which makes it easier to export. We export a greater percentage than anyone else does, so if we can do that, it's to our advantage. However, for our regulators, the people who sit at those tables, it's not even on the agenda. It's not often in their mindset.

There needs to be a cultural change in the way we think about regulation and about how we advance our national interests.

[The Chair, Liberal, Dan Ruimy]

Do you have a final word in 10 seconds?

[Brian Masse, NDP, Windsor West, ON]

Hurray for me.

[The Chair, Liberal, Dan Ruimy]

All right. I like how we're getting along.

Mr. Baylis, you have seven minutes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

I'll start off by taking Darren up on his point.

In the medical field, we call that harmonization.

[Darren Praznik]

Yes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

You're looking to have harmonization among different jurisdictions. That is ongoing in different areas of the government. Are you saying that in the cosmetics area it's not taking place, or are you saying it's not taking place in the way you'd like to see it?

[Darren Praznik]

We're involved with the Regulatory Cooperation Council between Canada and the U.S., which has been in place now for five or six years. It's very slow. I think if you look at the number of places we've had alignment, they're very few.

We've been involved now—

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

If we use you example of aqua and water, though, there's a certain reality here, which is that the Americans in general like to march to their own drum. They could easily align with everybody else, but when they have ISO rules and they make GMP rules, they persistently look not to align. We might say we're of good faith and we want to align, and obviously they could change tomorrow and call it aqua. That was your own example.

They've chosen not to do that, so what could we be doing? Should we be focusing on aligning with just Europe or Asia? Should we neglect the States? How should we deal with that?

[Darren Praznik]

You ask a broad question which I've thought about a lot, because we're very engaged in this issue. We really have to be smart diplomats, and we have to be using things like our trade agreements with Europe and the RCC process with the United States. The TPP, whether you're for or against it, contains a provision for alignment. It's one of the first trade agreements to do so.

We Canadians have to be smart about moving other jurisdictions to commonality. The people we send to these tables for these discussions generally do not have that in their experience. It's not their agenda and it's not their skill set.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

I have a quick question. You're an export-driven market and you want to export to, say, Asia, Europe, the United States, and you want to sell in Canada. Is Canada imposing specific extra needs on you which, if you took them away, would alleviate things for the rest of the markets? Is Canada also staying apart, or are they mostly open to alignment?