Industry Committee on April 14th, 2016

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

I'm glad you mention this, because with respect to FedNor and the investments we're making through infrastructure there are two different issues.

FedNor is a program that was through Industry Canada before and is still a part of ISED now, so we have monies allocated for it. It really focuses on business development, on investing in companies, and on investing in the region in different sectors—and in the community, of course, as well.

With respect to infrastructure, we have a different plan in place, a short-term and a long-term plan. We have a $120-billion commitment that we have made over the next 10 years within our overall infrastructure envelope. In the budget we committed to $11.9 billion: $3.4 billion for public transit, $3.4 billion for social, and $5 billion for green infrastructure. The criteria are such that we're willing to partner up to 50%. We're willing to pay our fair share and make sure that we're engaged, but it's a bottom-up approach. We want the local municipalities, the local region, to really help develop priorities—

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

With “green infrastructure”, what exactly is going to go up? The concern I have is that it's going to be more solar panels and wind farms, when throughout Ontario it has been shown that the highest input cost for industry and economic development is the cost of electricity. Every time a wind or solar farm goes up, eventually there's an incremental increase in the cost of electricity to consumers, both employers and residents.

I'm very concerned that this green infrastructure money is going to work backwards and hurt the people in northern Ontario, just as it's hurting the consumers of electricity across the rest of Ontario.

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

To the contrary, I think the investments we're going to make are going to help stimulate growth, create jobs, help us with the low-carbon economy, and reduce the price for consumers. These investments, as I've indicated, are really a reflection of the local needs. It all depends on what local needs—

[Cheryl Gallant, Conservative, Renfrew—Nipissing—Pembroke, ON]

Yes or no, are you putting solar and wind in this green infrastructure in northern Ontario?

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

Again, it all depends on what the local needs are. It's not a top-down approach; we're not here to prescribe.

[The Chair, Liberal, Dan Ruimy]

We're way over time.

Thank you very much.

We're going to move to Mr. Arseneault.

You have five minutes.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you, Mr. Chair.

I thank our guests, particularly the ministers, for coming to meet with us today. I know that your time is really valuable. It is an honour for us to be able to take advantage of the time you are giving us.

My first question goes to Minister Duncan.

In the innovation field, what is the difference between applied research and pure research in terms of their roles?

This relates to discovery-based science innovation.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Thank you for that question.

You've raised a really important question, and I want to be very clear to this committee. It is not either-or. You need basic and you need applied—you need both. We start here with fundamental research, and that's to have our new discoveries, whether it's of a new battery, a new BlackBerry, or a new therapy. Then we want to move it through a continuum to the commercialization of that idea and to selling that product and creating jobs.

We have to ensure that those links are very tight all along the way. In Canada we have suffered through the valley of death.

I also want to point out the role that our colleges and our polytechnic institutes can play. We have discovery research, which is often done at the universities. At the colleges and polytechnics, they do really important work. They are embedded in their communities. They can often do good social innovation projects, but they can also respond very quickly to industry's needs. A company, a small or medium-sized business, may come to a college with a problem that the college can respond to quickly.

I was out in Winnipeg for the annual meeting, and just hearing the work with which our colleges were able to help, whether for the wine industry or to help a small company out in Winnipeg....

Thank you for the question. We absolutely need both.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you very much.

Minister, last week you announced the launch of the post-secondary institutions strategic investment fund, a $2-billion investment in infrastructure to Canadian universities and colleges. Can you discuss why this fund is needed right now?

[Kirsty Duncan, Liberal, Etobicoke North, ON]

Again, thank you for the question.

Thank you for your interest, and for the interest in our post-secondary institutions.

I was delighted to announce that $2 billion. Minister Bains and I will be looking at it, because it's research and innovation.

If we look to some of our institutions that are now coming up to 50 years old, for example, in the college system, some of this infrastructure is 25 years of age. We want our students and our researchers to work on cutting-edge technology. When they go out to work, that's what they're going to be using. It's really important.

I want to make the entire committee aware that the fund is for research and innovation infrastructure, including commercialization spaces. It's for training at the colleges that respond to industries' needs. It's also for infrastructure that's linked to environmental sustainability.

The committee should know that if you have an institution in your riding, the due date is May 9. It's important. Not only is it going to help the institutions, it's also about local economic development across the country and jobs in our communities.

[René Arseneault, Liberal, Madawaska—Restigouche, NB]

Thank you.

I would not want to dwell on the question asked by my colleague, Mr. Baylis, but I am pleased that there is collaboration between colleges and universities. Polytechnic institutions are the future of the country.

Two days ago, we heard from representatives of a science and engineering agency whose exact name I forget. They told us that a real industrial revolution is taking place and it will be the fastest and greatest that we will ever experience.

I asked those representatives, as I am asking you as well, whether, in terms of the rest of the world, our postsecondary institutions are looking at a shortfall in any areas. My question goes to you, Ms. Duncan, as well as to Minister Bains.

[Kirsty Duncan, Liberal, Etobicoke North, ON]

I'd like to thank you for the question.

I want to make it clear. During the last decade, we really fell. We fell from third to eighth position in terms of investment in research and development.

I want to be clear. We have excellent researchers, but the investment fell from third to eighth for higher education. When it came to business, the funding of business research and development, it fell from 18th to 26th during the last decade.

What we heard from the three federal granting councils was that they were starved. That's why that $95-million investment in the granting councils is so significant. It's the largest investment in more than a decade.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We will now move to Mr. Dreeshen.

You have five minutes.

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

Thank you very much, Mr. Chair.

Thank you to all of the ministers and your officials who are here today.

I am going to perhaps take a little bit of a different tack. We also wish to speak about the main estimates here as well, and after spending four years on public accounts, it's something that I do have a certain amount of interest in.

Here are just a couple of the highlights. The Canadian Space Agency, there is recognition that 16.4% of its voted appropriations were not spent. This is a normal type of situation that occurs. These are things that do happen.

With the Social Sciences and Humanities Research Council, certainly some changes have been made there. It's a different request that you have, especially for SSHRC, in its requesting only $1.9 million for specific projects in 2016-17. Of course, there's the Canada first research excellence fund, and how it is being split within the various participating agencies.

These are some of the things that we do see. In the main estimates, we look at what is involved with the Natural Sciences and Engineering Research Council with increases in various areas....

In some of the discussions that I've had with these organizations and, of course, as was mentioned by Mr. Arseneault, and also our colleges and universities and polytechnics there, they're looking at ways to make sure that the dollars that are being allocated are allocated in a manner that is going to help innovation. It's to make sure that we have the incubators that are there. I think when you have your discussions with those officials they'll be very pleased to be able to expand upon some of their concerns and issues.

Minister Bains, one of the things that you mentioned in your notes had to do with supporting clean tech. As someone who lives six miles from 53 windmills, I take a look at the energy that is actually used in order to produce them, and try to find out the information on just how many years that one windmill would have to spin before we actually pay for that. For someone that lives in the province of Alberta where we have the best, the cleanest technology in the world as far as our oil and natural gas is concerned, I don't see any mention about oil and natural gas.

What I see is clean tech, as though that is the only definition that this government is able to deal with.

I don't see it particularly in the budget, as I had gone through it. Again, you speak in the budget about how a low business investment is the biggest single drag on Canada's economic growth. This is one of the critical aspects that we have right now, where we have companies and businesses that are saying that there's no way we can invest in certain areas. The assumption is, well, don't worry. We have green tech. We have this tech; we have that tech. You'll have lots of places to put your money, but where's that money going to come from in the next few years?

These are the issues that we have. Of course, there are arguments that we have with regard to whether or not we should be able to get our natural resources to tidewater—these are critical components as well in discussions—recognizing that the oil used as people were driving here does not come from Canada. It is from countries such as Venezuela and Saudi Arabia and Iran. The dollars that are spent, the income that comes from those countries is not spent on the infrastructure that we need.

Therefore, if we can make sure that we have Canadian oil and gas industries treated fairly and looked at in a positive light rather than only this one direction, I think you'll find we'll do as we have always done, which is to lead the world as far as technology is concerned and lead the world as far as regulations are concerned. I believe we'll find there is going to be an extremely positive position from there.

I see you're very close to the button, Mr. Chair. When I get a chance later, I would then like to speak about some of the issues as far as Statistics Canada is concerned, and small businesses.

Thank you.

[The Chair, Liberal, Dan Ruimy]

I'm not sure if there was a question in there, but time is up.

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

I can briefly, Chair—

[The Chair, Liberal, Dan Ruimy]

Okay. I will allow it.

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

Again, thank you for the intervention.

To my colleague, I want to make one thing clear with respect to our government's position. We understand that technology prevails in every single sector, including oil and gas. The point I made in my opening remarks was that innovation is important for our success, and we need to embed that culture of innovation in every single sector. That's the only way we're going to be able to compete in the next five, 10, and 15 years. That especially includes oil and gas.

With respect to that sector, we make many different investments, and we have many different initiatives through the Western Economic Diversification portfolio. It's an area that we understand. We appreciate it. It's part of our economic mix, and it's something we do not undervalue or under appreciate.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

We're going to move to Mr. Arya.

You have five minutes.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Mr. Chair.

Mr. Bains, as you know, we have launched a study on the manufacturing sector. I am a bit concerned about the status of manufacturing and the direction in which we are going in Canada. I would like to compare Canada with the oil-rich Arab countries. The only common thing we have is oil. The Arab countries also have oil, but there every single day a new manufacturing plant is coming up. It is not just adding value to oil. It is not just the petrochemical plants or the fertilizer plants or the power-intensive industries, but manufacturing companies in every segment. They don't have expertise. They don't have technology. They don't have manpower, and they don't have markets. We have all of these things. I'm a bit concerned that we are not looking seriously and going beyond the auto sector or the aerospace sector now that we are talking of clean tech, which is good, but still we have a lot of opportunities in Canada, especially in Ottawa.

Many times talking about Ottawa, people forget that in Ottawa we have a larger number of knowledge-based companies than in Kitchener and Waterloo. We have the DRDC here, and we have a technology sector here. There are a lot of opportunities here to promote the C4ISR companies: the command, control, communications, intelligence, surveillance, and reconnaissance industries. The U.S. defence R and D project is around $90 billion, and Canadian companies are considered U.S. domestic companies when it comes to U.S. defence acquisition. Maybe we are facing this problem because we don't have an industrial policy that will create a sort of road map on these kinds of sectors with ways to go and how to go.

What are your thoughts on that?

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

Thank you very much for the question. I want to highlight a few key observations from the outset. One is that the manufacturing sector is still very important to Canada. Even though we've seen a sharp decline, it still represents 1.7 million jobs and 10% of our national economy. It's a significant player when it comes to economic success, presently and going forward.

I also want to highlight the fact that it usually doesn't get enough credit, but it represents 42% of Canada's total business R and D spending. A significant amount of research and development investments are done in the manufacturing sector.

I think the point you made—and I think we need to do a better job of branding it—simply doesn't apply to the auto sector, or it doesn't simply apply to the aerospace sector. It's prevalent in the agricultural sector, the forestry sector, the mining sector, the digital technology sector that you talked about, and life sciences. Manufacturing is prevalent in all of those different sectors. I think we need to do a better job of branding that, marketing that, and coordinating that.

With respect to your point about what the government's view is going forward and what kind of policies we're going to set, I say we have to be setting smart industrial policy. I think it's absolutely important. We're competing with jurisdictions that are doing the same thing. We will fall behind if we don't play an active role. ICT adoption is going to be critical.

You mentioned industrial and technological benefits. This is something that we take seriously with the national shipbuilding procurement strategy coming up. We want to make sure we have a strong value proposition that enables us to gain a strong a footprint here in Canada with respect to the ITB process. That's important simply because we don't want to lose out on the opportunity of creating companies not only as a part of that process, but we want to gain the expertise, the skill, and the know-how so they can be part of global supply chains going forward. The idea again is to set ourselves up for the long-term success when it comes to industrial policy. This is an area that is a priority for us.

As you know full well, in our budget we talked about growing the economy. We have slow growth rates. Even though we go up, they're very modest. We have to understand that we want to create good quality jobs. The investments that we'll be making in ITB are going to be focused on the middle class and good quality jobs. It's consistent with our overall government economic agenda. We are committed to this and we made sound investments. I illustrated the automotive sector, for example, but we made sound investments in the budget and will continue to do so going forward.

[Chandra Arya, Liberal, Nepean, ON]

On the ITB, the previous government changed the rules on ITBs. I believe that now if the defence contract is worth less than $100 million, ITB is not obligatory. What are your thoughts on that?

There are billions of dollars' worth of ITB obligations outstanding. I think we should push these defence companies to fulfill their obligations under that.

[Navdeep Bains, Liberal, Mississauga—Malton, ON]

Once again you've done your homework, so thank you very much for your comments. You're speaking on a very important and substantive issue.

You're absolutely right. There have been about 125 contracts since 1986 up to the present, which reflect about 37.7 billion dollars' worth of industrial and technological benefits. There are approximately $9 billion that are still in progress. We are monitoring that and are very engaged and very much on top of that because, as you know, as part of our industrial and technological benefit initiative, it's a dollar-for-dollar match. For any kind of acquisition we make, we want to make sure we gain the same dollar value in terms of an ITB footprint here in Canada.

This is something that is a priority for us in my department. We have a lot of capacity built within our team. As I mentioned, I have a tremendous department, a tremendous team across this country, and they fully understand and appreciate how important this is for economic success going forward. It is a priority for our department and for me.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Minister.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

For the final question in the first round we'll go to Mr. Masse. You have two minutes.