Evidence of meeting #22 for Industry, Science and Technology in the 43rd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was investments.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Charles Burton  Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual
Patrick Leblond  Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual
Daniel Schwanen  Vice-President, Research, C.D. Howe Institute
Willie Gagnon  Director, Mouvement d’éducation et de défense des actionnaires

12:25 p.m.

Vice-President, Research, C.D. Howe Institute

Daniel Schwanen

I would support anything that sustains Canadian industry and cleaner energy in particular, so to the extent these high tariffs prevent the development of that industry, absolutely, I would support reducing or eliminating tariffs, generally speaking.

12:25 p.m.

Liberal

Nathaniel Erskine-Smith Liberal Beaches—East York, ON

My last question is for you, Mr. Schwanen. It's difficult, because obviously we know China is one of Canada's largest trading partners. It is inevitable, given the size of China's economy. However, we see human rights violations. A number of countries violate human rights and it's a challenge to police all of those efforts through trade. However, when we see China's willingness to use our economic reliance and trading relationship to punish Canada for following the rule of law and arresting Huawei's CFO, and we see them kidnap and mistreat Canadian citizens, how are we to respond to that?

12:30 p.m.

Vice-President, Research, C.D. Howe Institute

Daniel Schwanen

We're not here to do China any favours. Some exchanges, some investments even, might still be in the interests of both, and we should cautiously pursue those while restricting others, absolutely.

12:30 p.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

We are now starting the next round of questions.

Mr. Lemire, you have two and a half minutes.

12:30 p.m.

Bloc

Sébastien Lemire Bloc Abitibi—Témiscamingue, QC

Thank you, Madam Chair.

My question is for Mr. Gagnon from the Mouvement d'éducation et de défense des actionnaires.

You mentioned in your intervention what is being done at the European Central Bank.

Should we actually be including in the law the stakeholders, in other words the shareholders, the employees, the suppliers, the creditors, the consumers, the governments and the environment to ensure that we capture the best interests of these parties?

12:30 p.m.

Director, Mouvement d’éducation et de défense des actionnaires

Willie Gagnon

People say that these types of measures would result in a change in culture and properly applied governance practices in businesses and in Canada. That's what makes the laws as effective as possible. We know that a law is only effective if people obey it.

Over the years we have seen that the Investment Canada Act has allowed the government to reject three transactions since 2008. Ottawa rejected the bid for MacDonald Dettwiler and Associates from British Columbia by the American company Alliant Techsystems, Ottawa rejected the bid for PotashCorp in 2010, and then rejected the bid for Aecon in 2018.

You see, what this legislation does is essentially serve the interests of the Department of National Defence. When corporate governance goes well, these issues do not end up in the hands of the government; they are resolved at the source. What is more, the benefit of cleaning up corporate governance is that it's the best way to get long-term results on these issues.

12:30 p.m.

Bloc

Sébastien Lemire Bloc Abitibi—Témiscamingue, QC

Thank you, Mr. Gagnon.

In the same vein, I want to go back to the first of Mr. Martel's five recommendations, which was about withdrawing the buyer's voting rights.

Could you explain how we would benefit from protecting our stakeholders?

12:30 p.m.

Director, Mouvement d’éducation et de défense des actionnaires

Willie Gagnon

Taking away these voting rights puts the decision to reinstate them in the hands of the other shareholders, once they've seen how the takeover is going to go. Then the other shareholders can either void the new buyer's power or attach conditions to that power.

That leads us to consider conditions that could be imposed on buyers, such as multiple voting or measures that would limit the rights of foreign firms on Canadian soil.

12:30 p.m.

Bloc

Sébastien Lemire Bloc Abitibi—Témiscamingue, QC

Thank you.

12:30 p.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

Our next round of questions goes to MP Masse.

You have the floor for two and a half minutes.

12:30 p.m.

NDP

Brian Masse NDP Windsor West, ON

Thank you, Madam Chair.

Obviously, I don't believe all foreign investment is equal. Maybe, Mr. Leblond, you could tackle this one specifically.

How did Rona's being sold to Lowe's help Canadian consumers and Canada in general? Maybe you could lay that out. I want to hear the opposite to what I'm concerned about. Perhaps you could reflect on that, or any other of our witnesses could. I'd like to know specifically how Lowe's taking over Rona helped Canadian consumers and Canada in general.

12:30 p.m.

Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual

Patrick Leblond

I'm not an expert who has studied the Rona acquisition. I was more making an issue about what is strategic and what is not.

I believe that you raised the issue of job creation and what happens after an investment. You mentioned a number of them that have ultimately been failures, whether it's the acquisition of Zellers by Target or the acquisition of Rona by Lowe's. The question I was raising is, are these strategic assets that need to be addressed in a separate way from other businesses?

The law as it is allows for.... When the government assesses net benefit, obviously one of the considerations is job creation or job maintenance. We can question if that was done in the right way at the time of those acquisitions. That's one question. There is also the issue of undertakings. We know that the law allows the government to impose undertakings. To some extent the Quebec government did that with the Rona acquisition.

Afterwards—

12:35 p.m.

NDP

Brian Masse NDP Windsor West, ON

We have just a few seconds here and I'm so sorry, but—

12:35 p.m.

Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual

Patrick Leblond

The big issue is whether we actually follow up on these things and whether we hold these companies to what they actually promised. That, to me, is the crucial thing.

12:35 p.m.

NDP

Brian Masse NDP Windsor West, ON

We saw our laws with U.S. Steel become a debacle and workers robbed of their pensions.

I just don't think all foreign investment is equal.

Thanks, Madam Chair.

12:35 p.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

We'll start our third round of questions.

The first round goes to MP Genuis.

Welcome to INDU. You have the floor for five minutes.

June 8th, 2020 / 12:35 p.m.

Conservative

Garnett Genuis Conservative Sherwood Park—Fort Saskatchewan, AB

Thank you very much. It's great to be with you.

Mr. Burton, maybe I'll start with you with a few different questions.

Can you share a little bit very specifically about how state-owned enterprises work specifically in the People's Republic of China? People may come from a framework where they think of a state-owned enterprise as overseen by an independent board of directors with the mandate of maximizing profit. Maybe this is a problem in general with how we view the Chinese system. We presume a sort of institutional separation between public and private, military and non-military. Could you share your thoughts on how a state-owned enterprise actually operates in China and how that might be different from what we're used to?

12:35 p.m.

Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual

Dr. Charles Burton

It's very difficult to establish an equivalence between Chinese state enterprises or large Chinese government associated enterprises and anything that exists in liberal democratic countries because these enterprises are closely connected to the ministries of the Chinese state that they respond to. They are required to be governed by their Chinese Communist Party branch. If you look at the organogram of any of them, including Huawei, the Communist Party branch is at the top and the board of directors is below that.

From that point of view, they are designed to realize the overall interests of the Chinese state and are therefore able to draw on all the resources of the Chinese state, including military intelligence or other resources to engage in cyber espionage or the ability to acquire information about their competitors' technology and economic operations.

In Canada, BlackBerry for example couldn't call on the CSE to assist them in knowing what Samsung is up to. In the Chinese context, this is natural; it's integrated. They're all the same.

12:35 p.m.

Conservative

Garnett Genuis Conservative Sherwood Park—Fort Saskatchewan, AB

Can I pick up on that? Could you talk a bit more about the integration between the commercial and the military?

I think this would surprise a lot of people as well, that ostensibly private companies are constantly looking for opportunities to find all kinds of military applications through the direction of party committees, and this has been escalated dramatically under Xi Jinping. This isn't just particular sectors; this is ubiquitous in what is expected on the commercial side within the Chinese economy.

12:35 p.m.

Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual

Dr. Charles Burton

The Chinese Communist Party establishes a five-year plan with goals for furtherance of their interests in key strategic sectors, including high technology. Therefore, the industries are involved in acquiring this information either through commercial deals with foreign companies contingent on the transfer of intellectual property and technology or through theft. For example, cyber espionage or espionage engaged in by agents of the Chinese state are involved in these relationships with foreign firms or universities where PLA-associated scholars have been found to be collaborating with Canadians in key sectors without identifying their People's Liberation Army association.

All the industries in China belong to these systems. Each ministry has a system, and this includes the military. A lot of things that we think are commercial enterprises are actors whose primary mandate is to further the interests of the Chinese strategic and military apparatus. That's been pretty well established.

12:40 p.m.

Conservative

Garnett Genuis Conservative Sherwood Park—Fort Saskatchewan, AB

To your recommendation about a moratorium on all state-owned enterprise investment from China, would it be possible, as some might want to do, to say this sector might have military applications or might be more strategic, and this sector isn't, or is it more likely that those applications exist in a very broad spectrum of sectors?

12:40 p.m.

Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual

Dr. Charles Burton

I think the Chinese state is not likely to be investing in failing Canadian industries and sectors that are not in the geostrategic interests of the state as reflected in their planning process, which is comprehensive and very thorough. I think we have to look at any Chinese investment that is controlled by the Chinese Communist Party, which all of them are required to be by virtue of their citizenship in the People's Republic of China. I think we'll find that most, if not all of them, are serving the interests of the Chinese state and are not simply about enhancing the profitability of a company in Canada through a shrewd investment by private or corporate considerations. They're state considerations.

12:40 p.m.

Liberal

The Chair Liberal Sherry Romanado

Thank you very much.

Our next round of questions goes to MP Longfield. You have the floor for five minutes.

12:40 p.m.

Liberal

Lloyd Longfield Liberal Guelph, ON

Thank you, Madam Chair, and thank you to the witnesses.

I'd like to come back to the Investment Canada Act, which is really what we're studying.

Mr. Schwanen, as was mentioned earlier, Canada has taken some steps to protect Canadian businesses from foreign investments or takeovers in terms of what we're going through now with COVID-19. When it comes to the recovery, how would we know when the buttons should be pushed to open up our foreign investment again?

12:40 p.m.

Vice-President, Research, C.D. Howe Institute

Daniel Schwanen

The short answer is that it would depend on the sector. As you know, some sectors are not going to recover for a long time. If you took the sectoral approach and you figured that sector was so crucial and strategic to the Canadian economy that, if it was acquired by a foreign entity, it would threaten Canadian economic policy, sovereignty or our recovery, then you might want to extend by sector.

The more general point I'd like to make goes back to what Patrick was saying at the beginning of his presentation, which is maybe this is, as it is for a lot of firms, an opportunity to examine more permanent questions. Maybe this crisis is really an opportunity for us to ask: What is strategic? What is national security? Maybe we have a broader view of what that entails.