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.
12:40 p.m.
Liberal
Lloyd Longfield Liberal Guelph, ON
Thank you.
You mentioned a term that I jotted down about being knee-jerk in terms of policy changes, and—
June 8th, 2020 / 12:40 p.m.
Liberal
Lloyd Longfield Liberal Guelph, ON
No apologies.
I sat on several international boards of companies operating in Canada. I was the Canadian director, so I was there to say what you could do in Canada, what you couldn't do in Canada, how Canada might differ from European or Asian countries in terms of how we implement policy. Often the board would just say, “Okay, that's a Canadian thing, we get it, but in order to do our overall...how could we work within the Canadian context?”
So far today, we've talked about a lot of things dealing with the Canada Business Corporations Act versus the Investment Canada Act. We actually do have laws in place to protect Canadian businesses from doing things that would be illegal in Canada. Could you make a brief distinction between the corporations act and the investment act and how they might work together?
12:40 p.m.
Vice-President, Research, C.D. Howe Institute
They do work together, so I was very interested in Monsieur Gagnon's presentation for that reason. It's not like you're a foreign company here and you can run roughshod over Canadian law. As Monsieur Gagnon mentioned, the Canadian Securities Administrators has recently made reforms to allow boards to consider the broader implications of a foreign investment, better than before. Those things do work together, and it does mean the Investment Canada Act is there for maybe a different purpose, having to do with our ability to implement policy, our sovereignty, our national security, which is what I was driving at. All of these things are complementary, yes.
12:45 p.m.
Liberal
Lloyd Longfield Liberal Guelph, ON
Thank you very much.
That's what you mentioned in terms of clarity of criteria and enhanced guidelines. I think that point was very well taken in terms of the Investment Canada Act.
I'm going to go over to Mr. Leblond.
Nate Erskine-Smith mentioned a Chinese-owned solar company that was operating in Canada. Canadian Solar in Guelph might be that company. It faces solar tariffs from the United States, a lot more tariffs from the States than China. The national policy around security concerns where energy, including solar energy, could be part of what we're looking at.... We've seen Canadian businesses recently look at their valuations decline. How do we balance getting investments into industry with some of these types of security or tariff concerns?
I'm sorry, we only have about 20 seconds or less.
12:45 p.m.
Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual
Probably even less.
The answer is that it should not matter what the valuation of a company is, whether we are in COVID or not. I think if we deem something of national interest or national security, including the inability to provide ourselves with certain goods, whether it's solar energy or something else, well, this is a national security issue. Right now, I agree with Daniel that we can improve the process, but we have what is there in the law to actually do this, and it's irrelevant whether we're in COVID or not in COVID.
12:45 p.m.
Liberal
The Chair Liberal Sherry Romanado
Our next round of questions goes to MP Rempel Garner. You have the floor for five minutes.
12:45 p.m.
Conservative
Michelle Rempel Conservative Calgary Nose Hill, AB
Thank you, Madam Chair.
I'm trying to take a different tack here. Rather than just looking at the issue of complete moratoriums or lowering the threshold in the ICA for a review, I want to zero in on the point you made, Mr. Burton, about how certain countries might employ different companies to take over certain parts of a business or an industry so that it doesn't trigger the review. Using that concept and marrying it with the concept of the visa framework review, could we look at a policy option that basically says if a country does x, y and z—let's say, takes Canadians hostage—then we would consider placing the country on a list where all investments or potential investments would trigger a net benefit review under the ICA? That would do two things. It would give Canada leverage in a situation, and it would arguably allow a discussion on whether or not that investment is in the best interests of Canadians to occur in a much clearer framework. Is that perhaps something that we could consider?
12:45 p.m.
Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual
I don't know about the legalities of it in Canadian law or how you would frame it, but I very much like the idea that we have sanctions against regimes that we find are engaging in activities that are violations of the international rules-based order. We don't deal with North Korea, for example.
I think something similar is important. If we see that these companies are associated with a state that is engaging in behaviour that is grossly violating the principles of the WTO—for example, the barring of our canola seeds—that we would look at it as these companies being required to abide by the demands of their state.
Aside from that, we also have serious issues with Chinese state companies' compliance with Canadian environmental and labour regulations, because they function in Canada in ways that they function in other countries that have looser regulations. I think we have to look at the whole thing—
12:45 p.m.
Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual
—a comprehensive assessment.
12:45 p.m.
Conservative
Michelle Rempel Conservative Calgary Nose Hill, AB
I've watched the non-enforceability or violation of WTO decisions in certain countries unfold over the last two years, essentially the imposition of sanctions on our goods. The public commentary has always been that we don't have the leverage. I would argue the opposite. Certain countries that do these things still want to buy out Canadian industries that have strategic value to their country.
Taking the point of saying that we don't want to completely chase away FDI, we don't want to be a banana republic or more of an unstable place to do business than we are under the current government, but we would definitely want to say there's a certain line we draw as a country where we say we're going to stop selling you our mines.
Should Parliament be considering that?
12:50 p.m.
Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual
I think that certainly we should be considering that, and I think we should be working in collaboration with like-minded allies like Australia, New Zealand, South Korea, Japan and the United States to try to come up with some standards that we would all apply so China would not be able to pick and choose.
12:50 p.m.
Conservative
Michelle Rempel Conservative Calgary Nose Hill, AB
As a legislator, a concept I struggle with is separating the concept of hostages, sanctions on our goods, violation after violation, but then saying it's okay that we sell this strategic asset after all these things happen. At what point do we as legislators say we're being taken advantage of here and it's not holistically in the best interest of our country to do business in this regard?
12:50 p.m.
Senior Fellow, Centre for Advancing Canada's Interests Abroad, Macdonald-Laurier Institute, As an Individual
I would return to what I said before about reciprocity and fairness. If it's not reciprocal, then why do we allow China to do things in Canada that Canada cannot do in China? I think we have to start making it clear to the Chinese government that their state firms have to abide by reciprocal and fair principles.
I think it's unlikely that we can achieve that with the current Chinese government, and that's why I suggest a temporary moratorium while you all consider this more closely.
12:50 p.m.
Liberal
The Chair Liberal Sherry Romanado
Thank you very much.
Our next round of questions goes to MP Jowhari. You have the floor for five minutes.
12:50 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you.
Mr. Leblond, in your opening remarks and in your responses to many of the questions from my colleagues, you talked about the fact that it's very hard to define an industry as a strategic industry. You talked about the possibility of looking at it more as a sectoral strategy.
Can you expand a bit on that? On top of that, Mr. Schwanen led with the fact that the new technology companies are going to lead us out of COVID-19. I want to merge those two as a follow-up question for Mr. Schwanen.
Can you talk about sectoral strategy and whether the threshold plays a role in that, or whether the threshold should play a role in that or not?
12:50 p.m.
Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual
The issue of industrial policy was mentioned earlier, where in a way we would have broader, more comprehensive strategies with targeted sectors or types of technologies, such as artificial intelligence or things like that. We would monitor that and decide what do we do to promote these industries and promote more investments in research and development and all that.
That's one way to go, but that has nothing to do with the Investment Canada Act. If we want to modify the act in those industries that we have deemed strategic, which is ultimately a political process, then we would want to reduce the thresholds for international investments, because we want to study those more closely.
12:50 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you.
Canada enjoys about 98% of its economy under small and medium enterprises. We've made significant investments over the last five years on organizations across various sectors—advanced manufacturing, environment and agri-food. A lot of these SMEs don't have assets of $489 million or revenues of $1.07 billion, but they're primed for takeover as they get through their scaling stage, and they're looking for investment. Those investments are coming from all over the world, not only China.
What are your thoughts on that?
12:55 p.m.
Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual
This is a difficult question.
In a way, you could say, well, foreign investors can't buy a Canadian company unless that Canadian company has reached a certain scale, thereby forcing investors and entrepreneurs to reach that scale, but that also imposes great limits on entrepreneurs. They might say they don't want to have to wait until their company has reached $5 billion to be able to sell it. Maybe they won't want to sell it, and then decide to go to the U.S. to do their entrepreneurship. That's where they'll get their capital That's where they'll set up.
12:55 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
In my opinion, that's exactly what is happening. Most of our investments in those development areas are going down to the U.S. for many reasons. What should our response to that be?
12:55 p.m.
Associate Professor, Public and International Affairs, Faculty of Social Sciences, University of Ottawa, As an Individual
I mean, this is a broader debate, one for which I'm not sure we have a lot of time. It takes us outside today's meeting, in a way.
One issue, for instance, is government funding for R and D. When governments give funding for companies, in terms of tax credits or other things, to develop R and D and patents, should governments own a share of those patents? Should they own a share of those companies and maybe have some kind of say on what actually happens?
This is not so much about the Investment Canada Act. This is really about a different approach to securing at least government money. If it's private money, then we have to—
12:55 p.m.
Liberal
Majid Jowhari Liberal Richmond Hill, ON
Thank you. I have about 30 seconds, and I really want to hear from Mr. Schwanen as well.
Mr. Schwanen.