Thank you, Chair. Thanks to the committee for this invitation.
The question of whether companies within strategic industries have been devalued or have lost value would be easier to answer if we had a clearer idea of what constituted a “strategic” industry, and there, let me pick up where Patrick Leblond left off.
Also in the same vein as what Patrick was saying, we already have provisions—let's not forget that—for scrutinizing foreign investments of any size, for any national security concerns. We already have a lower threshold and different ways of calculating value for scrutinizing foreign state-owned or influenced enterprises, as Mr. Burton was saying, than we do for non-SOE investments. We already have, of course, restrictions in place in a number of sectors that we obviously consider strategic, whether it's culture industries, telecommunications, transportation and others. That's already our current regime, so when we say “strategic”, we need to have a new definition in mind that means more than that. In fact, in light of the COVID-19 crisis, I would agree that we see that the supply of goods that Canadians rely on for their security and safety—for example, medical or food supplies—is more fragile than perhaps we had realized, and enabling Canadians to scrutinize investments that threaten those supplies would have to be properly seen as a strategic matter in my view.
Canadians also sense that new technologies will be at the forefront of our recovery from this crisis. Governments that have supported the development of new technologies via subsidies and the development of ecosystems that allow these technologies to be commercialized from a Canadian base, which is really ultimately the goal of policy, might want to discourage any panic selling by those firms or technologies in the current context, which might jeopardize this policy goal.
We can think of other strategic firms or sectors whose disappearance might trigger a really catastrophic loss of Canadian production capabilities in a number of sectors. The auto sector has often been mentioned in this respect. I would urge the following consideration. The loss of this kind of economic activity is not the same thing as selling a firm operating in these sectors to a foreign entity. FDI, in general, has been very good for the Canadian economy as long as foreign-owned firms, state-owned or otherwise, follow Canadian rules and regulations. To me, that's really the crux of the matter.
Having said this, I do not see generalized panic selling, and the market, as we've seen, has rebounded. What I hear is that, in general, government support measures and lenders that use liquidities, which are in turn supported by governments, of course, and the Bank of Canada, do, by and large, support their clients and provide the bridges, the lifelines, that allow companies some room to breathe and to continue operating through the emergency closures and a temporarily reduced demand.
Of course, some companies will not survive the crisis in their current form or will survive it only if they are allowed to restructure and refinance or become more sustainable under changed business models reflecting changes in demand and safety requirements, and in general, a different perceived risk return profile on the part of investors for different industries. I'm thinking of the airline industry, for example. As companies contemplate their future and seek more secure financing, or seek to restructure in some cases, foreign investment can again be a very useful way of providing capital to these companies or to channels through which capital is provided. I would again be careful of any knee-jerk reaction against FDI per se.
The other thing is that the changes these companies are going through are really a global phenomenon. It would be one thing if one Canadian airline company was alone in suffering, but all the airlines around the world are suffering, so it's not necessarily the case that competitors have the means to come in and pounce on Canadian firms. Again, I would be worried about imposing some new restrictions. Everybody is struggling, and while some investors will see opportunities for consolidation and perhaps even bargains, it's not necessarily such a bad thing to attract capital, including foreign capital, into these firms as they restructure, as long as this does not jeopardize public policy goals.
The trick is to give us the tools to quickly sift through investments that are potentially inimical to Canadian interests while retaining the door as wide open as we can to others. In the ordinary course of business, takeovers should be allowed, particularly as boards of public companies have more leeway now under provincial securities regulations to consider alternatives to a proposed takeover. This is something fairly recent.
What should this committee consider or recommend? It should think about clarity of criteria regarding any additional security over and above what we already have. This clarity could be obtained through examples or guidelines of what investment or investor might be considered problematic for Canada at the current juncture or going forward. It doesn't necessarily have to be rigid definitions that provide this clarity. It can be enhanced national security guidelines, for example.
I would also recommend swiftness of decisions on proposed acquisitions, with very clear guidelines. Swiftness of decisions is key to maintaining the balance between remaining open to foreign direct investment, with the benefits that FDI brings, and ensuring that the public interest is protected.
Having said this, my understanding is that it would be very difficult—certainly not easy—to change, in a timely fashion, the current thresholds that trigger the net benefit test. In this context, the key tool we can wield is expanding, in effect, the guidelines in the national security review to include matters that concern strategic questions of security and safety of supply and of potential systemic loss of otherwise competitive Canadian economic activity, as I fairly narrowly defined.
Last, we're thinking here about temporary changes, but I'm not exactly sure, to the extent we actually go through these changes, that they should be temporary. We could make them permanent. I think that would be very helpful to policy, going forward.
