Evidence of meeting #24 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 review.
A recording is available from Parliament.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Thank you, Madam Chair.
Thank you to each of the witnesses. I found today's testimony very informative.
I'll start with Mr. Balding, if I may. On several occasions during the course of your testimony, you have made it known that you're not familiar with the Investment Canada Act. Is that correct?
Associate Professor, Fulbright University Vietnam, As an Individual
Yes, that is correct.
Liberal
Ali Ehsassi Liberal Willowdale, ON
As I understand, having listened to you, you're concerned about predatory action by Chinese state-owned enterprises. Is that correct? I think you consistently emphasize that these SOEs are attempting to avoid scrutiny so far as their investments are concerned.
All of that is to say that the Government of Canada, the Department of Industry, released a statement on April 18. I'll read it to you, and you can tell me whether there is any way those SOEs could avoid scrutiny: “the Government will also subject all foreign investments by state-owned investors, regardless of their value...to enhanced scrutiny”.
Does that put to rest some of the concerns you have highlighted?
Associate Professor, Fulbright University Vietnam, As an Individual
Thank you for that piece of information.
It does not really, and let me explain why.
In China, a state-owned enterprise is a very specific incorporation classification. It's like LLC, partnerships, or things like that. SOE is a very specific form of incorporation.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Mr. Balding, do you know the national security provisions in the Investment Canada Act? Those can be used. Are you aware of that?
Associate Professor, Fulbright University Vietnam, As an Individual
Yes, and here's what I'm leading up to. There are many companies that do not qualify as state-owned enterprises that are also, first of all, either acting at the behest—
Liberal
Ali Ehsassi Liberal Willowdale, ON
But, Mr. Balding, even if that were the case—even if, let's say, for whatever reason, the government is not aware that this is essentially a state-owned enterprise—there are national security provisions that allow you to look at every single investment. Are you aware of that?
Associate Professor, Fulbright University Vietnam, As an Individual
Yes, I learned that today. I would just—
Liberal
Ali Ehsassi Liberal Willowdale, ON
If you'll allow me, I will now turn to Mr. Wakil.
Welcome, Mr. Wakil. I know you have an abundance of experience. You've been one of the most distinguished practitioners in this area. In your [Technical difficulty—Editor] intellectual property could fall into the wrong hands. Does the Investment Canada Act provide adequate protection?
Partner, Torys LLP, As an Individual
I only got the last bit of that question. My apologies, I had audio difficulties.
Liberal
The Chair Liberal Sherry Romanado
Mr. Ehsassi, could you please repeat the question? You were cutting out. I've stopped the clock.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Sure.
Mr. Wakil, I know you're very experienced in this area—over 20 years, I would say. Mr. Balsillie has identified a real concern about intangible assets, intellectual property and things of that nature. Do you think the Investment Canada Act, as it's currently constituted, protects against the acquisition of intellectual property assets?
Partner, Torys LLP, As an Individual
I share Mr. Balsillie's concerns that there are gaps in the legislation. I think the legislation as it's currently drafted does a very good job with respect to monitoring the acquisition of controls of Canadian entities. In certain instances, there may be jurisdictional scope for an acquisition of an intellectual property asset to be caught by the Investment Canada Act and reviewed by it.
I think it would be worthwhile to do exactly what Mr. Balsillie says and think about whether or not there are any gaps. I think there are arguably gaps with respect to its scope, and that is with respect to transactions that do not involve acquisitions of control, or acquisitions of ownership interests in other entities or assets. There could be situations where technology transfers undermine national security but are not caught by the jurisdictional scope of the act.
I do think the act does a great job, and my response to the question that the committee is considering in these hearings, with respect to whether or not there ought to be threshold reviews or moratoriums, is that the act doesn't need to be changed.
With respect to non-COVID-specific issues that are broader in nature, should we periodically re-evaluate the act and whether or not it needs to be upgraded? Yes, I think we should.
Liberal
Ali Ehsassi Liberal Willowdale, ON
Very briefly, Mr. Balsillie, as for the concerns you've raised, do you want to see all of these changes in the Investment Canada Act framework, or can some of the things that you're concerned about be addressed outside the Investment Canada Act?
Chair, Council of Canadian Innovators
The ICA has to be profoundly revisited for the nature of the contemporary economy.
Liberal
The Chair Liberal Sherry Romanado
Our next round of questions goes to MP Patzer.
You have the floor for five minutes.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Thank you, Madam Chair.
I'm going to start with Mr. Balsillie here. I want to go back to what you told us a few weeks ago, and I'll start with a quote:
...we have to be honest about the degree to which our policy community has been captured by foreign interests.... A sovereign Canada is not their job and not what they're interested in, so we have to be very cautious about the degree to which foreign companies have captured the regulatory mechanisms and policy-making of our country. I see it every day....
We're studying this closely now. Could you get a lot more specific on these points? What are you seeing from foreign companies and policy-makers that works against our sovereignty?
Chair, Council of Canadian Innovators
What I see is our policy-makers inviting foreign companies to take our sovereignty and prosperity away. That's why I said in my comment that we're talking about a second bolt on the front door while we advertise the screen door on the side is open. We have no effective policies for the nature of the contemporary economy, and I think you could begin by creating a list of strategic technologies, which every advanced country is doing.
The U.S. is revisiting that right now in key sectors of their economy. We have not done that. They list the technologies, they list the companies, they list the researchers and then they review this very carefully. Then they have a comprehensive spillover framework so that the nature of any investment is taken through the lens of the nature of the spillovers for how these technologies work. Those are two steps we should have done 20 years ago.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
The government has talked about enhancing scrutiny under the ICA for public health and critical goods and services. There are areas that should be considered critical, but the government is not declaring or treating them as such.
Does it make sense to define our energy sector and agriculture as critical? If so, would that include oil and gas?
Chair, Council of Canadian Innovators
You have to look at the nature of the technologies that have economic and non-economic effects, because of the cross-cutting nature of it. I wouldn't say agriculture broadly or energy broadly, but I would say aspects of renewable energy, aspects of clean agriculture and aspects of AI that apply to those. If we want to be sovereign, secure and prosperous in those realms, we have to define the specific technologies and spillover structures.
I've laid out a framework that is rather straightforward and considered convention by innovation economists globally and other nations. I suggest we adopt what others do.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Being industry-specific, though, are there any other industries that may or may not be considered critical that should be protected in the Canadian interest?
Chair, Council of Canadian Innovators
Sure. We could look at the U.S. right now. This week they're studying water treatment and sanitation. Next week they're studying emerging fintech. Last week they did AI and quantum. Do we know who's the leading holder of quantum technologies in Canada? Do we know how many patents they hold? Would they hit our threshold? The week after, the U.S. is doing space and space technology.
Have we done any of these exercises for any of our sectors that affect us economically and non-economically? I'm deeply involved in these files and the answer is no.
Conservative
Jeremy Patzer Conservative Cypress Hills—Grasslands, SK
Mr. Balding, there are concerns that our natural resources, which the government doesn't seem to care about developing in the first place, are vulnerable to foreign acquisition, but I want to bring up the upcoming shift to 5G.
Canadians were already worried about Huawei before the COVID economy, but now we have to consider it even more. You mentioned that China has a list of targeted sectors. How likely is it that it includes our communications companies? Would there be subtle or indirect methods for a takeover?