Industry Committee on June 15th, 2020

[Christopher Balding]

They absolutely have a lengthy list, not just of companies but also of specific intellectual property that they're interested in, and they use a variety of methods. For example, even though we're using Zoom, China has.... Basically, the underlying technology in Zoom is used widely within Chinese companies and it's going to essentially flow over the exact same network. Even if you were to leave Zoom, there are Canadian companies using basically the same underlying set of code that is going to take that communication through China.

It's not just direct-investment takeovers. There are many channels through which China seeks to obtain that level of interest, and telecommunications would be a key sector for them.

[Jeremy Patzer, Conservative, Cypress Hills—Grasslands, SK]

I think I'm at the end of my time, so I'll cede the rest of what I have.

[The Chair, Liberal, Sherry Romanado]

Thank you very much, MP Patzer.

The next round of questions goes to MP Jowhari.

You have the floor for five minutes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you, Madam Chair.

Once again, welcome, witnesses, to our committee. It is very informative.

Mr. Balsillie, I'm going to focus my whole five minutes on asking questions and exploring IP and the contemporary economy that you talked about, IP and big data.

As I was prepping for the meeting, I was looking at the number of applications that have been submitted, the dollar value, the threshold, etc., but nowhere could I find the number for the IP associated with these investments. When I looked at the $428 million in assets, I was trying to get a definition of the asset, and whether or not the IP includes the asset. I was looking at different state-owned organizations, for which it's $1.6 billion, or $1.07 billion.

I come from a management consulting background. I worked with a lot of Fortune 500 companies as well as small businesses. Even from the Government of Canada industry department, which is spending $2.2 billion scaling up organizations—and these guys come with a lot of IP—I could not find any indicators of the number for the IP going to foreign investment or foreign countries, regardless.

I know most of our investment is going to the U.S., 54%. The rest is going to the EU at 24%, and 5% to China, but I could not get any data around IP. Do you have some data around where our IP is going?

[Jim Balsillie]

Yes, there was a recent IRPP study, which basically said that an overwhelming proportion of Canadian IP is leaving the country. As well, WIPO recent reported that we're the only large AI country that's had a decline in patents filed in the past three years.

For 20 years, Canadian taxpayers have funded foundational AI IP that is transferred to Google without any review, and Google has said it's in all their products and worth billions of dollars a year in their profits. Seventeen of our top researchers in strategic telecommunications are working with Huawei, with no form of strategic review in either research funding or our ICA.

As I said, we have a big screen door at the side with a sign that says, “Please enter here”, while we're talking about another bolt on the front door.

[Majid Jowhari, Liberal, Richmond Hill, ON]

What could we change in the short term and in the long term? You're talking about updating a new framework. You're saying we need to update it, and immediately, that we need to bring IP and big data into it. I agree 100%. What can we do in the short term as an amendment, as a recommendation, and in the long term?

[Jim Balsillie]

As I said, in the short term there are two things you should do right now. First, create a list of strategic technologies and review them, just as other nations have been doing throughout 2019 and 2020. The U.S. is working through specific sectors right now, and it's all on the web.

Second, I would have an updated framework that codifies the effects for what they really are, not just some arbitrary dollar level, and not jobs when it's a reshuffling of jobs for sectors that have zero or negative unemployment.

[Majid Jowhari, Liberal, Richmond Hill, ON]

The government has identified six sectors, what we call tables. We recently added two more around food distribution and health. Isn't that sufficient as a tool to use, or do we need to further modify that? What, to you, would be a strategic technology that's not covered under the act?

[Jim Balsillie]

I'm deeply aware of what those tables are doing, and in no way, shape, or form have they looked at this kind of role for the purposes of protecting us from a national strategic point of view, based on our geostrategic realms for investment in technologies. If they put that in the mandate, that's fine. Then they'll come back and say the very same thing: Create a list of technologies and sectors that matter; create a framework that you evaluate, and make sure it's a proper approach for most—

[Majid Jowhari, Liberal, Richmond Hill, ON]

With 30 seconds to go, could you give me the top three that you recommend?

[Jim Balsillie]

Do you mean technologies? Without a doubt, AI and quantum should be in it, and other things like telecommunications that go with it, renewable energy, all the biomedical and biotechnology, emerging fintech and space technology. Those also happen to be the eight that the U.S. is doing.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Regardless of the threshold, the valuation, the asset or the benefit, should any organization that has an IP in that area be considered for a review?

[Jim Balsillie]

It should, 100%.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Thank you.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

Next up is Mr. Lemire.

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

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Thank you, Madam Chair.

My question is for Mr. Wakil.

In your presentation, you talked about the possibility of progressively amending the act. In my opinion, to be able to amend the act, we must understand it, and to understand and assess it, we will need transparency.

Would you agree with providing access to archives and with reviewing ministers' decisions to determine what reasons they used and what conditions they imposed under the Investment Canada Act? Would you be open to doing that in order to better understand the act's weaknesses?

[Omar Wakil]

I would be agreeable to a proposal to engage in an ex post review of investments to measure the effectiveness of the Investment Canada Act.

With respect to the specific proposal or suggestion to open the archives, I would hesitate to do that. There are statutory protections for the confidentiality of information that investors have provided to the government in the context of their reviews. I think an opening of the archives would risk breaching those statutory provisions, and investors take great comfort in the fact that their sensitive business information will be treated confidentially in the context of a review.

Some form of review to assess success or failure, I think, should always be welcomed and endorsed, but the specific opening of the archives I would not recommend.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Nevertheless, we see that the minister is not currently accountable.

Do you think we would benefit from making sure that the minister is accountable and transparent relative to his obligations?

[Omar Wakil]

I have nothing to add to the prior response.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I was thinking more about the current situation. Should the minister be more transparent in terms of his decisions right now?

[Omar Wakil]

No, I don't think there is urgent need for greater transparency with respect to net benefit reviews.

With respect to national security reviews, as per my prior statement, I think it would be helpful, as we have experience with a national security review regime, for the government to consider whether or not additional case-specific disclosure would be possible in order—

[The Chair, Liberal, Sherry Romanado]

Unfortunately, that's all the time we have for that round.

[Omar Wakil]

Okay.

[The Chair, Liberal, Sherry Romanado]

We will now move to MP Masse.

You have the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Madam Chair.

Part of the challenge we have right now is the fact that the Investment Canada Act was changed in 2013 under the Harper administration, through a budget bill. What that meant was that there were no committee undertakings with regard to this as a specific file. In fact, in the subsequent Parliament, I had a motion to do just that, which didn't come to fruition either.

What that means is that we've never had a robust discussion, nor an opportunity to discuss the intricacies and also the changes necessary for updating. In fact, we saw the threshold go up, in 2017, to $1 billion. All this was done with zero public input with regard to an actual bill and zero consultation open in a democracy.

Mr. Balsillie, do you think there would be an interest from stakeholders in various sectors to actually now participate in a more wholesome review of the legislation, given the fact that even when we talk about the review that was done in 2013, prior to that it was decades before there was anything meaningful done on this bill?