Industry Committee on Feb. 27th, 2020

[The Chair, Liberal, Sherry Romanado]

Good morning, everyone. Welcome to the Standing Committee on Industry, Science and Technology, meeting number six.

Pursuant to Standing Order 81(5) we are studying the supplementary estimates (B) for 2019-20.

We have with us today from the Department of Industry Mr. Simon Kennedy, deputy minister, Innovation, Science and Economic Development Canada, as well as Mr. Douglas McConnachie, our assistant deputy minister and chief financial officer, corporate management sector, Innovation, Science and Economic Development Canada.

Gentlemen, you will have 10 minutes to present, followed by a round of questions. The floor is yours.

[Simon Kennedy, Deputy Minister, Department of Industry]

Thank you, honourable members.

I am pleased to be here today before your committee.

Madam Chair, you have already introduced my colleague Doug McConnachie, who is our department's chief financial officer.

This is my first time appearing before this committee in some years, and I'm pleased to be back in front of all of you to answer your questions.

Everyone at ISED appreciates the work your committee does on important matters of economic policy.

Everyone at Innovation, Science and Economic Development Canada appreciates the work your committee does on important economic policy matters.

Allow me to move on to what we're here to discuss today, the tabling of the supplementary estimates (B) for 2019-20. I hope to be able to support you in your work by clarifying these estimates, briefly discussing the department's priorities and answering your questions.

Madam Chair, I am happy to report that, despite a challenging global economic environment, Canada's economy remains resilient.

Our recent macroeconomic performance has been solid, with GDP growth expected to be second among the G7 countries for 2020 and 2021, behind only the United States.

Unemployment rates are near historic lows, and corporate profits are stable.

What's more, in addition to strong employment gains, wages have increased. At 3.4%, 2019 marked the strongest wage growth of the decade. Sustaining this employment growth and the wage gains will be crucial to supporting incomes for Canadian households.

ISED's objective is to support economic growth for the benefit of all Canadians through smart policies and investments to promote a more dynamic and innovative Canadian economy. Many of these investments are reflected in the supplementary estimates that we are here to discuss today. They support key government priorities, such as science, research, clean technology, tourism and women entrepreneurs.

These investments include funding for Canada's digital research infrastructure strategy, the women entrepreneurship strategy and the Canadian experiences fund. The estimates also include investments in the RADARSAT constellation mission to help provide a better picture of our planet from space and the sustainable development technology fund to support clean tech.

I will now discuss my department's priorities in support of the government's economic agenda.

Let me begin with the government's support for science and the application of new knowledge. Modern economies, as this committee would well know, depend heavily on the generation and application of new ideas, which make investment in science and research critical.

That is why our department has focused on applied and discovery-based science and on ensuring that we do everything we can to remove barriers that stand between research and commercial success.

Since 2016, the government has invested more than $10 billion in science and research activities. This includes significant funding for key institutions engaged in the Canadian science enterprise, such as the National Research Council.

These new investments in science are being complemented by other federal efforts to strengthen industrial ecosystems across the country.

The innovation superclusters initiative is a good example. The aim of this initiative is to accelerate innovation and foster stronger connections among all players in the ecosystem, from large anchor firms to start-ups.

To date, the superclusters have enlisted more than 1,700 member organizations. They have also invested in 40 projects. To date, this initiative represents an $85-million investment, which has leveraged $143 million from industry and other partners.

Another of our major instruments to support innovation and job creation is the strategic innovation fund, SIF. Through the SIF, my department is making investments to strengthen and expand the role of Canadian firms in regional and global supply chains, supporting economic strategies and attracting investments to create new and well-paying jobs.

Since the program was launched in 2017, the strategic innovation fund has supported 65 projects, including 22 projects directly supporting the scale-up of Canadian-owned small and medium-sized businesses.

With a federal investment of $2 billion, the SIF has leveraged more than $43 billion in total investment and helped to create and maintain more than 67,000 jobs. Nearly $1 billion of this investment will support 26 projects that contribute to the adoption and development of clean technology by Canadian business.

Clean technology is another important emerging area of strength for our economy, and the department is working to support the growth of Canadian clean-tech firms. Let me highlight one key program in the efforts to support the clean-tech industry: Sustainable Development Technology Canada, SDTC.

As of March 2019, SDTC has invested in almost 400 companies supporting more than 13,000 jobs. Estimates indicate that these companies have reduced greenhouse gas emissions by more than 18 megatonnes annually.

Beyond our major departmental initiatives, we are also making a sustained effort to improve Canadian entrepreneurs' access to our programs and services.

You will probably not be surprised to learn that some entrepreneurs have told us they have had difficulty navigating federal innovation programming.

In response, the department developed the Innovation Canada portal to make it easier and faster for Canada and its innovators and entrepreneurs to find the federal, provincial and territorial government programs that will help them grow and innovate. Since its launch just over two years ago, 1.5 million business people have received a tailored list of government supports through that website in less than three minutes.

We are also working to improve services for early stage innovators and high-growth firms by doubling the number of innovation advisers who, in partnership with other government officials, offer accelerated growth service, AGS. The AGS is a whole-of-government advisory service delivered directly in boardrooms, stores and plants in communities across Canada.

I mentioned the importance of supporting clean tech earlier.

To advance this aim, the government also launched the clean growth hub, a whole-of-government focal point for clean technology, in January 2018.

Since its launch, the clean-tech hub has helped more than 1,400 businesses and organizations at all stages of innovation and growth find the programs and services that fit their needs.

Finally, our department is working to support the government in its efforts to modernize the rules for the digital economy and ensure that Canadians can have confidence in the digital world.

Canada's digital charter is a principles-based framework that sets modern rules for a digital and data-driven economy. It is designed to rebuild the trust of Canadians.

I think it's obvious that Canadians need to be able to live, work and play safely and securely in the digital world, and our businesses must be able to take full advantage of the online economy. I am pleased to report the department is working towards changes that will help achieve those goals.

In parallel, to help ensure that Canadians have access to the digital economy in all parts of the country, our department is working to support the government in its effort to lower wireless prices. We will also continue to roll out programming to bring high-speed broadband coverage to Canadians in more rural areas.

Let me close by emphasizing that ISED is committed to working closely with industry, academia, other stakeholders and certainly your committee to build an innovative, prosperous and sustainable Canadian economy.

Thank you, Madam Chair and committee members, for your time and for providing me with the opportunity to highlight our priorities and to update you on what we're doing.

I would be pleased to answer any questions you may have.

Thank you very much.

[The Chair, Liberal, Sherry Romanado]

Thank you very much.

We'll begin our first round of questions at six minutes per person.

Our first round begins with Ms. Gray.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Thank you, Madam Chair.

Mr. Kennedy, Innovation, Science and Economic Development Canada awarded a contract to Ernst and Young for $1,001,998 for the development of an internal trade barriers index, which was supposed to be delivered by the end of 2016. In March of 2018, your department confirmed that the report was completed and was being used by government officials to identify regulatory reconciliation priorities related to the implementation of the Canadian Free Trade Agreement.

Can you table the internal trade barriers index today to this committee?

[Simon Kennedy]

Madam Chair, I'll have to take that request away and come back to the committee.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. When do you think you might be able to table it?

[Simon Kennedy]

I can come back to the committee with a response in, say, the next week or two. Certainly in short order we can come back to you with the response.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great.

Mr. Kennedy, can your department table the report showing how the federal government has assessed that interprovincial trade barriers are costing Canadians?

[Simon Kennedy]

Madam Chair, maybe in the same spirit, I think I'll have to....The member obviously has a keen interest in internal trade and the work we've done, and I'd be pleased to come back to the committee with a response along those lines.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Great. Thank you very much.

Mr. Kennedy, as you're surely aware, there was an amendment to the Canadian Free Trade Agreement on January 15 of this year to allow parties to the agreement—and parties are defined as federal, provincial and territorial governments—to remove or narrow their own party-specific exemptions more quickly and efficiently.

Can you table the federal government's analysis of this amendment that was announced on January 15?

[Simon Kennedy]

I think, Madam Chair, what I might suggest is that, if there is a series of questions involving the free trade agreement and access to some of the data we've produced, I might take the request back globally and perhaps come back with an assessment of what we're able to share and some of the work we've been doing in this area. I would be happy to try to illuminate for the committee some of what we're doing.

[The Chair, Liberal, Sherry Romanado]

Thank you.

Again I will remind members that we are here to talk about the supplementary estimates (B). For requests that are outside the scope of them, as Mr. Kennedy said, we'd be happy to have those reports sent to you.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Madam Chair, some of these questions are coming from page 2-50 of the supplementary estimates (B), where it is noted that $175,000 from the Internal Trade Secretariat Corporation was reallocated. This falls under Vote 10b relating to the Department of Industry.

The Internal Trade Secretariat Corporation is funded through grants from Industry Canada, which sought more than $67 million. The work of the Internal Trade Secretariat from previous years carries through into this year, so it's a matter of getting an assessment of why there's a difference in budgets, why there was a budget change and, if the work has been completed, what stage they are at—and also, of carrying through to this year.

That's where my questions are coming from.

[The Chair, Liberal, Sherry Romanado]

I'm not ruling it out of order. I'm just mentioning that he may not have the information with him.

[Simon Kennedy]

Madam Chair, the chief financial officer could illuminate this specific item in the estimates, if that's of interest to the member or to the committee.

[Douglas McConnachie, Assistant Deputy Minister and Chief Financial Officer, Corporate Management Sector, Department of Industry]

Certainly, Madam Chair.

The item referred to by the honourable member relates to a small internal reallocation that was made to cover an exchange rate difference. The agreement we have that you've referred to is actually paid in a foreign currency, whereas the authorities that are provided are in Canadian dollars. Therefore as the currency rates fluctuate from one year to the next, it's necessary to perform small reallocations to make up for that differential.

There is, however, no net change in cost for the initiative, other than that small differential.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay, thank you.

Also, can you tell me whether work has begun on narrowing or removing any federal-specific exemptions? Again, this falls under the department and part of the budget. Can you table a report on which ones have been worked on?

[Simon Kennedy]

Madam Chair, to address the member's question, I would include this in a return to the committee. We certainly can look at what kind of response we could provide on the issue of internal trade and the work we've been doing.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Okay. I have another question.

Mr. Kennedy, the federal government created a Regulatory Reconciliation and Cooperation Table work plan, abbreviated as the RTC—this is for 2019 and 2020—listing the targeted timing for agreements on various items.

Can you confirm what input your department had in creating this work plan?

[Simon Kennedy]

Madam Chair, I would have to come back on that as well. For the honourable member's benefit, we've been doing a lot of work on regulatory reform on a number of fronts. I would want to make sure that I'm answering the right one, because we are doing quite a bit of work on the regulatory front on a number of different tables.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Are you able to table the report on whether the agreements that were targeted for completion in 2019 have been completed?

[Simon Kennedy]

Madam Chair, again I would probably come back, as part of my response to the committee generally, on that question.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

Since a lot of this flows into the budget for this year, I'm surprised that you don't have some of this information prepared.

The other question I have is this. There was a recommendation from the program directly under your department.

Can you table the report on whether those 23 early action recommendations have been completed or whether they are being carried over into 2020?

[Simon Kennedy]

Madam Chair, let me just indicate that there is obviously a lot of work going on in the ISED portfolio across many fronts. I am happy to take back requests on very specific questions about documents that may have been prepared and come back to the committee.

[Tracy Gray, Conservative, Kelowna—Lake Country, BC]

What does fall under your department is a lot of regulatory reconciliation. I'll just say, Mr. Kennedy, that the provinces are getting ready to table interprovincial trade issues.

I know that Alberta, for example, and also many premiers, are committed to increasing the flow of trade within Canadian borders. Would you not then say that now is the time to work on this with your department to fulfill some of these regulatory reconciliations and move forward on what the provinces are working on? The provinces seem to be working forward on this, but the federal government is not.