Industry Committee on Jan. 27th, 2022

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

It's good to see you too.

Minister, my question relates to state-controlled and state-owned enterprises. Our committee, in the last session, recommended that where you do have acquisitions that involve state-controlled or state-owned enterprises, you would implement a fuller national review. I understand that there is a preliminary base and there is a look at acquisitions regardless, but the act does provide for a fulsome national security review.

Walk me through whether that did take place. If it didn't take place, why didn't it take place, given the acquiring company in this instance?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I appreciate that. That's a very good question.

You may have seen this in the new guidelines that we published, in section 7: “The Government will subject all foreign investments by state-owned investors, or private investors assessed as being closely tied to or subject to direction from foreign governments, to enhanced scrutiny”. That's the point I was trying to make to your colleague before.

I'm happy you asked the question, because any suggestion...and there were suggestions before by members to say, “Was that subject to enhanced scrutiny?” The answer is yes, absolutely, because that's exactly what the guidelines call for. But the suggestion that.... The national security process under the act, as I tried to explain, is a multistep process, but the national security review starts from day one.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Minister, the witnesses we heard yesterday emphasized what I think is a useful point, which is that if Canada decides on every single transaction on a case-by-case basis, then we miss the forest for the trees. If you want to have a broader strategy around critical minerals, you can't simply do it piecemeal and case by case. You have to take a step back and look at the broader strategy.

Walk me through how this particular transaction plays into a broader strategy. Do we do it on a case-by-case basis, or are we taking a step back and looking at the bigger picture?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Well, obviously transactions are reviewed on a case-by-case basis, but totally to your point, we're taking the big picture. That's what the guidelines were for. I would say—and I know you have a lot of experience when it comes to technology—that's why, at that time, in March of last year, I wanted to tell the world that if they intend to invest in Canada, if they invest in critical minerals, in strategic technologies or in any companies involving the personal data of Canadians, they will be subject to enhanced scrutiny.

That's exactly what I was trying to explain to the member before. This transaction and any transaction involving state-owned enterprises, under the new guidelines that I've put in place, will be subject to additional scrutiny, what we call “enhanced scrutiny” under the act.

[Nathaniel Erskine-Smith, Liberal, Beaches—East York, ON]

Thank you, Minister.

[The Chair, Liberal, Joël Lightbound]

Thank you, Minister. Unfortunately, that is all the time we have.

I now yield the floor to Mr. Lemire, who has six minutes.

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

Thank you, Mr. Chair, and Minister.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Good evening; how are you?

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

I'm very well, thank you.

Thank you for being here today.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I'm pleased to see you again.

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

At our meeting yesterday, we heard from Mr. Wesley Wark.

In response to a question, he mentioned that it was impossible to really know whether the acquisitions made by China were made for strictly commercial or rather geostrategic reasons. In his view, more and more national security reviews should definitely be done; in fact, they should be done systematically.

What do you think about that?

Your recent mandate letter calls for a modernization of the Investment Canada Act to strengthen the national security review process and better assess and mitigate economic security threats arising from foreign investment.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Thank you for asking that question, Mr. Lemire.

That is exactly what I tried to do, back in March, by issuing new guidelines. We set out a very clear framework under which transactions involving critical minerals, for example, are subject to even greater scrutiny. That is what we did in the case of Neo Lithium and that is what we will continue to do.

As you said, you have to look at each transaction, but you also have to look at all transactions. In the case of the TMAC mining company in Nunavut, we did not hesitate to block the transaction when a foreign investor wanted to buy the company. I also asked China Mobile to divest its assets in Canada.

You're right, and that's why we consult our allies when necessary. That's why we have a rigorous process that works well.

I continue to talk to my partners internationally about supply chains to see how we can have reliable partners in Europe and the United States. Also, in Quebec, we are building a whole battery ecosystem. We've already talked about that. Of course, we are paying a lot of attention to all the issues regarding lithium, manganese, graphite, nickel and cobalt.

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

At the previous committee meeting, Mr. Wark stated that only 1% of foreign acquisitions of Canadian companies were subject to a national security review, which seems very low to me.

Do you believe in the effectiveness of the Canadian national security review process and the rules in place? Don't you think that the criteria on which the decision to review or not to review is based should be broader? Do you take into account, for example, the specifics listed by the Quebec government in its own battery development strategy?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I do work a lot with Quebec. However, I would like to come back to one thing, because I think the way in which the Investment Canada Act works is misunderstood.

The investigative process and the minister's delegated investigative powers begin on the day we are informed of the transaction, either by notification or by public information. There are a number of stages in this process, but the national security investigation begins on day one. I think there was a reference to another step in the process, which comes later. So I want to explain to Canadians as well as members of the committee that the national security review begins on day one and continues throughout the process.

When we determine that there are reasonable grounds to believe that the transaction could be injurious to national security, we take the process further. As I explained at the outset, it is important to understand how this works, and I would be happy to discuss it with members of the committee.

People do not generally know that the analysis starts from day one, not after 45 days. It even starts as soon as we become aware of a transaction through public information. From that moment, we start our investigation.

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

As a result, there may also be a transparency problem.

Do you or do you not support the government being more transparent in this context, and being able to publicly explain the basis on which it made its decision to proceed or not to proceed with a national security review?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

I'm trying to be as forthright, open and transparent with you as possible, but you have to understand that we have to factor in national security elements, as well as the confidential information that companies provide to us.

The Investment Canada Act framework is very rigid in terms of confidentiality. That's why I'm trying to be as transparent as possible tonight. If you wish, and if the chair of the committee wishes, I can ask the officials to send you the latest annual report in the next few days, which will provide you with even more information on the transactions examined during the last period, as well as on the process. We have made sure to explain it well, so that people understand that the national security review starts from day one, and continues throughout the transaction.

If it will give the members of the committee more information and more insight, I will be happy to do so.

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

Thank you for that, Minister.

As you know, the committee has produced a study on the Investment Canada Act. I assume that you are aware of it.

So what recommendations from our report, tabled last spring, have you implemented, or do you plan to implement?

I will read you recommendation 4 from the committee:

That the Government of Canada protect strategic sectors, including, but not limited to: health, the pharmaceutical industry, agri-food, manufacturing, natural resources, and intangibles related to innovation, intellectual property, data and expertise.

That's kind of what the Neo Lithium issue is all about.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

The new standards that I put in place last March are going in the direction that you want, as the committee recommended.

If there are areas you feel are not sufficiently covered, I will always be open to making additions. The idea is to attract investment to us, because that allows us to grow our companies, but to do so while always protecting national security and having that global vision to protect our supply chains.

I thank the committee for its recommendations. Of course, we always take them into account.

[The Chair, Liberal, Joël Lightbound]

Thank you, Minister.

Mr. Masse now has the floor for six minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Welcome, Minister, to our committee.

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

It's good to see you.

[Brian Masse, NDP, Windsor West, ON]

It's good to see you as well.

With regard to your opening comments, you mentioned that the act is agnostic as to where the investment is coming from. I want to make sure I'm clear on this. You're saying, then, that if it were an investment from Russia, it wouldn't matter that we might get into some conflict with them over Ukraine. Whatever our current situation with China is, that has no influence whatsoever. There's no political connection. We have Syria and all kinds of different countries out there with different records. This government, as did we, pushed, finally, for the new deal with the United States, to get labour and environment in the agreement.

Are you saying there is no connection whatsoever between the country an investment comes from and the moral and ethical issues of what that nation is doing?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Well, I would say, Mr. Masse, you're a very experienced member of Parliament. We look at a number of factors. In the case of Neo Lithium, we looked at the mineral, the location of the operation, and the impact on the supply chain. As a former trade minister and foreign affairs minister, I not only looked at national security under the act, but for those we have listed.... As you may recall, in March I even expanded it to make sure that the world will know that if they intend to invest in Canada, we welcome that, but we will apply enhanced scrutiny, as we did with respect to critical minerals.

I'm very well aware of the geopolitical circumstances, and we are consulting with our allies. You may have seen that, when it comes to supply chains, I have been talking to colleagues in Europe and in the White House to say we should have trusted partners in terms of our supply chain.

[Brian Masse, NDP, Windsor West, ON]

I appreciate that, but I guess this one strikes a bit of a pattern that there is not much of a change. We know Parliament has already spoken about the genocide of Uighurs, and now here we are, back with something that we couldn't even put on pause from a state-owned Chinese company. We still don't have a decision on Huawei.

Why wouldn't this government start putting a stronger lens on human rights and—where there is some support even across political lines on issues—stopping state-owned companies from interfering with Canadian companies or buying them up?

[François-Philippe Champagne, Liberal, Saint-Maurice—Champlain, QC]

Well, Mr. Masse, you would know that when we do an investing in Canada process, it's a quasi-judicial process. In the case of Neo Lithium, I just want to reassure you and all Canadians that we did a review to ensure that there was no national security risk. That is the conclusion that was reached by the different departments involved and our national security intelligence agencies.

To your questions, you can rest assured that I look at these things very seriously. We will never compromise Canada's national security. I'm very well aware of the geopolitical circumstances.

You will recall what I did on China Mobile. You will recall that I did not hesitate a moment to act on TMAC, the mine in Nunavut. I will continue to use all the powers vested in me, as minister under the act, to protect national security and our supply chain in Canada.