Industry Committee on April 26th, 2023

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Good afternoon, Minister. We're pleased to welcome you today.

No one here will be surprised to learn that the questions I'm going to ask today will be on critical minerals.

Could you, Minister, describe the protections for critical minerals in Bill C‑34?

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

Under Bill C‑34, giving notice is a requirement. We want to be aware of these investments as quickly as possible so that we can conduct a national security review.

The committee members and my colleagues have definitely seen that I'm prepared to use the act on behalf of of Canadian interests. We recently blocked three transactions by Chinese companies that wanted to acquire certain activities or assets in a number of mines here in Canada.

The bill will give us more tools. The required notice is one example of this. It will enable our teams to conduct a national security analysis. The principle underpinning the bill is to have as many tools as possible in the tool box to protect national security. Critical minerals are definitely in the picture here.

Earlier on, a member asked a question about Volkswagen. Volkswagen came to Canada because of the qualified workforce, the ecosystems, and access to critical minerals, renewable energy, and the market.

My concerns include not only protecting the mining of our critical minerals, but also the refining thereof. The idea is to keep the added value of these resources here in Canada rather than exporting raw materials to other countries.

[Viviane LaPointe, Liberal, Sudbury, ON]

For the Minerals Security Partnership, can you explain how we work with our allies on common national concerns in connection with critical minerals?

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

As you know, we are in partnership with our colleagues in the United States and Europe. Bill C‑34 includes a provision that will enable us to exchange information with our colleagues and allies around the world.

It's an important provision, because of what we can see happening today in terms of development. For example, state or non-state stakeholders could purchase part of a technology in one country and another part in a different country and end up with a dual purpose product, meaning both military and civilian, that could eventually prove harmful to Canada's national security.

From that standpoint, the provision in the act that allows for the exchange of information with our partners is important for the protection of national security. As you know, I was at one point the Minister of Foreign Affairs. Over the years, I encountered instances of companies purchasing components in various countries, a practice that enabled them to eventually make a particular product. Unless we exchange information with our allies, including the Five Eyes, things like that could take place under the radar.

This provision in the bill is essential because it will enable us to work more effectively with our partners. Given how quickly quantum technologies and advanced digital technologies are developing today, we need to be able to exchange information with our American, British, Australian and New Zealand partners when we carry out a national security study, to ensure that we understand all the repercussions.

[Viviane LaPointe, Liberal, Sudbury, ON]

Will this bill contribute to a reduction in potentially harmful foreign investment in critical minerals?

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

Definitely. I think, in fact, that this is something we anticipated. What I want for the country is for the bill to provide even more tools.

For example, it would no longer be the Governor in Council, but rather the minister, who could extend review periods. This would give intelligence services more time to do their work. And then there is the exchange of information. That was a concern shared by several of our opposition colleagues who were in government. We want to give the security organizations more time to do their work.

Then there's the whole issue of undertakings that have to be submitted in compliance with the bill. This, for cases of national security, would enable us to have legally binding undertakings.

This set of tools will enable us to better defend Canada's national security in terms of investment.

Going back to the question asked previously by one of our colleagues, Canada attracted a record number of investments in recent years, and that's a good thing. Nevertheless, these investments have to benefit Canadians. I believe we were able to do that during these years, but the bill will certainly be useful to future ministers, becausethey will have more tools in the tool box.

[Viviane LaPointe, Liberal, Sudbury, ON]

I think I have enough time for one last question.

In your opinion, what is the most significant change this bill will make in terms of critical minerals?

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

The most important aspect of Bill C‑34 is the provision that allows the minister to extend the national security analysis period. In these matters, the agencies have a lot to look at. I believe that the guidelines we have come up with, meaning the four policies I previously announced, send a very clear signal to markets about critical minerals: we take this issue very seriously and allow acquisitions by state enterprises only in special cases, because we know that it's a key sector for Canada's economy and for several of its allies

We want to develop these resources and build our economy here. As I was explaining it earlier, what we want to do is not just mine and export natural resources. The idea is to mine them, refine them and keep the added value here in Canada. That's how we're going to go about building a strong economy.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Lemire, you have the floor.

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

Thank you, Mr. Chair.

In your opening address, Minister, I expected you to mention the Huskies' victory over the Cataractes de Shawinigan in the playoffs.

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

I got wrapped up in our colleague Mr. Masse's accomplishments.

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

I wasn't able to get you to bet, but I nevertheless amicably told you that the Huskies would win in five games, and I would like to officially report that that's what happened.

Bill C‑34, which focuses strictly on national security, is not doing anything about the fact that Quebeckers and Canadians are gradually losing control over their own economy. That's why we are asking the government to table another bill to modernize the whole Investment Canada Act rather than just the section on national security. National security is all very well, but economic security is also important.

You decided not to do anything about the thresholds. Why was lowering the thresholds not part of the Investment Canada Act strategy?

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

The key focus of the bill was national security because that's what generates the most interest. I would nevertheless tell you that in the analysis of national security, we were able to do a number of things to protect the country's economic interests. One example is the Paper Excellence Group, in which you are keenly interested, where we were able to obtain undertakings to protect the economic interests of Quebec and Canada.

Moreover, the new provision for filing these undertakings will also enable us, whenever we are doing a national security review, to obtain binding undertakings. That's what our American friends often do to protect their national interests.

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

I repeat that Quebec's economy remains open to the world, as you know, and foreign investment is essential to its economy. And yet from 2009 to 2019, only 1% of acquisitions were reviewed under the Investment Canada Act.

Could more still be done to further protect the head offices of our companies? Small and medium-sized enterprises are central to the Quebec economy, perhaps to a greater extent than in the rest of Canada. How can we protect our SMEs and send a clear signal that we wnt to keep the economic development of our enterprises and our strategic niches in Canada?

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

I have the same concern as you on this, Mr. Lemire. Protecting the interests of Quebec and Canada is of course always among my objectives.

I have a table on national security reviews which shows that they have been increasing in number. In 2017, there were four exhaustive national security reviews. This increased to 10 in 2018, dropped to nine in 2019, but then rose to 24 in 2020, 2021 and 2022. So you can see that over time, we have been doing more and more national security reviews, precisely to protect the economic interests of the country.

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

The highest number for a given year is 24 reviews out of 1,255 investment projects. That's 2%, which is relatively low.

But what tools provided in the bill would, according to you, make it possible to confidently continue to develop Quebec's economy while maintaining some control over foreign investment? We know how proactive you are in seeking such investments from around the world.

Not only that, but how important do you think it is to provide protection over intellectual property given that Quebec has a lot of start‑up companies, which are particularly vulnerable? Thresholds are, among other things, used to protect start‑ups.

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

In terms of national security, we'll be in a good position to accomplish a lot. These interim measures are certainly important, because we want to make sure that there won't be any technology transfers during the review. That's a significant shortcoming in the current Investment Canada Act. That's why I am hoping that with the assistance of our colleagues, we'll be able to have this bill adopted as quickly as possible.

As you were saying, Mr. Lemire, what's important today is intellectual property and all of the intangible assets. We want to prevent the transfer of any given company's knowledge or secrets. So if you were to ask me whether one provision was more important than others, I would answer that it's the one that will enable us to establish interim conditions while we are carrying out the review.

Some of our colleagues have had to apply this act in the past. Imagine a company today that wants to purchase an artificial intelligence enterprise. Without a measure of this kind to prohibit the transfer of knowledge between the two, even if a transaction is blocked, the harm has more or less already been done.

That's what we have to accomplish. It's one of the most important tools for defending the country's economic interests.

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

During the last Parliament, the committee did a study on the Investment Canada Act. One of the recommendations was to modernize the act. Thank you for having done just that.

One of the important aspects was transparency. Can the conditions presented to the minister be made public? Does the current act provide for that?

How to ensure that more is known about your undertakings or about the conditions you are prepared to require from investors in order to benefit from our creativity and resources and keep the economic value here in Quebec and Canada?

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

I believe you've put that clearly, Mr. Lemire.

I'm all for transparency. There is, of course, the annual report, and there are other things that we can do in that area. There could be a judicial review. I want to provide parliamentarians with as much information as possible.

However, it's important to know that our decisions are often based on issues of intelligence. We therefore need to strike a balance.

As for the annual report, we're prepared to look at that with members of the committee. We can try to see whether people want more information in it, provided that we can maintain this essential balance. As you know, it's a process which, by its very nature, requires us to maintain the trust of investors, and involves various non-disclosure considerations for each competing enterprise.

I believe that through our policy statements in the annual report on what we are doing, and also in our approach to the annual report, we provide a lot more information than we used to. Various people, and my colleagues, will no doubt recall that for Neo Lithium, we were able to give out more information than in the past. The senior officials will be able to tell you more about that.

I'm in favour of this transparency, but at the same time, I believe we need to maintain this balance with respect to information, precisely in order to be able to make the right decisions.

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

Thank you, Minister.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Lemire.

Over to you, Mr. Masse.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you, Mr. Minister, for being here.

Through you, Chair, I want to thank the minister and all the members of the committee and members of Parliament for supporting the private member's bill. It's also about reconciliation, so I really appreciate that today. Thank you very much for that. I really appreciate that a lot.

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

I'm proud of you.

[Brian Masse, NDP, Windsor West, ON]

Thank you. That's very kind.

I do want to touch a little bit on Volkswagen with regard to the investment there. I remember the days before, when General Motors collapsed and so did Chrysler. Actually in the eighties, Chrysler collapsed and we actually made money off of supporting them at that time because we cashed in shares. Later on, with General Motors most recently, it was then minister Jim Flaherty who at first said we wouldn't do anything because we couldn't pick winners or losers, but then came around. The government actually invested there and we now have massive amounts of reinvestment. There were also some new engineering jobs. Had we not sold the shares that we got from that, we would actually have made more money back then, but the government did sell the shares. Maybe can you highlight a little bit...because I wouldn't want the impression to be that there are no terms and conditions on this. I've been very critical in the past of having no terms and conditions. We had a plant that got money and went to Mexico.

When I look at the deal you made with Volkswagen, I see it as being a little bit different. Perhaps you can outline that. I did a green car strategy with Dr. David Suzuki and Joe Comartin, my former colleague, back in 2006. I'm seeing this as being a little bit different, and I would like to see what you can provide on that.

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

Sure. First of all, let me congratulate our colleague on a great achievement on the Ojibway national urban park act.

For me, the way we have structured the deal with Volkswagen is as Canada's response to the IRA in a very smart way. We've said that the company in this case needs to build a facility. We're talking about a $7-billion facility. We said in the fall economic statement that we would be levelling the playing field with respect to the Inflation Reduction Act in the United States, but that we would not have a race to the bottom. That would not be smart for anyone to do that, and that's what I have been advocating in Washington and in many parts of the world.

What we said was that first they would have to build the facility, and then we would provide production and support. I like it because the conditions are in the contract, to your point. That's why I was saying to colleagues before that, when people say it will be between $8 billion and $13 billion, that will only be, perhaps ever, if they build a battery and sell a battery, subject to the IRA being in place or any reduction in the IRA, whether the amounts would be reduced or the IRA would be disappearing, and after that it would be done retroactively. Then you have a number of contractual conditions around that, which I think, to your point, are the best way to protect Canadian taxpayers, because not only do you have an upfront investment by the company, but as we saw with GM and Ford, if you do an equivalent analysis, if you look at the multipliers that are normally used, an investment like that will generate between $200 billion and $400 billion over 30 years.

Now, for folks who were here before the pandemic, a federal budget is $300 billion. That's the equivalent in 30 years of a full federal budget in terms of the economic impact. What we did at the time was look at what the payback was. That's what I focused on. When people invest, they get a return on investment.

To your point, we said there would be 3,000 direct jobs. If you look at that, it's 30,000 indirect jobs that will be created in the Canadian economy. My answer is that this is Canada's response to the IRA in a very smart and targeted way, because, to your point, we said we are not the United States, so it has to be targeted, focused and very strategic. Bringing in the first-ever European manufacturer to Canada and the first OEM in 35 years, you would agree with me, is a home run.