Industry Committee on April 26th, 2023

[Greg McLean, Conservative, Calgary Centre, AB]

Thanks to the officials for being here.

I'm going to go back to where I was when I was asking the minister about all the foreign investment that comes in and the value chain we're trying to build here in Canada for strategic metals that go into battery processing, into battery manufacturing and into cars, at the end of the day.

We are subsidizing now every one of those steps of production. We're subsidizing with flow-through financing, which is a gift for rich people, if you will, at tax time for the mines themselves. We're also subsidizing the processing of the minerals with offshore producers sometimes. We're definitely subsidizing offshore manufacturers when we build the batteries now, for sure.

We talk about looking at offshore financing as if it's something we should cast an eye upon, yet, at the same, time we're writing checks from the Canadian public for every one of these steps in this value chain.

Can you tell us what this value chain is worth if we have to subsidize foreign companies to come in and do this for Canadians?

[Charles Vincent, Assistant Deputy Minister, Small Business and Marketplace Services, Department of Industry]

Thank you very much.

Within the context of the Investment Canada Act, we're looking at when foreign companies are coming in to set up, purchase or acquire Canadian companies.

In that context, that's the scope of what the ICA looks at. There are other policies and other elements that look at strategic investments in the value chain you're referring to from mines right through to the automotive industry, but the ICA itself isn't going to shape or dictate that value chain. It's just going to look at when foreign companies come in to set up shop in Canada or acquire a Canadian company. Then it will assess whether that's in Canada's best interests.

[Greg McLean, Conservative, Calgary Centre, AB]

Yes, but at the same time, we're parking a whole bunch of Canadians' money into these foreign companies that we choose. The minister wants carte blanche to choose which one he says no to, which I presume means the contrary to that is that he's going to choose which one he says yes to as a result of what he's proposing here in this act. Therefore, it is a thumb on the scale of which international companies will get projects subsidized by the Canadian taxpayer in Canada. Right now that happens at the battery production level, at the lithium process level and at the auto manufacturing level.

I want the government to square this for me because, frankly, we are putting a whole bunch of bets on these electric vehicles, which have a large investment from Canadian taxpayers into them and a large, upfront CO2 footprint. This is not going around.

Can you see why we're not meeting any of our targets, either for bringing in foreign investment or lowering our CO2 emissions in Canada?

[Charles Vincent]

As different investment opportunities come forward, they will fall within the purview of the Investment Canada Act, depending on the nature of those investments and the degree to which they represent a foreign acquisition or a foreign company setting up within the context of the Canadian borders. From that standpoint, those companies, when they acquire a Canadian company, for example, will have to notify us. At that point, we'll look at that. If it meets certain thresholds, it would fall within the net benefit provisions, and we would look at it through that lens. If it doesn't, we would still look at it through a national security lens.

[Greg McLean, Conservative, Calgary Centre, AB]

I'm not sure that answers the question.

The whole thing is.... Take a look at the investments we're making through the SIF, and it is with foreign companies that are investing in Canada. We have to bribe them, and this is the minister writing cheques to these companies. We're giving them a lot of money, and they walk away with the IP, much like what has happened with Medicago and Novavax. This is on the edge of what's been happening with Rio Tinto, when we're gambling on a new technology for them. It's ArcelorMittal, which is gambling on a new steel production method.

The IP, at the end, even if it doesn't work, has some advantages that they're walking offshore with. We're not keeping our IP in Canada as a result of these decisions.

Can you explain how we're protecting the Canadian taxpayers' investment in intellectual property in that respect?

[Charles Vincent]

I'll try again to get a more defined answer from that standpoint.

There are multiple tools that are used in these investment periods. You mentioned the strategic innovation fund. The government negotiates with companies around the strategic innovation fund in those situations. The Investment Canada Act and the process around the Investment Canada Act is separate and apart from that, because some strategic innovation fund investments are relevant and fall within the Investment Canada Act purview, and others are not.

With respect to Bill C-34, those are the pieces we're.... You mentioned intellectual property. I think that's an important element.

With respect to intellectual property, there are a couple of provisions that I think are particularly important, because we've heard from various stakeholders about the risk associated with intellectual property and the degree to which we may invest in those areas and the degree to which we are able to control those.

[Greg McLean, Conservative, Calgary Centre, AB]

Have you learned from the failures we've had over the last handful of years, where the intellectual property has just disappeared, with contracts that your department has written with foreign investors coming into Canada?

[Charles Vincent]

I would say, in the context of the strategic innovation fund, that there are specific clauses associated with intellectual property, and those clauses would kick in if the company were to leave the country or investments were to change.

[Greg McLean, Conservative, Calgary Centre, AB]

Okay, so let's drill into Medicago in that respect. How has that worked? Right now, that IP is parked offshore, and we've paid hundreds of millions of dollars for it. Walk me through how we're going to return that investment to Canadians.

[Charles Vincent]

I'm, unfortunately, not familiar with the Medicago investment. It's not a piece that I'm familiar with, so unfortunately I can't answer that question. I'm sorry.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. McLean. That's all the time.

Just as a reminder for MPs, we have officials with us taking their time to review Bill C-34, which is what this committee is looking at.

Thank you being here with us to examine Bill C-34, which has been referred to this committee.

Ms. Lapointe, you have the floor for six minutes.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I also have questions about IP transfers, and I understand that there are amendments to better address national security concerns associated with IP transfers.

Can you first explain to the committee what types of intellectual property are considered to pose the greatest national security risks?

[Charles Vincent]

We heard from a number of stakeholders about the importance around intellectual property with various sensitive technologies. The minister referenced the fact that we will be establishing a list, effectively, of those areas and those industries where that will be. Intellectual property will, obviously, be first and foremost on that list.

I'd say that there are at least three areas where the proposed amendments will help support intellectual property and the protection of intellectual property. One is around the pre-implementation filing. We will know in those areas and those sectors where intellectual property is particularly important before the investments take place, so that we can take action earlier in the process.

The second one really has to do with imposing interim conditions. In those places where there's intellectual property at stake, the minister will have the authority to apply interim conditions to ensure that it can't be shared. The third area really comes to what he referred to around undertakings within the national security area. Where there are national security implications associated with intellectual property, the minister will now be able to have legally binding undertakings put into place.

Those three elements together, really, are functionally around trying to make sure that we identify the intellectual property and that we're in a position to protect it more effectively.

[Viviane LaPointe, Liberal, Sudbury, ON]

Can you tell this committee what role Canadian companies and researchers have in ensuring that their own IP transfers do not pose national security risks?

[Charles Vincent]

We certainly talk regularly with Canadian companies to help them understand the geopolitical environment and the intellectual property they have. You'll not be surprised to know, as the department responsible for the intellectual property policies and with the Canadian intellectual property office, that we spend a fair amount of time working to educate Canadian companies around the value of their intellectual property and the tools and strategies they can use to ensure that they have intellectual property strategies in place to protect it.

It's very much a scenario where it is really incumbent on companies to understand their intellectual property and have strategies in place, but we have worked, as the Government of Canada, to try to make sure that they have the tools to do that effectively.

[Viviane LaPointe, Liberal, Sudbury, ON]

On the subject of national security, I understand that, under the act, Canada was only permitted to share limited information regarding certain aspects of current and ongoing cases.

What information will be shared with international allies under the proposed option in Bill C-34?

[Charles Vincent]

Mr. Chair, I can say that we have very good relationships with our Five Eyes allies and with allies in various countries. Up until this point, the only information we could really share, frankly, in the context of the ICA related to process elements, the different ways in which we do our business and efficiencies in how we go about doing that.

This will allow us, if an investment is coming forward and a company is working in multiple countries, to be able to use and collect that intelligence more effectively and to be able to take decisions in Canada's best interest, leveraging and using the intelligence that we can get from other countries in that same context. The reality is that most of the companies that invest in Canada work globally, so we're otherwise tying our hands if we're not in a position to be able to share some of that information.

[Viviane LaPointe, Liberal, Sudbury, ON]

Do I have time for another question? Okay.

You've talked a few times about how this bill will create new ministerial authority to extend the national security review of investments.

Could you explain to us why you feel this is necessary instead of leaving it with the Governor in Council?

[Charles Vincent]

I will say that, yes, it's a new ministerial authority, because technically that's what it is.

The national security process is divided into a series of stages. In the early stages, when there is a reasonable suggestion that something could be injurious to national security, the minister has the ability to act and notify them. At the next stage, similarly, after both the Minister of Public Safety and the Minister of Industry together have determined that they believe that this could be injurious to national security, he can proceed. The stage after that, however, requires us to go to an OIC to cabinet. There's an important role for OIC at cabinet. That's why, at the very final stage, we would leave in place cabinet's ability to review before any block or any divestiture happens.

In terms of that previous stage, frankly, the value of cabinet's discussion at that point is less important than it is at the end. To the minister's point, it slows down the process and it makes it more difficult for the security intelligence community to have the time they need to do that.

This is the place in the process where we found an efficiency. We believe that we can move that while still getting all the benefits and ensuring that we have full cabinet vision and transparency.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Vincent and Ms. Lapointe.

Mr. Lemire, it's over to you now for six minutes.

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

Thank you, Mr. Chair.

I'm going back to the minister's comment a little earlier about protecting acquisitions by foreign entities of Canadian or Quebec companies. The Investment Canada Act also allows the minister to request a national security review of foreign investments in Canada.

So let's go back to the example of CRRC Corporation Limited. Could the current act or the proposed act be used as a tool by the government to prohibit foreign enterprises from taking part in public tender calls in Canada? I'm talking about enterprises that represent a national security risk, if only because of their presence here, for example their access to strategic information about the structure of the Toronto subway. These risks can be considered even greater owing to the fact that the CRRC is already banned by the United States.

[Charles Vincent]

Thank you very much for your question.

It's important to recognize, in the context of protecting Canada's national interest, that there are multiple tools, and the ICA is one of those tools.

To answer your question quite directly, no, there isn't anything in the ICA that deals directly with procurement. There are, however, other tools provincially and federally where the government is in a position to say, “This is how we're going to define procurement. Here are the rules around procurement. Here are some of the things that we're going to be looking at.”

What the ICA is solely focused on is the degree to which people are making investments in the country, and to that extent, no, it doesn't deal with procurement.

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

Thank you.

To keep our resources and capital from flowing out of the country, monitoring mechanisms are needed for our supply chains.

Does the new act provide for that?

[Charles Vincent]

Yes, I would say that, within the context of supply chains, where I think the most value from the act comes, is a recognition that, as these supply chains build, investments get made from different parts of the world. To the extent that we are looking to make sure we're building supply chains that are consistent with Canadian values and consistent with the degree to which we are aligned with our Canadian allies, it provides an ability to review these investments before they come in and make sure that they are going to be well aligned with our overall supply chain strategies.

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

I would of course hope that we could monitor what happens in our supply chains. I and some of my colleagues also mentioned it, as well as the fact that sanctions for any of violations need to be stronger. These sanctions should be strengthened to deter foreign investors from violating any of the rules in the Investment Canada Act.

Would the new act include any amendments of that kind? Are the sorts of conditions that the department could impose clearly defined in Bill C‑34?

In terms of transparency, could these conditions be published? The minister has stated a strong desire for transparency. Will this be reflected in reality?

The most striking case for us, as Quebeckers, is of course the purchase of Rona by Lowe's. We never learned what conditions were placed on this by the minister. In the end, we get the impression that there is nothing of this company left in Quebec, even the supply chains.