Industry Committee on May 1st, 2023

[Jim Balsillie]

I think you can look at it in a very specific context in terms of which ones you can unwind, like university research partnerships or forms of technology transfer that have not gone through the review process on it. You can do this in a way that does not hurt business, and if it is costing 10¢ of business but gaining $10 of national benefit, I'll take that trade.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Fillmore, you have the floor for five minutes.

[Andy Fillmore, Liberal, Halifax, NS]

Thanks very much and thank you for your time and for being here.

Ms. Walker, it's nice to see you again on this topic so soon.

I'd like to direct my questions to Mr. Ciuriak and Mr. Balsillie...Honorary Captain Balsillie. It's nice to see you.

First of all, I'll say that I thank you for your comments and I'm sympathetic to them in the context of the unimproved bill. The place I want to explore with you is the concerns you've raised in the context of the proposed amendments that we have before us, for example the concerns around the sharing of data or the loss of data or the use of data against Canadian interests, and the ability that is proposed in this bill to allow the minister to impose interim conditions.

Is there something here to work with? With the new filing requirements prior to the implementation, interim conditions, the order for further review of investments, improved information sharing with international allies, are we starting to get to something here?

[Dan Ciuriak]

I think in terms of having at least a framework for intervention in an investment that may raise the concerns that we're talking about, that's good. The question is how you actually then wind up elaborating that regime and providing guidance to the civil servants who will ultimately be administering it.

If it's just like a set of check boxes that you tick and see whether or not this fits into the category and that then is kicked over into a process for an interim review where there's another set of boxes to tick as to whether or not something happens, then the real question is, what are the labels on those boxes? How do we actually implement such a regime? Do we have a framework for classifying data concerns that would then allow the minister to intervene in a way that we've been talking about on transparency, as Daniel Schwanen has been emphasizing?

We need to have a framework that gives the minister a leg to stand on when making such interventions. I don't think that we've elaborated that framework at all so far in Canada.

[Jim Balsillie]

Yes, I would echo that. We don't have a framework that manages the appropriation regimes for both economic and non-economic goods.

When I read the bill, I see it as we're focusing on the trees and we don't have a sense of the forest. When you look at the kinds of issues.... In the tangible production economy, if you get 90% of it right, you get 90% of the benefit. In the intangible economy, if you get 90% of it right, you get 10% of the benefit. It penalizes incompleteness non-linearly.

You need a complete framework; you need complete expertise, and you need a very sophisticated approach to that. Losing foundational battery technology when we're spending $13 billion, potentially, in a battery plant.... Wouldn't we like to participate in the value chains there so that we can capture more of the economics than assembly if we can chisel into value chains?

You have to manage appropriation structures, whether they're for mining technology or every sector in the economy. They are all IP and data industries. We have learned that they all have social insecurity effects now, so it comes down to the appropriation and control of systemic factors.

I don't see the legislation coming with that lens, capacity and framework, as Mr. Ciuriak said.

[Andy Fillmore, Liberal, Halifax, NS]

The challenges we have are that the needs are broad and the legislation is narrow at present. Some of the things you have raised are covered in a ministerial order here about research, and maybe the digital charter covers another piece of it.

I think it was you, Jim, who mentioned that our approach may be dispersed over too many departments. Someone mentioned something like that.

If I could bring this all together, there seems to be a common feeling that some of our allies are doing this differently, better and more comprehensively. We seem to be facing a challenge of having it dispersed across government, instead of having it centrally coordinated.

Are the allies doing it in a way such that it is centralized? Have they solved this problem?

[Jim Balsillie]

I think there's an element of dispersion. I think there's also an element of capacity and competence. I think until you get expert, concentrated, accountable and transparent agencies that look after this.... If it's a bit over there and a bit over there, it's going to be of no force and effect. It will be.... I have written publicly that I consider it regulatory theatre.

I do not see this bill materially changing the erosion that Canada is experiencing in these realms.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you for that.

I'm going to ask you a practical question. There has been a lot of discussion about data and defining data that maybe should be covered in the bill. There's always a question about how much detail you put in the legislation and how much you leave for regulation. You want enough flexibility in the legislation to allow the regulation to react to changing circumstances.

Can we really define the data that is at risk in legislation, in your view? Do you have a solution to that problem?

[Dan Ciuriak]

No. I would not put it into legislation for reasons that I think Sandy Walker mentioned earlier, which are that it's much easier to change and amplify regulation, and that's where you would put it.

I think you need a more articulated regime than you have right now to give the minister, who will ultimately have some discretion here at the end of the day to intervene when needed.

We are making this up as we go, and so are our allies. There is no set playbook here. This is not ready for textbooks yet in terms of how you deal with this particular data-driven, knowledge-based economy with all of the negative externalities in the social and political spaces. What we have to do is to provide ourselves with some flexibility.

I hearken back to my own days of developing legislation in the financial sector. We provided the Minister of Finance with an awful lot of flexibility and discretion in approving who could own a bank in Canada. That stood us very well, ultimately, in the great financial crisis. We came out of that with the strongest financial sector in the world.

When times are changing, you need flexibility and you need discretion. That cuts against transparency, but at least you tell them where you are going to be looking, and you have to give some indication of what your criteria are.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Mr. Fillmore, you are out of time.

Mr. Vis, you have five minutes.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you, Mr. Chair, and thank you to all the witnesses here today.

My mind is sort of blown right now with all the directions I could go, but maybe getting back to basics here, Ms. Walker, how would you define investment?

[Sandy Walker]

I'll tell you how it's defined in the act, if that's helpful. Investment could be very broadly defined, but in the act it means the establishment of a new Canadian business, and it also means an acquisition of part or all of a Canadian business. The national security regime applies slightly more broadly, but it's still linked to the establishment of a business or an entity with links to Canada, or an acquisition.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Thank you. In other laws in Canada, is investment defined differently from that?

[Sandy Walker]

I've never actually looked at that question, so I don't know. Obviously, as legislators, you have the ability to come up with a definition. The scope of the Investment Canada Act is currently really focused on those two things—establishment and acquisition.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I ask that question in the context of the points raised about the digital economy and what this committee will be dealing with as well in respect to C-27.

Mr. Balsillie, you caught my attention, and I was texting with my wife during this committee about what we were talking about. The other day I came home, and my son had asked for a Paw Patrol app to be downloaded on our iPad. I don't know the origins of this application or which company owns it, but in my mind it almost seems that a foreign company is operating in Canada. They're investing in Canadian users. They're extracting information from children as young as two years old. They're using that for monetary purposes, but it wouldn't be covered under the Investment Canada Act. As Ms. Walker said, it would also likely not be covered under another law in Canada, even though it is a form of investment to extract information and therefore wealth from Canadians of all ages.

Would you agree with that type of assessment?

[Jim Balsillie]

Yes, that's what Mr. Ciuriak said, and it's being well documented. They're now extending this youth exposure from gaming to pornography and creating dysfunctional addictions at critical developmental ages. We're manufacturing a mental health crisis in our youth.

Our job is to protect our youth. Look at the negative spillovers of these operations that may not be here but are participating here. It's not only security. It's not only democracy. It's many other aspects of negative spillovers on mental health as well as the economy. These kinds of mechanisms should be attuned to protect and advance our society.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Just to clarify, you're recommending that the Investment Canada Act, which covers the traditional aspects of the economy that we're all aware of—mining and in some cases health care, such as in British Columbia—extend and broaden the definition of what investment includes to protect, as you referenced and I alluded to, the mental health of children?

[Jim Balsillie]

When you start to look at the business operations, as Mr. Ciuriak said, I think that really says that, whether you're physical or virtual here, that should be affected, and yes, that can be regulated. You must also begin to look at things like privacy legislation and algorithmic legislation to attend to those things, and when you have trade agreements trying to shackle our ability to address these things, we now have to start to look at whether we push back on these kinds of things.

These are links in a chain, and you have to look at them systemically, but this is a powerful instrument, as is privacy and algorithms, as are all of the elements that I keep referencing, as are research partnerships and so on; so we have to start to look at these things expertly and systemically.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Right. You alluded throughout our testimony today—I'll ask Mr. Ciuriak to comment in a second—to the fact that we're at a tipping point in Canada in dealing with some of these digital challenges in respect to intellectual property, Canadian sovereignty and national security.

Are there any proposed amendments—maybe you can get back to the committee a little later—that in any way can address this in the context of Bill C-27, which touches upon many of these points, too?

You mentioned that there is a capacity and context issue with the Government of Canada in this department. Can government ever really keep up with the technology that's being developed and implemented so quickly today?

[Jim Balsillie]

Yes, a hundred per cent the government can keep up. You have to focus on it deliberately.

I've spent the better part of a year working on predecessors—Bill C-11 and Bill C-27. On the Centre for Digital Rights website, we have a 50-page set of proposed amendments to it.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

Oh my goodness.

[Jim Balsillie]

They can all be done properly. Yes, we will come forward with specific amendments to this bill. It all can be done.

We govern our fisheries. What it takes to govern this realm is a subset of the resources we apply to fisheries. That's not to say fisheries are not important, but when we decide something's important, we can put resources and expertise to it. We just haven't decided that yet, as a policy community.

[Brad Vis, Conservative, Mission—Matsqui—Fraser Canyon, BC]

I'll go to you, Mr. Ciuriak, with any remaining time.

[Dan Ciuriak]

Thank you very much. I'll go back to an example from financial history again.

One time we used to have an inspector general of banks, a superintendent of insurance and so forth. We generalized that to the Office of the Superintendent of Financial Institutions because they were blurring.

Now, in the current context, investment, as you say, is a physical presence. We do have the OECD/G20 inclusive framework, which already acknowledges the virtual presence and applies a method for taxing that. There's your starting point.

We have an incomplete framework for regulating operations in Canada. We need to generalize our investment Canada framework to that level or create a separate instrument that governs the virtual presence.