Thank you, Mr. Chair.
I prepared my speech in English, but obviously I will be pleased to answer any questions you may have in French, if you prefer.
According to the OECD, scrutiny of foreign direct investment, or FDI, on security grounds, has picked up quite a bit since 2015, as firms controlled by foreign governments that are not necessarily friendly have used FDI on the one hand to gain access to critical supply chain components, or to critical technologies or infrastructure, while on the other hand clearly exhibiting signs of not treating these investments or their host countries on normal commercial terms, and even introducing coercive or hostile aspects into the relationship of the kind that Mr. Burton described.
It’s not foreign ownership per se but the combination of these two factors that is alarming, and the proposed amendments are also part of a global trend. Again, there's the example of Australia.
Studies that we published over the years have recommended simplifying and bringing more transparency and more openness to the screening of those foreign investments in Canada for which there are no reasons to think that they would not be undertaken for legitimate commercial reasons, following Canadian laws and so on, while at the same time exercising a sharper scrutiny of investments posing potential security threats. We can do both. The research I just mentioned supports the current direction in this bill.
I want to make that support clear, because the rest of my comments concern the relationship between this bill and Canada’s competitiveness in attracting FDI.
Canada had a decent year in 2022 in terms of attracting or retaining FDI, as reported just a couple of days ago by Statistics Canada. Nevertheless, the OECD continues to rank Canada’s FDI policies as more restrictive than those of partners who also happen to be competitors for investment, such as the United States, the United Kingdom or Australia.
As we strengthen these security provisions in the Investment Canada Act, then, we don’t want to unnecessarily add to these barriers by sacrificing predictability and transparency of criteria for potential foreign investors, when this predictability and transparency can be provided consistent with ensuring the security and safety of Canadians.
Since addressing economic security threats is a major focus of this bill, for example, I would say that to be predictable and transparent, Canada needs to be coherent across government about what these economic threats are and how they can be addressed by adding criteria for scrutinizing foreign investment. As one example, Canada is still developing its national supply chains strategy, which presumably will address the security of critical supplies. Which sectors come under particular scrutiny here under the ICA should be consistent with that strategy, just as Canada’s decision on which investors will come under particular rules or scrutiny should be informed by the Indo-Pacific strategy. This is a matter of coherence and clarity for foreign investors.
Naturally, what we might at any given point consider “certain investments in certain sectors” has to be left to regulations; it has to be flexible, but I hope that the legislation will require that these regulations be based on a clear rationale and require the government to provide guidance regarding their interpretation, for example in the form of updated guidelines on the national security review of investments.
With respect to the bill’s information-sharing provisions, they will help align our FDI policies with those of our close partners, which is a good thing in an era of friendshoring and will help us understand and anticipate threats better, especially assuming that our partners reciprocate with information sharing.
The ability provided in the proposed amendments for the investor and the government to discuss mitigating actions an investor might take to make its plan conform with Canada's security needs was also anticipated in our 2015 paper, and it is to be applauded. Of course, for that mechanism to be effective, investors need to know the elements that would make such an undertaking acceptable in the government’s eyes, without the government divulging national security secrets. Here again, clarity of criteria and guidance are crucial.
Thank you.