Industry Committee on May 1st, 2023

[Sandy Walker]

I think regulations offer greater flexibility than the act does. They're much easier to add on to or subtract from.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

My next question is for Mr. Ciuriak. It's very interesting, the fact that value could now exist in non-existent, material things.

How do you propose that regulations would address the concern that you have, which is that the real value and risk lie in data and supply chains? How would you propose we tighten up the legislation to address that more closely, as you've suggested?

[Dan Ciuriak]

That is the billion-dollar question facing us all today.

First of all, we can at least recognize the fact that data is a very valuable asset, but has no specific monetary value at the same time. You can't necessarily put a figure on this. We see it indirectly in the market cap of companies that have very limited amounts of physical assets but a very large market cap, and they don't even have intangible assets in the form of intellectual property, patents and so forth, which account for most of it. We know there's an awful lot of value out there.

We also see in market transactions an acquisition that will be described as a pure data play. A company that may not be making very much money whatsoever may transact for billions of dollars, simply because of the data it has. How do you deal with that?

I think the first thing to recognize is that companies disclose that they have data, and then we apply a threshold to the amount of data—perhaps to the value of it—and a description of the data as to whether or not it would have potential national security concerns and how that data connects with other forms of data that we may have in the Canadian ecosystem.

It's a question of getting new terminology about the connectedness of companies. There has been work done on that, by the way, by Ari Van Assche in Montreal. He has put together charts that show how companies connect, but we're at the very early stages of understanding this.

In the first instance, what I would suggest is that we have a separate criterion for data, where it is disclosed and described. There would be a consideration as to whether or not that amount of data is something that is material and of concern to Canada.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Could you submit the reference you made to the committee for our review?

[Dan Ciuriak]

I would be pleased to.

[Tony Van Bynen, Liberal, Newmarket—Aurora, ON]

Thank you.

Am I out of time?

[The Chair, Liberal, Joël Lightbound]

You're out of time, Mr. Van Bynen.

Thank you.

Mr. Lemire, you have the floor for six minutes.

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

Thank you, Mr. Chair.

I will begin with Dr. Burton.

Dr. Burton, at our committee meeting last week, I asked the minister if reforming the Investment Canada Act would protect Canada from foreign companies that might be hostile to its interests, not only when they try to acquire Quebec or Canadian entities, but also if they were awarded public tenders in strategic sectors. I gave the example of the Chinese company CRRC, which qualified for the renewal of the Toronto subway car fleet, even though it was banned in the United States.

In your opinion, should we improve the Investment Canada Act to ban companies like CRRC in such cases?

[Dr. Charles Burton]

Yes, I do. I think Quebec is becoming much more aware of this situation. The articles in Le Journal de Montréal have really been increasing the awareness of the Quebec public of the nature of the Chinese regime.

I salute that, because I think it's important that people in Quebec know.

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

You wrote an op-ed for The Globe and Mail on the transaction between Tek Resources and Glencore. I'd like to talk to you about another similar transaction.

Canada's Paper Excellence Group, which is related to Asia Pulp & Paper, has been making rapid acquisitions in the forest industry, including Domtar and Resolute.

Does this concern you?

Do you feel there should be some conditions imposed on these types of transactions?

[Dr. Charles Burton]

Yes, I believe I was quoted in the Quebec press with the word “troublant”. It's troubling to me that this is going on.

I agree that it's part of the Chinese regime's overall scheme to use these investments to serve Chinese interests and to cause us to have too much dependency on China, which then could be used as economic coercion in political areas over things like police stations or Chinese espionage.

The Quebec universities have a very serious problem of Chinese money resulting in the transfer of dual-use technologies to China from Quebec. Huawei, for example, is still sponsoring projects in the province of Quebec.

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

So you feel an independent public inquiry into China's interference might be in order.

Don't you agree?

[Dr. Charles Burton]

I'd just like more information on it. I'd like it to be from sources that don't have a vested interest or a perception that they may be beholden to Chinese interests or the interests of a certain political party.

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

Thank you.

Mr. Balsillie, you have already contributed to our study. In my opinion, your presence was salient, particularly when it came to managing intellectual property. You are very critical of the way Canada manages and protects innovation.

Does this review of the Investment Canada Act alleviate your concerns? You touched on this a bit in your opening remarks, but I'd like to hear more about it.

[Jim Balsillie]

No, the approach with the Investment Canada Act has heightened my worries.

What we have to come to appreciate in this changed world is that these realms are first very technical, so they require expertise. Second, there's a linkage between IP management, research, trade agreements, foreign direct investment, tax treatments, competition strategies, privacy management and democracy protection. These forces crosscut and are very technical.

Canada has experienced a systemic erosion in its realms economically and non-economically in this digital era because of this inattention. These are links in a chain. They have to be looked at systemically. If you falter in scientific research, or in appropriately updating this act or appropriately seeing trade agreements as regulatory remote control agreements and not tangible trade facilitation, then that one weak link can be exploited. It can erode the work of every other piece of legislation. It's absolutely critical that we upgrade all systemic portions.

This is not a processing issue. This is a comprehension issue and we need an expert, systemic approach, or we will continue the erosion that we've been experiencing economically and non-economically over the past couple of decades.

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

The lack of clarity in Canadian intellectual property rules makes our sensitive assets a little more vulnerable from a national security perspective.

Can you give us examples of how some countries—we can name China, again—are appropriating our innovations?

[Jim Balsillie]

Yes, in countries such as the United States and in Europe, when you do research that's taxpayer-funded it immediately accrues to the state to have control over it for appropriation purposes. They also have pooling structures for their intellectual property for the economic and non-economic benefit. They also govern their data in a much more front-footed way for public well-being. Places like Australia have broadened the scope to things like university partnerships and other things that don't address this, and they have unwinding mechanisms.

Also, our adversaries have controlled the information space. We've kept ours open without rules. Therefore, it's actually a strategic disadvantage to be an open western economy in this realm, absent of digital rules. We're vulnerable in pretty much every realm because of the inattention in this space over the last couple of generations of policy.

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

Thank you very much.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Lemire.

Mr. Masse, you have the floor.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair, and thank you to our witnesses for being here.

I think I'll start with our friends from the Canadian Bar Association and work my way across. I know that you have 12 committees. I appreciate having two of them represented here.

There are six recommendations that you have in total. Do they come from the experience of your law firms and your clients? Is that specific to real field activity that's taken place?

[Sandy Walker]

As a general matter, when we work on these policy positions and positions on legislative proposals, we certainly have experience in practice in this area and we bring that to bear. Also, some of our comments are legal concepts, like protecting due process, etc. It's a combination, and we represent both foreign investors and Canadian businesses.

[Brian Masse, NDP, Windsor West, ON]

Do you represent foreign governments, too? Would you have members that represent foreign governments during acquisitions of Canadian companies?

[Sandy Walker]

If a foreign investor had foreign government ownership, we might represent those, yes.

[Brian Masse, NDP, Windsor West, ON]

Would that concern you, a bit of a conflict of interest, I guess, at the table? The Canadian Bar Association is well involved with a lot of different things—I don't want to misjudge here—but it sounds to me like there's a bit of a connection here to the value of work that would happen or the process if there were changes.

[Sandy Walker]

I think you would find that we have a fair bit of integrity. We come to you as the Canadian Bar Association, and we try to maintain a fairly principled way of looking at legislation.