Chairman Lightbound, honourable members, thank you for the opportunity to present today.
I'm Jim Balsillie, chair of the Council of Canadian Innovators. In the modern, knowledge-based and data-driven economy, the sources of prosperity and the vectors of risk have changed. Updating the Investment Canada Act is a critical strategic step that can advance Canada's prosperity and security. Unfortunately, the proposed amendments are not sufficient to make the ICA fit for those objectives.
The understanding of foreign direct investment that informs the updated document is based on the tangible production economy. Today's economy is knowledge-based and data-driven. In such an economy, FDI is extractive, where technology, knowledge and data assets, senior executive personnel, tax base and wealth effects can easily flow out of countries that receive foreign investments. Prosperity and security risks do not scale with the size and type of buyer but with the nature of economic and security spillovers.
Specifically, economic and security risks should not be analyzed separately. IP and data have multisided features that interrelate, giving rise to the so-called “dual-use” technology that has both economic and national security value. Any assessment of risk and net benefit needs to include the economic and security value of assets as an integrated whole alongside the changed nature of spillovers in the economy of intangibles.
Second, the list of strategic technologies and a set of risk factors is incomplete and needs to mirror those of our allies, particularly the United States.
The ICA needs to be regularly updated to properly guide an informed assessment of a given investment in Canada. IP and data have strong public good characteristics, so decisions made by businesses do not price the associated spillovers into contractual agreements. Data, in particular, has pervasive dual-use characteristics with implications not just for the security of our nation's infrastructure, like transportation, telecommunications, energy and finance, but also across all economic sectors and areas of human interaction, including democracy.
My recommendations are, one, to broaden the focus of any review to a include a more appropriate lens of critical strategic technologies, which would allow for the assessment of university partnerships, licenses and transactions of valuable IP and data. If assets are deemed critical to Canada's prosperity and security, then the ICA needs to ensure that they remain in our control, regardless of the type of foreign counterparty or the nature of the commercial relationship.
Two, give legislative powers to the federal government similar to those legislated in Australia to unwind any prior investment, university partnership, joint venture, or merger or acquisition.
Three, build capacity inside the federal government for governance of today's economy. Recent FDI initiatives such as the Sidewalk Toronto project, continued university partnerships with Huawei and Invest in Canada agency marketing strategies demonstrate that Canada's policy-making apparatus is not just rooted in the traditional production economy of yesterday but is decades behind the realities of the contemporary economy.
Four, create a transparent, expert entity akin to CFIUS to implement and oversee all FDI regulations and strategies for the federal government, akin to the coherent and coordinated approach Professor Burton just advocated for.
The strategic nature of IP and data have restructured the composition of markets by reconfiguring how an economy extracts benefits from technology and introduces new risks. This is why advanced economies and our allies have made significant steps to develop modern investment screening systems and continue to make dynamic updates, expanding the powers of foreign investment reviews necessary to defend valuable national interests. Canada must do the same if it wants to defend critical infrastructure and assets vital to our prosperity, security and sovereignty.