Industry Committee on May 1st, 2023

[Brian Masse, NDP, Windsor West, ON]

I appreciate that. I just think it's important to note. Like I said, you have 12 sections and committees.

I'll give you an example. This is where my concern is: adequate resources. Would they be paid by the companies in acquisition, or would they be paid by Canadian taxpayers?

[Sandy Walker]

That's probably a bigger government question as to how funding works. I know some things are self-funded. For example, when you make a merger notification to the Competition Bureau, you pay $82,000 per transaction, whether it's a small transaction or a big transaction. Other government functions do not have filing fees, so it varies.

[Brian Masse, NDP, Windsor West, ON]

I guess my concern is this. If not, you either cut services somewhere else or you raise taxes. Those are the two choices we have to create this for the foreign acquisitions of Canadian companies, and that's something I was a bit surprised to not see as a recommendation coming forward, because it's a tall order for Canadians to do for a process to lose our companies.

I guess I'm going to switch over to the next three right here, Mr. Balsillie, Mr. Ciuriak and Mr. Burton. I'm going to bring up a case that I think is important, because I think, Mr. Balsillie, that you mentioned a transport and export committee that would be formed, and Dr. Burton, you mentioned Aecon construction, and I think this is important as a good example, because I want to see what your thoughts are about this entity.

Here's a headline from 2018 that I was mocked for by a number of different members, “Windsor-West MP Worried China Could Be Part of the Howe Bridge Project”. Aecon construction was building this iconic new border crossing in my riding. My riding basically has 40% of Canada's daily trade with the United States. I've been working on a new bridge since 1998, and we finally got it. I couldn't believe it, but Aecon construction was up for sale at the time we were in the process of building it, and people dismissed it as being.... This lands in the United States, so we raised it.

I guess I'll start with Mr. Balsillie and come across here. This committee you're talking about, this entity, how important is it? I'm talking about a pretty straightforward thing, about construction of a bridge, but now we have artificial intelligence, critical minerals and other issues.

Mr. Balsillie, go first, please, and then I'll go across the table.

[Jim Balsillie]

I think we have to come to terms with the fact that these are crosscutting issues. In my earlier part, talking about data governance and IP, I did not talk about algorithmic governance, which is also highly interrelated to that and has, quite frankly, soared in its relevance.

These things are governed in our trade agreements. They're governed in privacy, in investment attraction and in competition. They're crosscutting, so we need an economic council with deeper expertise. We need crosscutting approaches to these things. We need agencies with expertise and transparency. If we do not do this, we will continue to experience this decline and erosion in the country, economic and non-economic, which you cannot deny has happened in the past 20 years, and it's a consequence of inattention to critical public policy issues.

[Dan Ciuriak]

Yes, China, it's big. It is doing an awful lot of investment in its knowledge capabilities and whatnot. It's now the leading patenting country in the world. It is one of the fastest-growing countries in terms of international intellectual property receipts, so it's actually now marketing its own knowledge. It is the world's largest payer for intellectual property. In other words, it's the biggest importer of technology in the world at a time when it's under technology sanctions.

It's going to be around, even in the area of computer chips, where it only has about 7.6% of the global market and is under a major full-court press by the United States to prevent it from moving forward. It is actually moving forward gradually in terms of improving its processes, and within five years it will be there. We will have to deal with China.

The idea that somehow we cannot deal with China is a non-starter. The question is this: How do we define that relationship? The Europeans are talking about de-risking. Does de-risking mean that a Chinese company cannot build a bridge in Canada? Now, if it's interactive infrastructure where it has lots of telecommunications, data flowing, then we may have very valid concerns about which companies from which country are involved in the construction and the management of that infrastructure. If it's a physical thing in Canada, do we worry about that?

Again, it goes back to the data and the information flow within our economy. We are moving from a world in which we used to trade inert products across borders. Now everything's smart, and of course the infrastructure is getting smart, so it's very difficult.

[Brian Masse, NDP, Windsor West, ON]

Mr. Burton, you can have my two minutes later.

[The Chair, Liberal, Joël Lightbound]

Please go ahead, Mr. Burton.

[Brian Masse, NDP, Windsor West, ON]

Thanks, Mr. Chair.

[Dr. Charles Burton]

I think, certainly, while perhaps your colleagues laughed at that headline, Aecon construction did not laugh at it. They withdrew their bid on the Gordie Howe International Bridge prior to continuing the negotiations with regard to their acquisition by a Chinese-state associated entity.

I had expected that the government would approve the acquisition, based on all the other things that were raised earlier in this hearing, and I was pleasantly surprised when that was turned down. As for the reasons, I don't entirely agree with Dan here. It's just not a good idea for the Chinese state to have intimate knowledge of Canadian infrastructure that would be acquired through acquisition of a construction company. Those blueprints would be heading to Beijing, for sure, if that had happened.

[Brian Masse, NDP, Windsor West, ON]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Mr. Williams.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Mr. Chair.

I think this is an interesting time right now. I know Mr. Balsillie, for one, was just at our science and technology committee. We were talking about IP commercialization, owning more of what we create, and at this point we are also trying to make sure we protect what we create.

I really want to zero in on some recommendations you've given the committee. I can't agree more that economic and security risks should not be analyzed separately. Certainly we need strategic technologies and critical technologies lists like the U.S. has. I think your last recommendation was to create a CFIUS, the committee on foreign investment that the U.S. has. We have an investment review division under ISED right now. I think one of the differences I've seen is that CFIUS is an inner agency, so it seems to work across many different...I guess here it would be ministries, and the U.S. seems to get that. We seem to have it only under ISED.

To the point I wanted to zero in on earlier, we're not talking about intangible assets. We're certainly not talking about data and IP, and protecting that. Again, AI, as we're going to be studying with Bill C-27, is just incredibly powerful right now. We don't know what that's going to do to IP and data.

This is just a question of whether we should be looking at maybe a recommendation to give more power to the investment review division under ISED, and maybe looking at multi-ministry...? Also, how do we handle the AI component, let alone just IP and data itself?

[Jim Balsillie]

I'm systemically concerned about the attention on these issues. The AI act has it being operated by the promoter of AI, who is also the regulator of AI within a ministerial discretion.

There are issues where the Competition Bureau is seeking more independence. We're looking at issues for strengthening rather than weakening the Privacy Commissioner. You have granting agencies under ISED that have not done any governance of the AI and the data elements, and now you're wanting to task them with a bigger role in this. What's the governance of that? What are the expertise issues? What are the resources? What's the transparency of it?

We have to build expertise in the form of some kind of economic council to distill these things. We have to start creating agencies with transparency and with accountability on that, which could then be called before Parliament to explain the rationale.

These kinds of informal, non-transparent, generalist approaches have not served Canada well in this era of the knowledge-based economy. That erosion is going to keep happening at an increasing rate. If we don't stop this before a tipping point, then all the issues we're seeing around polarization, economic erosion, compromised security that we've heard of, and being bullied in trade agreements and so on, are just going to get worse.

It has to be a structural, systemic commitment to the expertise in a crosscutting realm. As Einstein said, make it as simple as possible and no simpler.

The character of this stuff is tricky, so don't pretend it's not. It's just like we shouldn't pretend that China is not going to be here. It's only going to get tougher.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Ms. Walker and Mr. Caldecott, from a legal perspective on this, we have the investment review division, which is under ISED. This bill on the Investment Canada Act would then give specific instructions to this group.

I guess we're looking for some clarity. Mr. Balsillie recommended a strategic list, which is incredibly important, because not only does Canada have critical assets, tangible assets and AI that we need to protect, but also it has a list that I understand the investment review division would have.

What specifically in this bill...? How would we frame this and protect it? Making the ICA prescriptive is really difficult, because, as we've seen, at the speed of government it takes sometimes two years to reopen a bill. How do we give that prescription, legally, in recommendations to the investment review division through the ICA, so that they can be maybe more advanced or have a complete list of critical industry technologies that we need to protect?

[Michael Caldecott]

I'll kick this off. So far, the ICA has operated on a legislation plus regulation track. When it comes to national security and to increasing the enforcement of national security under the ICA, we haven't seen legislative change. We've seen change in regulations that has stepped up enforcement in particular sectors of the economy or against particular types of investors. As we mentioned previously, that is the flexible end of the enforcement approach that exists within that framework.

Legislation, as you rightly say, is a slow-moving process, and it isn't easily able to react to those evolving geopolitical challenges and changes in circumstances around which sectors might be sensitive and which might not.

I think you can lean on some of that history in terms of formulating the way in which regulations should be used in the future to address evolving national security considerations.

[Ryan Williams, Conservative, Bay of Quinte, ON]

I have a question from a legal perspective. Normally we look at either a minister's power, which we're not always in favour of, depending on who the minister is, or an order in council—cabinet. Would you recommend we look at an order in council rather than at a minister?

[Sandy Walker]

Regulations are made by the Governor in Council, which effectively is the federal cabinet. It's not the individual minister, and it's certainly not the investment review division.

If you figure out what you want to cover and you have a more flexible approach in regulations, the other layer on top of that is guidance from ISED, for example, on how they're going to interpret and apply what's in the regulations and in the law. That's another level. However, in terms of the prescribed business activities, there is greater flexibility if you stick those in regulations.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Gaheer, you have five minutes.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Thank you, Chair, and thank you to the witnesses for making time for the committee and for their testimony.

My questions are for Mr. Balsillie.

In your opening testimony, you mentioned that you would allow for broader review.

This question was asked of Ms. Walker earlier, but I'll ask you the same one: How do you suggest that the government strike the required balance between the protection of Canada's national security interests in IP on one side and the importance of allowing foreign investment in Canada on the other?

[Jim Balsillie]

Well, I think we have to revisit the nature of the flows of foreign investment, because we use an analytical framework of a production economy, where it brings management, technology, a tax base and a supply chain, whereas in the intangible economy it is fundamentally exfiltration, and the flows go outside of the country in that. I think our lens of FDI.... You can look at the nature of the marketing of the Invest in Canada organization: We give them money to erode Canada.

In value chains, there are no friends. Somebody's the landlord and somebody's the tenant. Everybody wants us to be the tenant and everybody wants to be the landlord, so we're going to have to stand on our own two feet and look after our own nation by ourselves.

Of course, in this, we need a proper analytical framework for how these things move, and then, when you do that with proper expertise, you will stop doing a lot of things that you think are helpful but are in fact hurtful. Our last place in the OECD in prosperity is a function of public policy misalignment for the last several decades. It has nothing to do with business dynamism. It has been a creature of public policy, and we have to put the mirror on the right cause of it or we're never going to fix the problem.

All of these issues are cascading, very much to this committee but also to a couple of others, at this time. This is a product of decades of inattention. If we don't fix it now, you're going to see things in 10 years that we're really not going to like.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

Speaking on that framework, you mentioned unwinding existing partnerships and giving that legislative power to Canada's Parliament.

Could you expand on this and how it has been used in Australia? Couldn't that create a climate in which people don't want to invest in Canada anymore?

[Jim Balsillie]

Well, if most of these relationships are fundamentally exfiltration.... We spent decades creating foundational AI technology and gave it to Google. Taxpayer money created foundational battery technology at Dalhousie and gave it to Tesla. What we get are some research papers. Taxpayers funded this.

Would you like the legislative authority to unwind that? What exactly is the FDI that we're “losing”? Yes, we're gaining 10 cents to lose $10, and we want the option to unwind that. I kind of like that deal, and I don't like that FDI, and I think that if people took the proper time to bring in experts in the analysis, they'd figure out that we're shooting ourselves in the foot, and that this is not the kind of FDI that we want.

Seeking this FDI is why we're last place in the OECD for the last 40-odd years and are forecasted to stay there for the next 40 years. People cannot afford to pay their bills because of poor public policy.

I don't think we want this kind of FDI under these terms. Other nations put structures around these relationships to ensure that they look after many economic and non-economic realms to advance their citizens. Our extreme neo-liberalism has hurt us.

[Iqwinder Gaheer, Liberal, Mississauga—Malton, ON]

I feel that some of the amendments we've brought provide some of that structure. For example, the bill proposes interim conditions that allow the Minister of Innovation, Science and Industry, after consultation with the Minister of Public Safety, to impose interim conditions on investment.

First of all, would you agree with that? What sorts of interim conditions would you like to see during a review?

[Jim Balsillie]

Again, I will ask, one, is there the expertise to actually do this review properly, and is it done in an integrated whole? Two, is it done in a transparent fashion, so that we can be assured of where it's done and where it's accountable to Parliament? Three, is it done in the proper scope of realms that I'm trying to address? I've mentioned data, like Mr. Ciuriak has, so my answer to all of those is no.

I will restate: If we do not start rethinking our approaches, including to trade, investment, competition, democracy, privacy and AI—these are linked elements and they're for all the marbles—our citizens will pay the price of this inattention. The time for not taking this seriously is past.

I've been here before on regulated data and AI. We've seen the relevance of AI soar on this, and you've had people talk about this interrelationship of data and AI. I see none of this properly factored into these approaches. It's just.... It's regulatory theatre, and we have to come to terms with the fact that that's been our modus operandi for too long.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Balsillie.

Thank you, Mr. Gaheer.

Mr. Lemire, you have the floor for two and a half minutes.