Chair and honourable members of the committee, thank you very much for the opportunity to present here today.
Please allow me to make three comments related to Bill C-34.
First, intangible assets, particularly data, have changed the nature of economic growth and created new value chains, thus requiring a fresh lens and a renewed focus on the benefits and harms that may come from foreign direct investment. First-mover advantages, economies of scale and scope, network effects and asymmetric information derived from data create greater economic concentration that can leave Canada beholden to foreign firms and also reduce our economic resiliency.
Further, foreign direct investment may be used to capture Canadian intellectual property and data, which can reinforce such impacts. For example, data can not only allow investors to ring-fence a particular market; it could also allow investors to move into other sectors that may be sensitive and not anticipated with the initial investment. In other words, the capture of data can create issues across sectors and not just in a specific market. Thus, one needs to consider how data may be used across the list of sensitive technology areas and outside of them, not just within those specific areas. This can arise from any investment and not just those by state-owned enterprises.
Data is extremely valuable. We have an idea of the aggregate value of data, with experimental estimates from Statistics Canada placing it around $200 billion Canadian, though we need more detailed and updated estimates. Because data is not explicitly valued on balance sheets, monetary thresholds for a review miss the capture of data that may be the reason behind the investment. Data need not only be held in large firms but also smaller ones, so where the investment takes place in the value chain is important.
Second, data creates geopolitical issues that touch upon national security, and Canada needs to be active in setting global rules. Countries and firms are strategically setting rules around the uses of data, particularly personal data, that can give rise to national security concerns and have a direct impact on Canada.
Canada needs to be actively engaged internationally in setting these rules, including standards, since Canada can be held accountable under such rules: for example, adequacy decisions by the European Union for its general data protection regulation. Just as Canada may be judged by its adequacy to rules set in other jurisdictions, Canada should also assess other countries on the prospective uses of our personal data and whether they meet Canadian values. In this regard, it is important that Canada's own governance is up to date with respect to privacy legislation, for example.
Third, data requires a whole-of-government approach, as well as new forms of governance. Although it is important to take a national security perspective to foreign investments, it also requires that other policy areas be taken into consideration, including privacy, data governance, competition and consumer protection, public safety and so on.
There are a few examples. Investment that could lead to greater economic concentration may make our economy less innovative and resilient. This is linked to competition policy. Also, personal data can be combined with other data to reveal patterns of behaviour, which can then be used to create social tensions and undermine our institutions and democracy. This is clearly linked to public safety and national security.
A recent example from the European Union and the United States that links privacy and national security is the so-called Schrems II decision from the Court of Justice of the European Union, which invalidated the EU-U.S. Privacy Shield, which relates to the cross-border transfers of personal data, on account of “invasive U.S. surveillance programs”, arguing that it did not provide adequate recourse for individuals whose data may be used by U.S. intelligence agencies.
Our regulatory structures, therefore, need to adapt. As I noted in my submission to the consultations on the Competition Act, digital technologies are challenging all policy frameworks, and broader regulatory and policy-making structures need to be considered. In this context, the interaction of investment review under the ICA and the Competition Act is very important.
I would urge that decisions on investments wait until respective reviews are completed so that the expertise of each area can be drawn together for a broader assessment, given the intricate linkages that may exist.
Thank you.