Evidence of meeting #76 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cfius.
A recording is available from Parliament.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Mr. Chair, the interpreter is saying that the witness needs to lift his microphone a bit so we can hear her better.
Senior Counsel, As an Individual
A number of jurisdictions have taken action to strengthen their investment review mechanisms, often to add more authority related to critical technology—
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Mr. Chair, there is no interpretation in French because the witness needs to raise her microphone.
Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Lemire.
Ms. Black, could you raise the boom? Then we will see. I will wait to get confirmation from the interpreters.
Could you say a few words?
Senior Counsel, As an Individual
Can you hear me now?
Now that I have taken a bit of time, I will try to be quick to say that Canada does, in the U.S.'s view, have a strong investment review mechanism—
Liberal
The Chair Liberal Joël Lightbound
I'm sorry, Ms. Black. I think it's still not working properly. You need to raise it even more.
Okay, I think that should be good.
Senior Counsel, As an Individual
I will wrap up quickly. I do think Canada has very strong, broad jurisdiction. Where a number of other jurisdictions have taken action is to have more mandatory preclosing filings. The U.S. is on the narrower side of that in what is required, but a number of Five Eyes and G7 partners have taken those actions.
I will say that some jurisdictions have very narrowly scoped authority with respect to, for example, just infrastructure, so in many ways Canada does have stronger jurisdiction than a number of other countries.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
The last time the ICA was updated was in 2009.
This time I will turn to either Mr. Fay or Mr. Gilbert.
Can you talk to the committee about the implications of the changing geopolitical landscape, the increased threat of foreign interference and how now is the time to make these changes to the national security review act?
Managing Director, Digital Economy, Centre for International Governance Innovation
Thank you for the question.
Exactly. Things have changed tremendously. I know I talked a lot about data, but the ability to harness big data has truly changed everything. Data, as I mentioned, is now a geopolitical tool. You can feed it into various types of AI, if I can use that term, and it can be used to influence behaviour. It can be used to capture markets. It can be used in many different ways. We have seen examples of that.
This is not something that was even thought about in almost any policy 10 years ago. Most of our frameworks really need updating, and this is one of them.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
One thing about AI is that it is extremely mobile. The one example I reflect on is the Facebook movement of data from the EU to the United States. I think there was a fine of $1.2 billion.
Are our penalties significant enough? When you look an organization the size of Meta or Facebook, $1.2 billion might simply be the cost of doing business. Should there be conditions or are there any conditions attached to erasing that data or sending that data back, so the penalty truly is a penalty and not simply a cost of acquisition?
Managing Director, Digital Economy, Centre for International Governance Innovation
Maybe I'll take the first part.
Once the data has been integrated into the technology, it's done. If there are benefits that come, the benefits are derived; if there are harms, they're already there.
The fine you're referring to is the one I had mentioned related to the Privacy Shield and how the data could be used by intelligence services without recourse for the individual. You do want recourse for the individual, but at the same time, even if you give the data back, the data has already been harnessed by the technology and whoever holds that technology.
Liberal
Tony Van Bynen Liberal Newmarket—Aurora, ON
Are you aware of any organizations that consistently monitor the transfer of data to ensure that these types of events do not occur? What types of regulation and investigation authorities are there?
Managing Director, Digital Economy, Centre for International Governance Innovation
Generally, what we do is rely on other countries to follow their legislation. For example, in a trade agreement, you would say to the other country that you need to have adequate privacy protection over personal data, and then you would rely on that country to enforce those rules. That's why I mentioned that, from a Canadian context, it is important that we also pass updated privacy legislation.
Managing Partner, Gilbert's LLP
Perhaps I might address your question of whether things have changed.
Would that be acceptable, Chair?
Managing Partner, Gilbert's LLP
Thank you.
I would look at it in three different ways. One, things have changed generally. Foreign interference in elections is obviously very topical. There seems to be much more activity with the United States or here. Two, there are concerns about ownership and scarcity of essential resources. Three, there are subject matter issues, whether it be data or those kinds of things. I will break down each of these. They likely have their own solution that evolves, and tweaking.
Foreign interference can be dealt with, for example, in an agent's registration process. That exists in the United States. I myself was a foreign agent for then Her Majesty the Queen in America and Washington, D.C., and it worked just fine. We did work for Ontario in solving a problem between the United States and Canada. That system has been in place for many years, and it works fine. We just don't have it.
Second, in terms of the scarcity of resources, the Canadian government has addressed particular issues of importance—as have provinces—whether it be land or minerals, key concerns that the government directs its attention to it and signals to the world that it wants to restrict ownership in a certain way or provide a key limit.
The third would be in subject matter, something like data, which likely requires a deeper dive and more consideration than what's possible as a broad brush for every industry. They're industry-specific approaches that likely should be considered as the economy has moved.
Liberal
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Thank you, Mr. Chair.
My first question is for Ms. Black.
I'd like to discuss the U.S. approach to a national security review of foreign investments. There was a case recently, on February 5, 2023. Gotion High-Tech, a company that manufactures batteries and provides energy storage solutions in China, signed a memorandum of understanding with InoBat, Europe's leading supplier of high-end batteries for electric vehicles, to explore the possibility of creating a joint venture that would revolutionize electric vehicle battery and energy storage technologies. In particular, the plan is to join forces to set up a mega battery factory with a production capacity of 40 gigawatt hours. Gotion High-Tech will build the plant, which will be considered a real estate acquisition, and not an investment in an American company.
You commented on a recent article on the subject, in which it was mentioned that the Committee on Foreign Investment in the United States may not have all the expertise it requires. Can you elaborate on this situation?
Several joint venture proposals like this are appearing right now, particularly for mining projects, and I wonder if it might have repercussions here, too.
Senior Counsel, As an Individual
CFIUS's jurisdiction is primarily over investments into U.S. businesses that are already functioning. CFIUS also has jurisdiction over certain real estate greenfield transactions around identified military facilities. This particular transaction was a greenfield transaction not near one of those identified facilities, although I'll note that since this finding of not having jurisdiction, CFIUS has updated its list to cover it.
I think what you're pointing out here is that in the U.S. greenfield businesses are not generally covered for CFIUS review, whereas I believe they are in Canada. What we're seeing in the U.S. are some proposals to expand CFIUS's jurisdiction, but we're not seeing anything moving in the short term. As noted, CFIUS has regulatory authority to update certain of its definitions, and it has expanded the number of military sites around which real estate is covered.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
In your opinion, has this issue arisen in connection with mining projects involving critical and strategic minerals, in particular? When you think of military projects, you quickly think of critical and strategic mineral reserves. Do you think this has actually happened?
Senior Counsel, As an Individual
It would depend on how the transaction is structured. Again, I think that Canada has broader jurisdiction with certain assets, sales or greenfield transactions. If there were an investment into an operating company, which is a pretty low standard, if it had permits or if it had undertaken any development, then it could be covered. If it were a pure asset purchase, CFIUS would likely not have jurisdiction. Again, it's about facts and circumstances. That's the general answer.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Once established, could this type of partnership or joint venture raise national security issues, if access is given to strategic things such as critical minerals, among others? In terms of exports, for example, ownership of the resource is a basic part of national security. It could happen that, in the case of a joint venture, sensitive information is disclosed to companies that are partners, but which I think could fall through the cracks of the Investment Canada Act and national security.
Do you share this fear?
Senior Counsel, As an Individual
I think the approach, as I said, that CFIUS takes is to review functioning businesses, as opposed to start-ups, where a foreign investor has come in. I take the point that it doesn't cover everything. It's one tool.
Maybe I'll just leave it at that.
Bloc
Sébastien Lemire Bloc Abitibi—Témiscamingue, QC
Do you think these changes have had repercussions on foreign investment in the United States?