Industry Committee on June 7th, 2023

[Mark Schaan]

Mr. Chair, I would flag two considerations for the committee, one of which I hope I'm not excessively repeating myself on, but the thresholds that have been articulated for the purposes of what can be reviewable under a net benefit test are part of international agreements that are set amongst the trading nations of the world to ensure there is not undue friction in the capacity for the global exchange, and thereby allowing for net benefit to concentrate on those very large transactions for which countries want to dedicate significant scrutiny from a net benefit perspective.

I would underscore again that all investments are subject to a national security review and that considerations specific to state-owned enterprises and considerations specific to the implications for investments that actually compromise the national security of the country are significant and are improved by this bill. That is the focus that we have put towards transactions that may not meet the net benefit threshold but still raise important questions for the government to consider.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I have a couple more technical questions for you on this.

Is that formula written into the trade deals that we do, or is it a judgment? Has it ever been challenged if you have gone differently?

Is it in the act, or is it a formula we've come up with?

[Mark Schaan]

The formula is in the act, and our trade deals specify that we can't make the act more restrictive than that which appears within the current formula under most-favoured nation clauses. You can't make it worse than what was agreed to at the time, which is the formula that's been set out.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

There is no country that I know of that has signed those deals and, subsequent to signing those deals, passed an act like the national intelligence act that China has. This, to me, abrogates any obligation we have when a country says it's going to.... It's abrogated its responsibility as a fair trade, or under fair trading rules, when it says it's going to use all of its businesses for espionage and theft.

Has there been a case where Invest in Canada or the minister has turned down or done a national security review of a proposed acquisition by a state-owned enterprise that is below that threshold? I'm not aware of any.

[Mark Schaan]

Multiple times. The critical mineral cases are all below threshold.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

They weren't subject to a full national security review, though, in those cases.

[Mark Schaan]

They were subject to a national security review.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

Is it the superficial one or the detailed one?

[Mark Schaan]

I will simply lay out for the chair the way the act works. We draw on the equities of the national security community at the outset of all investments, some of which draw upon the extensional capacity of the act for further time, but all investments are subject to a national security review.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

So we are approving them—and I know you can't do this—but the larger ones, like Tanco and Hytera of Norsat, were over the thresholds of the day and the government admitted that a full national security review wasn't done on those.

Now you're telling me that everyone under that threshold is subject to something that Hytera and Tanco by Sinomine weren't subject to.

[Mark Schaan]

The thresholds are immaterial to the contemplation of national security. National security reviews are contemplated at the outset of the investment, and national security considerations will determine whether or not further steps are required to be able to understand further detail related to the investment.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

There are certain levels of that review, though.

[Mark Schaan]

There are different stages of those reviews.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

What are they?

[Mark Schaan]

Section 25.1 is a generalized commencement. Section 25.2 is an investigation as to whether or not it could be injurious to national security, when there's a presupposition that there could be an injury to national security. Section 25.3 is the continuation of the investigation because it's believed that it would be injurious to national security.

Section 25.3 is “could”. I'm sorry.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

You're talking about every acquisition by state-owned enterprise, regardless of whether it's above or below the threshold, if I understand you.

[Mark Schaan]

If it can't meet the “could” test by which it could be injurious to national security, on the advice of the national security community, it does not proceed to the next stage.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

That's the first level that you described.

[Mark Schaan]

Section 25.1 is the commencement of the national security review. Section 25.2 is the extension of it. Section 25.3 is “could”, and then the ultimate decision is then the GIC on “would”.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

It's “could” and “would”.

[Mark Schaan]

That's correct.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

I want to make sure I understand your terminology.

How many have gone to “would” that are below the threshold?

[Mark Schaan]

I don't want to get into the specifics of individual cases, but I will note that there are below-threshold cases that have continued to be reviewed to the fullness under the national security provisions. This includes some that have gone all the way through to the notion that they would be injurious to national security.

[Rick Perkins, Conservative, South Shore—St. Margarets, NS]

That's fair enough.

This isn't for you; this is really for committee members when I say that, to me, that doesn't provide me with the assurance I need that this type of activity happening at levels below that is actually getting the in-depth look, under either a net benefit or a national security review. That is, I think, why this committee unanimously recommended that it go to zero in that report.

I would encourage members—I don't know if any of my colleagues have anything else to say—to support this amendment, because it reflects the work this committee did and what it recommended. Now is your chance, as committee members, to support unanimously—including what the government did in supporting this amendment—to implement into this bill what you unanimously put into that report by this committee.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Perkins.

Monsieur Masse.