Industry Committee on June 21st, 2023

[The Chair, Liberal, Joël Lightbound]

Dear colleagues and friends, I now call the meeting to order.

Welcome to meeting number 83 of the House of Commons Standing Committee on Industry and Technology.

Pursuant to the order of reference of Monday, April 17, 2023, we are continuing our study of Bill C‑34, An Act to amend the Investment Canada Act and resuming clause-by-clause consideration. Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022.

I invite members to have a look at the guidelines on the use of earpieces and microphones to ensure that there are no echoes or high-pitched sounds that could disturb our interpreters, whom we thank in passing and even applaud. I sincerely thank them for everything they do.

Joining us again today, from the Department of Industry, are Mark Schaan, senior assistant deputy minister, strategy and innovation policy sector; Jamieson McKay, director general, strategy and innovation policy; James Burns, senior director, investment review branch; and Mehmet Karman, senior policy analyst, investment review branch. They are here to answer our questions.

Thank you all for joining us. Once again, my apologies: it's voting season in the House, so we're often a little late.

(On clause 16)

Ladies and gentlemen, let us begin without further ado. You will recall that we had reached clause 16 of the bill and that Mr. Perkins had proposed the amendment renamed CPC‑11.2 and numbered 12525376.

Mr. Perkins, you have the floor.

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

Just to clarify, this was the one I was distributing at the end of the last meeting that had the reference number ending in 376, and everyone has that.

This section amends clause 16, as we know, and the genesis of the idea comes from recommendation six in the INDU report on the Investment Canada Act that was released in 2021. If I could reference members to recommendation six:

That the Government of Canada encourage Canadian entities to keep ownership of intangible assets developed with federal funds, including intellectual property, by requiring, when appropriate, that they return moneys received from federal programs or subsidies in full or in part.

The proposed amendment is drafted to reflect that, and the report at the time said that the question is not whether a foreign investment can be threatened by Canada's national security. Virtually all witnesses in that report recognize that. Rather, the question is whether the Investment Canada Act and its administration effectively protect Canada's national security and evolving circumstances.

On the intangible asset side, we had quite a bit of testimony on the issue of how our economy has evolved over the last 20 years from a tangible asset economy, as we heard Mr. Balsillie talk about, to intangible. More than 90% of the value of the S&P 500 is now in intangible assets.

There's a concern about those assets, particularly those developed in Canada. By my rough calculations—and the ISED officials probably have a better figure than I, but if you include the SR and ED tax credit—we're spending just about $16 billion or so. With granting councils, the clusters, all of the various programs that ISED has, plus the SR and ED tax credit, we're spending quite a bit on invention, as I'll call it—the invention that leads to IP.

We've seen recent issues that I know the officials have been dealing with, for example, issues related to COVID and Medicago in Quebec City, where over $200 million of taxpayer money was invested in producing a plant-based COVID vaccine, which apparently has Health Canada approval yet has not been produced. Now that company has been sold, and we don't have access to it.

There's a concern that we want to stop the free flow of capital in capital markets. We wouldn't want to do that, but if that IP involves that kind of situation, where you have over $200 million of taxpayer money to develop it, consideration of that should be given in the review of net benefit, and there should be a requirement that, if that IP leaves the country, some part of that, if not all of it, will be paid back as the price of doing business.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Perkins.

Are there other questions or comments before we move to a vote on the amendment proposed by Mr. Perkins?

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

I guess I should ask the officials if they want to comment on this.

[Mark Schaan, Senior Assistant Deputy Minister, Strategy and Innovation Policy Sector, Department of Industry]

Mr. Chair, I think the member has laid out the intention of the amendment. We would just note that this is amending the national security process, so the nexus to national security of the repayment would be an important consideration. Then, obviously, I'll just note that many of our programmatic mechanisms do have specific clauses that are specific to the programs around the consideration of intellectual property when there's change of control.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Schaan.

Mr. Fast is next.

[Ed Fast, Conservative, Abbotsford, BC]

I have a question for the officials. Have you been able to quantify how much of the value of taxpayer-paid research that is done in Canada escapes our country or leaves our country through acquisitions and otherwise?

[Mark Schaan]

Mr. Chair, I wouldn't be in a position to offer a number on that, in part because the benefits of research are multifold and aren't simply expressed in the value of one particular aspect, which would be potentially either a tangible or intangible value.

[Ed Fast, Conservative, Abbotsford, BC]

My point is this, Mr. Chair. There are two ways in which Canadians invest in research and in the value that's inherent in intellectual property.

One way is that we educate our children. We educate Canadians. These are the human resources that drive our economy, and we have taken great pride in the fact that our country is well educated and that we invest reasonably heavily in our education system. We could probably do more, but I think it's fair to say that Canada is among the most educated countries in the world, and it should be reflected in what our economy produces, especially when it comes to intellectual property and to intangible value.

We invest in their education, but we also directly invest as taxpayers in the research institutions that we have within our federal government. Sadly, over the years it's become apparent that a significant part of that research, with the value of that research, is lost to Canadians, because those companies are unable or unwilling to commercialize within Canada and are bought out and end up being owned by companies elsewhere in the world, primarily in the United States but Chinese companies and Japanese companies will also buy out Canadian companies, and the value of that research that Canadian taxpayers invested in effectively disappears.

It may have created temporary jobs along the way—research-driven jobs—but at the end of the day, the actual value of that research as is translated into intellectual property, the value in that IP, is gone, which is why I feel that this is a reasonable amendment to put forward to clause 16. I think we will serve Canadians very well and, by the way, incentivize taxpayers indirectly to welcome these kinds of investments, because if in fact those investments are lost because of purchases by foreign companies, we at least get the initial investment back.

We'll never get back the dollars that we invested in our children's education, especially if those children leave our country, but this is at least a step forward and is something very tangible that we can do to be accountable for the taxpayer dollars that are being invested in research. I encourage our members here to support this particular amendment.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Fast.

If there are no more comments on CPC-11.2, I will call the vote.

(Amendment negatived: nays 6; yeas 5 [See Minutes of Proceedings])

(Clause 16 agreed to)

(On clause 17)

We're moving on to clause 17.

Are there any amendments on clause 17? If there are no amendments on clause 17, we will move on.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

Mr. Chair, may I move LIB‑1 if the Liberals do not?

[The Chair, Liberal, Joël Lightbound]

Yes, you may.

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I think it’s important to move LIB‑1, but it shouldn’t be up to me to do so, in theory, since this amendment bears Ms. Lapointe’s name. However, I am very happy to do so.

[The Chair, Liberal, Joël Lightbound]

Mr. Lemire therefore moved LIB‑1 to clause 17. The reference number of this amendment is 12447492, and I believe that all members have the text in front of them.

Are there any comments about this amendment?

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

If I understand it, since there hasn't been an introduction for this one, this proposed amendment compels the minister to notify the National Security and Intelligence Committee of Parliamentarians, NSICOP, and the National Security and Intelligence Review Agency of any decision rendered regarding a national security review process. The notification will include the identity of the non-Canadian subject to review, the terms of the investment and whether a divestment decision was taken.

When I read this, I have a couple of questions. Maybe the officials can comment.

The officials already said here at committee that the intelligence review agency is already a key part of the national security review process, along with other government agencies like the RCMP. Why should the intelligence review agency be required to receive additional notification if it is already part of the process?

It looks to me like this time we're doing suspenders and a belt, when suspenders and a belt have been rejected previously.

[Mark Schaan]

Mr. Chair, national security community that we were referring to in the discussion about who was involved in national security reviews includes the Department of Public Safety and the equity agencies that are aligned with it, including the RCMP, CSIS and CSE. This amendment brings into play NSIRA and then NSICOP, which are investigative bodies that are not part of the national security departments.

[The Chair, Liberal, Joël Lightbound]

Go ahead, Mr. Perkins.

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

They're investigative parties, but they're not being given an investigative role with this amendment. As I understand it, under the amendment, the members of NSICOP are not privy to the details as to why an investment decision was taken. The committee members, if they are involved, should be involved.

When I look at it, it just says the identity of the non-Canadian subject to review, the terms of the investment and whether an investment decision's been taken, but it doesn't talk about the details of the “why” or the “why not” for that investment decision.

Am I missing something here? It looks to me like all they're being informed of is that there's been an investigation. They're not playing any real role in it, other than just saying it's an investigation. I don't see the purpose of it.

[Mark Schaan]

The National Security and Intelligence Committee of Parliamentarians and the National Security and Intelligence Review Agency have a responsibility to look at the treatment of national security information—not the outcomes or decisions reached with that national security information but actually the treatment of the information. This amendment simply ensures that they include the national security information that would be part of an Investment Canada national security decision.

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

What does “treatment” mean? I'm struggling with that. “Treatment” is what?

[Mark Schaan]

The two bodies referenced in the amendment are oversight bodies. They are often provided with the process issues around the treatment of national security information, not the outcomes of the decisions. They're not review bodies for the purposes of appealing decisions related to national security. They're to ensure that the national security information was treated appropriately, kept secret and handled in a reasonable manner.

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

Why wouldn't it be anyway? Why is this needed? I would presume that anyone brought into the process would be bound by those conditions already.

[Mark Schaan]

That is currently the impact of the law. This is, as I understand it, a mechanism for improved transparency.

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

I will oppose this because I don't see the need for it.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Perkins.

If there are no more questions and comments on amendment LIB-1, moved by Mr. Lemire, I will call the vote.

Shall amendment LIB‑1 carry?

(Amendment agreed to: yeas 7; nays 4—See Minutes of Proceedings)

Are there other amendments to clause 17? I see that there aren't.

(Clause 17 as amended agreed to)

(Clause 18 agreed to)

(On clause 19)

We move now to clause 19. Are there amendments to clause 19?

I recognize Madam Lapointe.