International Trade Committee on April 17th, 2018

[Peter Fonseca, Liberal, Mississauga East—Cooksville, ON]

Thank you.

Mr. Garber, you brought up the point that the affiliates make up 30% to 40% or whatever of our investment. I have many of those in my riding, be it Siemens, GE, or big pharma, etc. Often they'll come to my office. What they're looking for is this. They're going to the global table; they're going to headquarters of whatever company they represent and have to put their case forward at that global table to attract investment here. It happened in Ontario, when they were able to bring in Toyota and Honda. They have a big footprint in terms of their manufacturing assembly plants.

How would you help businesses be able to make their case? These are foreign businesses that are already here. They're looking to expand, have a bigger footprint here, and it's easier to increase that footprint than it is to go get new business, actually. How would you help those businesses?

[Mitch Garber]

Right now it would be a hope, and the hope is the following. I'll use the example of my hometown of Montreal, because I know it best. Along one of the busiest highways of Montreal, you have all of the pharma companies, from Merck to Abbott to Pfizer. How did they get there? In the 1970s we offered great incentives to have them set up large establishments in Quebec. Along that same road, we have all the aerospace companies, from Bombardier to Pratt to CAE. How did we get them? We offered them incentives and they stayed. They've been there for decades.

We still do need to be competitive. Amazon is an outlier and maybe we wouldn't be able to compete for their HQ2. Maybe a city in the States will offer them billions of dollars of cash and free land and no taxation for 20 years. We Canadians wouldn't do that, but we will have to look back at the pharma and the aerospace and those examples that you give from your riding. We will have to readdress them for your companies and future companies, because there's no way to build a highway of an industry without giving large incentives. These could be immigration incentives, tax incentives, or land incentives.

I'm hopeful—it's why I started my answer with the word “hope”—that we will have a good ear in government to make quality arguments about reasonable incentives that should be given to bring that investment, and further investment from those who have already invested in Canada.

I hope that answers your question.

[The Chair, Liberal, Mark Eyking]

Thank you, Mr. Fonseca. Your time is up.

We'll move over to the Conservatives for five minutes.

Mr. Allison, you have the floor.

[Dean Allison, Conservative, Niagara West, ON]

Sure. I'll just continue along that line of questioning, because I think that does bear some importance.

You can look at the U.S. trying to attract automotive and some of these things in terms of what they're doing with certainly property tax, energy, and all these other kinds of things. I guess the challenge is how do you create those incentives in sync with municipal, provincial, or federal governments? Obviously, the feds control some of the bigger strings, but when it boils right down to it, sometimes it's those other things.

You see yourself as a facilitator or coordinator to say, “Listen, we have company A, B, or C that may want to locate in your jurisdiction.” Sometimes it seems we're kind of stuck in our way. That's the challenge we have in Ontario. We have some of the highest energy costs in North America. That makes it tough for manufacturing. It's great, because we have some great advanced manufacturers. I have a great advanced manufacturer in my riding that does great work. But we still have to deal with the other things that aren't necessarily within the purview of the federal government.

[Mitch Garber]

I do see our being that sort of coordinated negotiating arm. At the same time, it's imperfect. We're not the Americans. We're unlikely to offer the same level of incentives, but we must be creative. Because we do have such a large part of our economy generated by foreign affiliates, we've gotten them to come here somehow, either on their own or with the help and assistance of incentives from municipalities, cities, provinces, or the federal government. We have gotten them to come here. We're not starting from zero. This country has been very successful at attracting foreign investment. Let's not fool ourselves. I don't think we're starting anything novel here. What we are trying to do is to coordinate what already exists in fragments, and to bring some type of coordination to it, so that we can grow this foreign investment.

It's true that since 2007, foreign investments have been on the decline. I don't really care what the reason is. I do want to know how to get more foreign investment, and I want a list of all of the deals that we've lost but came close to reaching, and to ask why we lost them and whether we are able to address those things and could not have won them as Canadians.

Would we never be prepared to offer the things that were necessary to get those investments to Canada? Today, I don't know the answer, but I want to know the answer, because the best way for me to be successful is to know why I failed in the past.

[Dean Allison, Conservative, Niagara West, ON]

Let's talk about access to capital, though I realize it's not necessarily within your mandate. We visit places like Silicon Valley and Boston, and some of the hubs of technology. Obviously, the U.S. has done a great job. Money flows in in a big way. People are more entrepreneurial. My thoughts are that every university and college in this country should have an incubator attached—maybe not that they have anything directly related to programming, but to get people thinking about being entrepreneurs.

I think that makes sense. Our challenge has been research money and commercialization, all of those things. At the end of the day, sometimes it boils down to access to capital. Would you just comment on that?

All governments struggle with how to do a better job, how to create a climate where people are prepared to put more capital at risk. Do you have any thoughts around that? I realize that's not directly related to your mandate, but it's one of the pieces of the puzzle. It makes a big difference to investment here in Canada.

[Mitch Garber]

I think you're right, but at the same time we've been very competitive in access to capital. Our pension funds, our banks, and our governments have been competitive in terms of access to capital. I don't believe that people have not come to Canada, because they couldn't raise the money or they couldn't find the money to come to expand in Canada.

On the U.S., I would say that we are a much smaller country. We have our Waterloo . We have our immigration policy. We have our very strong banking system, and we do have access to capital through that banking system. Our banking system has been very friendly to foreign investment.

I'm confident. I also have the glass half full. I haven't seen a problem finding access to capital. That's not the reason we're losing investment in Canada.

[Dean Allison, Conservative, Niagara West, ON]

I don't disagree with you with regard to larger companies. I'm referring more to start-ups, and rounds two and three.... I've had companies come to me and say, “Hey listen, we raised capital in the U.S., and the first thing they want us to do is move our head office to the States.”

[Mitch Garber]

You're right. I'll agree with you.

London, Silicon Valley, Israel, are much better venture capital, angel capital countries than Canada. I don't know how to fix it today. It's not in our mandate, but it's something that I'd like to be able to work on, because we certainly want to encourage start-ups and round A, B, and C investing. We are not at the level of a London or an Israel, or a Silicon Valley. That is true.

[Ian McKay]

If I could just add, because this is a super important point for start-ups to global enterprises, in Q1 of this year, Silicon Valley had 100 start-ups that raised $50 million or more. It's a new record. A hundred start-up companies raised that in Q1. That's telling us two things: one, the place is awash with capital; and two, the risk aversion is virtually at zero now.

Canada has a little more risk averse venture capital culture. The Government of Canada has done some great things through BDC, and through the venture capital platform launched by the previous government, so the pieces are in place.

Some of the other things we have in the tool box, of course, are the strategic infrastructure fund projects and the innovation superclusters initiative. These things are going to generate a lot of activity, and I've already had conversations with GE and others about how they can leverage those programs to accelerate their further investment into Canada.

[The Chair, Liberal, Mark Eyking]

We're quite a bit over time, but they were good questions.

Ms. Ramsey, for three minutes.

[Tracey Ramsey, NDP, Essex, ON]

I want to talk about some of the serious challenges that we face with foreign investment. If we talk about Aecon and the takeover there, certainly we're facing some really serious challenges around data sharing, national security, and procurement.

There was another thing that we unfortunately faced in southwestern Ontario. We had a company, Electro-Motive, which Caterpillar was involved with. Caterpillar came in and essentially took the innovation in the process and left the country after it had received some investment supports.

Can you speak to how you will overcome these challenges, both in making sure that foreign direct investment in Canada generates jobs, stays in our communities, doesn't come in and then essentially take what we have and leave? How do we address these really serious concerns with Chinese companies like Aecon?

[Mitch Garber]

What percentage of companies invest in Canada, take advantage of our benefits, and then leave?

[Tracey Ramsey, NDP, Essex, ON]

I don't know.

I'm just asking how you'll overcome those challenges.

[Mitch Garber]

You're asking it as though it's a major challenge, or as if it's a.... If I don't know the percentage, then I don't know how to answer it. Maybe it's very small.

[Tracey Ramsey, NDP, Essex, ON]

It's something—

[Mitch Garber]

Maybe it's almost de minimis. I don't—

[Tracey Ramsey, NDP, Essex, ON]

With all due respect, it's a challenge that you'll face, that you'll have to address. It will have to be a part of your mandate to understand that there are risks involved with foreign direct investments.

[Mitch Garber]

Sure.

[Tracey Ramsey, NDP, Essex, ON]

One company doing so, to me, is too many.

We need to make sure that part of your mandate acknowledges the risks that exist around foreign direct investment. That's my question.

[Mitch Garber]

Sure.

Let me give you a practical example. Then you maybe you can answer the Aecon question.

I participated in the acquisition of the Cirque du Soleil, a foreign direct investment by an American and a Chinese firm, Fosun and TPG. We got 10% of the equity from the Caisse de dépôt. We promised to keep the head office in Quebec for a number of years. We've increased the number of employees at the Cirque du Soleil. We've bought foreign companies and hired more people in Quebec to oversee the management of the acquisitions that we've made.

I'm involved in a practical example where we have told Fosun and TPG, “If you want to come into Canada, if you want to come into Quebec, you're going to have to keep the company here, or show us that you will. We'll bring you a pension fund that will only invest if you will keep the company here.”

[Tracey Ramsey, NDP, Essex, ON]

How will you translate that into ensuring that those things exist for the investment you're attracting?

[Mitch Garber]

I think we should have a very high moral and process standard when we are attracting foreign investment, especially when we're giving incentives. If we're giving an incentive, it's like any other incentive: it comes with terms and conditions. Those terms and conditions will have to be very consistent with some of the things that you're concerned about.

I don't know enough to be concerned about them yet. I did know enough at the Cirque du Soleil to be concerned about them, to make sure they were covered.

[Tracey Ramsey, NDP, Essex, ON]

When you adopt or create these policies, will you please share them with the committee as well?

Obviously you're in the start-up phase, but you're going to establish these policies as you go, once you gather more folks to work for you than the one you have right now.

[Ian McKay]

We would be happy to.

Just to be clear, Canada has a long history in aerospace and autos, primarily in attracting foreign direct investment. Many of those operations are here because of the strategic infrastructure fund or its predecessors. Any company that has applied successfully to those programs to land an investment has a very clear set of rules, terms, and conditions about the longevity of their investment and their employment requirements. Those are very clear terms that ISED, Finance, Treasury Board, and other departments are on top of.