Thank you very much, Mr. Chairman, vice-chairs, members of the committee, and fellow Canadians. Good morning. Thank you for the invitation to meet with the committee and present my views on the Trans-Pacific Partnership. It is an honour and a pleasure to be here.
I am a self-made capitalist, and I believe in free trade and open markets. I've commercialized Canadian intellectual property in 135 countries to a level never done before or since. My global business experience is unique in Canada.
I would like to echo the words of Jared Bernstein, former chief economist to Vice-President Biden, who called for a third category of trade critics: people who believe in free trade and globalization but who don't like what TPP does to our countries, our working classes, and our environment.
TPP is not a traditional free trade agreement. It's deliberately called a partnership because it describes an economic framework for 21st century prosperity. TPP is not principally about reducing tariffs at our borders, but rather about rules that govern how we run our currently sovereign economy and how these new partnership rules get enforced. In the 21st century, making and exporting tangible goods has given way to a global economy where wealth is made by making and exporting intangible goods: intellectual property.
The chart you will see at the back of the papers illustrates this as well. In 1975 intangible goods were one-sixth of the value of the S and P 500 companies. By 2015 intangibles were five-sixths of the value of that same index.
The economy of intangible goods, unlike traditional trade, is governed by rules and restrictions that govern ownership of intellectual property. The intangible economy is the opposite of free trade. It is about rules and restrictions that grant temporary monopolies to those who own valuable intellectual property. When a country ratifies a bilateral or multilateral agreement that governs intellectual property, it makes the commitment to enact those rules inside our domestic marketplace. These are very different kinds of commitments from traditional trade agreements, because they are about how we commit, to other countries, how Canada will operate its economy internally.
Canada is not a large exporter of intellectual property, so we import a disproportionately large amount. Canada owns and exports very little intellectual property, because we've never had a national innovation strategy.
The other part that you will see here illustrates that we have had zero growth in innovation outputs over the past 30 years. Canada never developed capacity for the 21st century global economy, where wealth is generated by commercializing intellectual property.
The most recent modelling of TPP shows that the agreement delivers negligible results in the realm of traditional free trade. What's even more relevant is that all TPP models do not account for the two most important parts: intellectual property and investor-state dispute settlement. ISDS is a tribunal that supersedes sovereign law in a system that allows no appeals.
Below the charts, you will see a few critical statements from the smartest trade economist I have met in Canada, Dan Ciuriak. Not calculating the economic effects of IP and ISDS is like doing a budget for your family where you don't take rent or food bills into account.
As Nobel Prize economist and trade expert Paul Krugman has noted, most of the tangible goods already move tariff-free. The same is true for intangible goods, where 97% of the world in information technology products already move tariff-free under the WTO's information technology agreement.
So what is TPP if not about free trade? TPP is about expanding freedom to operate for the winners in the innovation economy and restricting it for the rest. Freedom to operate is a core strategic and risk management factor for businesses in the ideas economy. Sophisticated ideas businesses use freedom to operate strategies from the onset of their R and D all the way to commercializing and distribution cycles.
As CEO of a Canadian technology company that scaled globally from an idea to $20 billion, my principal focus for two decades was to expand our freedom to operate and constrain our competitors' freedom to operate. I look at TPP's impacts on scaling Canadian companies from this unique perspective.
Canada went into TPP negotiations without ever consulting a single Canadian innovator and without a strategy for this critical aspect of an innovation economy. None of the aspects that constitute an effective freedom to operate strategy are present in Canada today. We don't have an innovation office; prior art libraries; sovereign patent pools; bilateral or multilateral negotiation sophistication; federal, provincial, or global judicial strategies; sophisticated standards and regulation strategies; or collaboration frameworks designed to commercialize Canadian ideas globally. It's inexcusable.
We couldn't have negotiated for our prosperity because you can't negotiate a trade strategy without an innovation strategy, let alone talking to the very companies that such agreements are supposed to advance. If Canada wants to build capacity for the 21st century global economy, then we will need all of these sophisticated capacities.
What we need in Canada, and what I hope this committee will ultimately advance, is a more sophisticated discourse on trade and prosperity. It's not enough to peddle old-fashioned trade liberalization theories when our own best trade economists told us we don't even have models to account for the most impactful aspects of 21st century trade. It's not enough to have lawyers looking at TPP through the lens of elegant wordsmithing. Like all global tech CEOs, I've hired and fired dozens of IP lawyers around the world, and, I can tell you, lawyers don't commercialize ideas. They reduce their clients' instructions to legal wording.
I would like to conclude by saying that it's gratifying to share this session with Professor Geist, not only because he does a great job of educating the public about TPP, but because in his recent blog post, Professor Geist brought to light perhaps the most important fact that Canadians have to consider, which is the fact that our own civil servants know that TPP runs counter to our preferred national strategies. In a briefing prepared for Minister Freeland, which I hope you will all read, it's clear that our civil servants understand that Canada prefers to create its own IP policy through multilateral forums rather than being jackhammered by large owners of IP into a set of rigid new rules.
In reading the document that Professor Geist made public, I would characterize our approach to these trade deals as palliative. We know we're going to lose, so we focus on slowing the inevitable erosion.
Let met summarize my concern with TPP with this. We signed an agreement that our civil servants told the minister runs counter to Canadian preferences after concluding negotiations in secret without consulting a single Canadian innovator. Now that the deal is done, we're doing an economic study to assess its benefits, which doesn't include the most impactful elements related to national prosperity. Then we do consultations with relevant stakeholders to assess their views. That is then followed by creating a decades overdue innovation strategy. This is all backwards. This is precisely opposite to how trade deals should be concluded, step by step.
Thank you very much.