Madam Chair and honourable members of the committee, thank you for the opportunity to appear before you today.
The digital transformation of the past 40 years has created a new economy in which wealth, power and security are rooted in the ownership of intellectual property and the control of data and AI. Prosperity today comes from new owned ideas that generate new high-margin revenue. Intangible assets now constitute over 90% of the S&P 500's total value, up from 17%.
Canada missed this shift. The federal government spends approximately $7.5 billion annually on research funding, with $4.2 billion via the granting councils and $3.3 billion internally.
When I last appeared before this committee in March 2023, I focused on Canada’s failure to adopt a framework to own, control and commercialize IP from publicly funded R and D, and I recommended building institutions and capacity for the knowledge-based and data-driven economy. Since then, there hasn't been a single new policy or institution created to meet the need for strategic reorientation.
Simply put, you cannot commercialize what you do not own. If you don’t own an idea, then you won't invest any more than you would build a house on land you don’t own or at least have prior explicit permission to build upon.
Canada has world-class universities, researchers and students. Our higher-education R and D spending ranks among the highest in the OECD, with billions invested each year, yet the translation of that investment into ownership and economic outcomes for Canada remains negligible.
Because we missed the shift from a production to a knowledge-based economy, Canada’s standard of living has been in steady decline. Over the past five years, GDP per capita has fallen by 0.4% a year, the worst among the top 50 developed countries. The OECD projects we will be the slowest-growing advanced economy through 2060. Both are a direct result of policy failure attuned to changing global realities. At the household level, the consequences are clear: As paycheques shrink, costs continue to rise.
Because IP and AI data directly determine wealth and power at both the firm and national levels, smart innovation economies reoriented to own and protect those assets and capture their economic and security spillovers.
South Korea elevated its intellectual property office to a full ministry, signalling that IP is a national economic priority. The Israel Innovation Authority office is located next door to the Minister of Finance. China built industrial strategies around massive portfolios of patents and data assets in AI, blockchain, clean tech and advanced manufacturing. Germany's Fraunhofer institutes convert public research into domestic industrial capacity, strengthening national champions in global networks. In the U.S., the Bayh-Dole Act is a sophisticated ownership framework that grants government march-in rights when publicly funded assets fail to serve the public interest. I could go on.
Meanwhile, AI has emerged as a new factor of production and a form of machine knowledge capital that both competes with and complements human expertise. It is transforming industries and the workforce at scale. Approximately two million AI-related patents have now been granted globally, yet Canada does not appear among the top 100 holders even though our publicly funded research helped build the foundations of the field.
Now politicians are exhorting Canadian businesses to adopt AI, which is to say to buy technology from abroad despite inventing it here with taxpayer funds because we have not secured the IP rights to deploy the AI into new processes, products and services. How is this a path to sovereignty and prosperity?
Lastly, I want to address the myth that a lack of business investment is the reason for Canada’s low productivity. Canadian firms are not lazy; they are rational. They will not invest because the policy conditions do not support earning a return. Until we fix this, domestic BERD trend lines will not reverse.
These are my recommendations to this committee: One, embed domestic value-capture provisions into the granting councils; two, establish a sovereign innovation asset bank; and three, build institutional capacity for the knowledge-based and data-driven economy. The solution is not to spend more or less on R and D but to strategically course correct by creating institutions and capacity to ensure Canada generates intangible assets and then captures the economic and security benefits from its investments.
Thank you. I look forward to your questions.