Mister Chair, committee members, thank you for the invitation to take part in your study of Bill C-26. 

Founded in 1976, the Business Council of Canada is composed of approximately 170 chief executive officers who run Canada’s most innovative and successful businesses.

As an organization representing a broad cross-section of Canada’s critical infrastructure sectors, I will restrict my comments to Part 2 of Bill C-26, the proposed Critical Cyber Systems Protection Act.

I will begin my remarks by underlining that Canada’s leading businesses are committed to maintaining a strong and resilient security posture in the face of growing cyber threats. Indeed, in a survey of our members, every single chief executive officer indicated that cybersecurity was either a “high” or “very high” priority for their business.

Our members are backing their commitment to cybersecurity with significant resources. In critical infrastructure sectors, most of our member companies each invest well over $150 million in Canada per year on measures to prevent, detect and respond to cybersecurity incidents. A plurality invests over $500 million annually on the same.

As cybersecurity risks to the country grow, so too do the resources that our members plan to devote to protecting Canadians. Over the next two years, over two-thirds of our members plan to increase both their cybersecurity spending and personnel staffing by at least 25 per cent.

However, we cannot lose sight that defending Canadians against cyberattacks is very much a “team sport”, requiring close coordination between government and industry.

That is why the Business Council of Canada supports the objectives of recent government cybersecurity initiatives. This includes Part 2 of the Bill, which if properly drafted and implemented, could improve the overall cyber resiliency of Canada’s economy by establishing a baseline of cybersecurity across critical sectors.

It is also important to stress that the enactment of Part 2 would bring Canada’s cybersecurity framework in line with best practices amongst our closest security partners.

In a period of growing global tensions, Canada must move in lockstep with its closest allies in strengthening its cyber resiliency. Otherwise, Canada risks being perceived as a “weak link”, which could have dire consequences for Canadians’ future security and prosperity.

Of course, no public or private sector initiative is perfect. It should therefore be no surprise that Canada’s business leaders would like to see targeted amendments to Part 2.

In the interest of time, I will highlight three of the most common suggestions for improvement that I have heard from our members.

First, Part 2 should be amended to adopt a risk-based methodology, which would impose regulatory requirements on designated operators proportionate to their level of risk. By imposing fewer and less onerous obligations on low-risk operators that have well-established cybersecurity programs, they can spend more of their finite resources on incident prevention activities. Regulators, on the other hand, could dedicate more of their finite resources towards high-risk operators that pose the largest threat.

Second, Part 2 should be amended to place fair and reasonable limits on Cabinet’s power to issue cybersecurity directions. In the absence of statutory safeguards, Part 2 would allow Cabinet to issue any direction regardless of whether such measure would be effective in reducing a risk to a critical cyber system. Directions could also be issued without Cabinet first consulting with impacted provinces and territories; negotiating in good faith with a designated operator; or considering relevant factors, such as the potential cost of the direction, whether reasonable alternatives exist to issuing the direction, or the potential consequences of the direction on competition, services or customers.

Third, and lastly, Part 2 should be amended to define key terms more precisely, such as “cyber security incident” and “critical cyber system”. The current definitions of these terms are overly broad. This will likely result in reporting inconsistencies as well as the over-reporting of immaterial incidents which could overwhelm government authorities.

I’ll conclude by noting that Part 2 is just one of several national security reforms that must be urgently undertaken to protect Canadians.

As a priority, the Business Council of Canada urges that lawmakers also amend of the Canadian Security Intelligence Service (CSIS) Act enable CSIS to proactively share actionable threat intelligence with Canadian companies where it is in the public interest and subject to all necessary safeguards and oversight.

This and nearly 40 other much-needed reforms are included in the Business Council of Canada’s recent report, Economic Security is National Security. That report is publicly available on our website.

Thank you for the opportunity to speak. I look forward to your questions.

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Mr. Chair, thank you for the opportunity to speak to this committee about the Russian invasion of Ukraine and implications for global peace and security.

The Business Council of Canada is composed of 170 chief executives and entrepreneurs of Canada’s leading enterprises. Many members lead global businesses with extensive trade and investment interests around the world. Following Russia’s brutal invasion of Ukraine, companies quickly severed ties with Russia and have steadfastly supported Ukraine. Canadian businesses have also worked hard to alleviate supply disruptions stemming from the war.

Canadian potash producers like Nutrien increased output to help many of our partners to reduce their reliance on Russian and Belarusian suppliers. Cameco is supplying Ukraine’s energy utility with nuclear fuel to safeguard its energy security and independence for years to come. These are just a few examples among many.

Rebuild Ukraine

As this war rages on, it is important that Canada remain engaged to support Ukraine and Ukrainian businesses. We cannot wait for the war to end to start rebuilding the country and to strengthen our economic ties. As Ukrainian ambassador to Canada Yulia Kovalev has said – Ukraine’s economy is the “third front” in the war.

That is why the Business Council of Canada is proud to support the Canada-Ukraine Chamber of Commerce for the second Rebuild Ukraine Business Conference taking place this week in Toronto. Our President and CEO, Goldy Hyder, as well as other members of the business community will participate in this important and timely conference to highlight the needs and opportunities to rebuild and modernize Ukrainian infrastructure.

Canada-Ukraine Free Trade Agreement (CUFTA) Modernization

We also support the recent modernization of the Canada-Ukraine Free Trade Agreement. This agreement brings in important new chapters and provisions to our bilateral trade agreement, including covering trade in service. It will create an environment of predictability and stability for our bilateral trade and investment flows.

Our Ukrainian friends and partners have been clear how important this deal is to demonstrate to Canadians that Ukraine is open for businesses, and that businesses can have confidence in the market in the long term. We agree and urge parliamentarians to swiftly ratify this deal.

Export Development Canada

We have also urged Export Development Canada to put in place war risk insurance and 2-year export credits to help support Canadian companies who wish to trade with and invest in Ukraine.

As our CEO wrote to EDC two weeks ago, credit agencies from Germany, France, Japan, the United Kingdom, Sweden, Poland, and the Netherlands are now all providing political and/or war risk insurance for companies from their respective countries who are investing in Ukraine. Similar programs have been established by both the United States’ International Development Finance Corporation as well as the World Bank’s Multilateral Investment Guarantee Agency.

Canada has promised its full support to Ukraine, and we agree with EDC President Mairead Lavery that Export Development Canada can play a pivotal role in Ukraine’s long-term reconstruction.

Defence Commitments

The conflict in Ukraine and deteriorating global situation highlights the need for Canada to step up and play a more active role in supporting peace and security.

We welcome Canada’s materiel support to Ukraine. The war also underscores the importance of the NATO alliance in safeguarding Europe and North America. Canada must at a minimum meet its 2 per cent defence spending commitment. It was once commonplace across the alliance to miss this target, but following the war, many NATO members have either increased spending or have outlined plans to increase spending to reach this level. Canada cannot be an outlier.

Canada in the world

This war marked a turning point in the global economy. Economic security is now a priority across the world, and many nations less blessed with natural resources than Canada are preoccupied with securing a safe reliable supply of energy, food, and other natural resources.

Many likeminded partners are looking to Canada to be a reliable and safe supplier.

In summer 2022, German Chancellor Olaf Scholz visited Canada and clearly stated his country’s interests in Canadian energy, including LNG, as well as hydrogen and critical minerals to power its economy today and into the future.

This visit was followed by South Korean President Yoon Suk Yeol in September 2022 and Japanese Prime Miniter Kishida Fumio earlier this year. In both cases, North Pacific leaders expressed clear desire to enhance their economic and energy security through closer economic linkages to Canada.

Finally, when European Commission President Ursula von der Leyen visited Canada in March this year, the EU outlined how important Canada is as a partner as it pursues a reliable supply of energy and raw materials. Among other issues, leaders committed to a Canada-EU Working Group on Energy Transition and LNG to identify and advance medium-term solutions. As European leadership returns to Canada for the Canada-EU Summit this week, we hope to see some concrete progress toward supporting our partners and allies in Europe.

We believe Canada has an important role to play in ensuring Ukraine wins this war and thrives in the years ahead. Canada also has an important role to play as a stabilizing force in world. Business leaders are eager to partner with government whenever possible to support a more peaceful and prosperous world.

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Remarks by Robert Asselin to the House of Commons Standing Committee on Finance in pre-budget consultations.

Mr. Chair,

The state of the world today reminds us of the inherent fragility of our international order and the global economy. For a country such as Canada, geopolitical shocks such as these have a deep impact. The global environment is only further compounding the challenges we were already experiencing domestically.  

Here at home, Canadians are feeling the weight of high interest rates, low productivity, and persistent inflation.  Canada’s GDP per capita has been trending down for several quarters, and without our natural resources, Canada’s trade deficit would be structural and significant.  Our population is also aging fast.

Going forward, private sector economists’ forecasts point to no growth in 2024 and very weak growth thereafter. Whether there is a technical recession will be of little comfort to Canadians as interest rates are expected to remain high for the foreseeable future. For the federal government, debt servicing costs will continue to be much more prohibitive than previously forecasted in Budget 2023.

Instead of working in concert, the government’s three core economic policy objectives — growth, equity, and price stability — could become increasingly in conflict. Growth rates that are lower than interest rates will have a dramatic impact on fiscal policy. Governments can no longer run permanent large deficits without fear. This fiscal year, the federal government will use as much of its revenues to service the debt than providing health care transfers to provinces and territories.

This is why we continue to urge the government to adopt a new and credible fiscal anchor, one which would limit debt servicing costs to a maximum of 10 per cent of revenue going forward. By doing this, we think it will preserve the government’s capacity to fund programs Canadians rely on and not put an excessive and unfair fiscal burden on future generations. The more the federal government spends on servicing the debt, the less it has to fund its core missions. 

More deficit-financed spending at higher interest rates will eventually and inevitably lead to levels of indebtedness that will force future governments to cut spending and raise taxes. It will lead to a weakened economy with considerable uncertainty for businesses looking to invest, hire and grow in Canada. It will also put in jeopardy the social programs Canadians value. This is precisely what we must avoid.

We are not of the view new spending is required in the next budget.  Over the last few budgets, the federal government has introduced many measures that have yet to be implemented. We also urge the government to move ahead with a real, comprehensive program review as well as implementing measures announced in Budget 2023, such as the commitment to outlining a concrete plan on permitting reform by the end of this year and accelerating the implementation of measures and incentives towards the energy transition.

In the aftermath of last week’s Supreme Court ruling on the Impact Assessment Act, it is essential that the government move quickly to provide clarity, certainty, and predictability on the rules for major projects. We must not lose out on once-in-a generation business investments that are necessary to reduce our emissions and foster economic growth for the benefit of all Canadians.

Thank you.

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The federal government has set a goal of achieving a 40-to-45 per cent reduction in carbon emissions by 2030 and net-zero emissions by 2050. These are substantial commitments that will require ongoing cooperation between governments and the private sector. There is urgency to getting this right. Absolute emissions in Canada need to drop by roughly 32 to 37 per cent in less than seven years while our GHG intensity per capita remains amongst the highest in the OECD^1,2.

Other nations are working hard to establish a comparative advantage in climate-friendly technologies. Just last month U.S. President Joe Biden celebrated the one-year anniversary of his trademark legislation, the Inflation Reduction Act (IRA) that positions the country to be the global magnet for clean technologies for the foreseeable future. The speed and scale of the

U.S. approach to unlocking investment should not be underestimated. In fact, a recent analysis highlights that there have already been 270 new clean projects announced in the U.S. stemming from the Act, with more than $130 billion USD expected to be invested in the next two years³. When all is said and done, the IRA is expected to inject trillions of dollars into America’s energy transition⁴.

Investments required to achieve Canada’s net zero ambition are estimated to be approximately $2 trillion, but year over year investment levels remain well off the mark and need to increase by 5.5 to 8.5 times from where they are today^5,6. A close partnership between governments and the private sector is necessary to enhance the competitiveness of Canada’s natural resource and manufacturing base, and to create the opportunities for clean technology innovators to grow their market share, both domestically and abroad. The time is now for Canada to take a leadership role in the global effort to address climate change.

The Business Council of Canada agrees with the growing consensus among experts, thought leaders and economists that the government must focus its limited fiscal capacity on economic competitiveness and the country’s most pressing decarbonization needs. Through Budget 2023 and previous work, the federal government has provided some guidance in terms of where the private sector can compete for capital by offering investment tax credits (ITC) in five specific areas: carbon capture utilization and storage (CCUS), hydrogen, clean technologies, clean technology manufacturing and clean electricity.

While important, ITCs on their own cannot generate the level of investment that Canada needs to meet its climate goals, nor are they the basis of a bold economic policy designed to drive sustainable economic growth and improve the competitiveness of Canadian firms. Canada has all the ingredients to be a go-to destination for green investing that can reduce emissions here and abroad, but it currently lacks the clear policy and fiscal incentives to attract the capital necessary to support its emissions reductions goals. Fulfilling the country’s true potential will require a broader view where numerous policies are working in concert to drive investment, grow talent and develop skills, expedite project approvals, and ramp up spending in research and development and applied science.

Nonetheless, the proposed ITCs do provide an important opportunity to bridge or at least narrow the gap between the economics of building out new decarbonization projects in Canada versus other jurisdictions. Their success will hinge on their ability to unlock an unprecedented level of private sector capital and position firms in Canada as cost competitive producers of innovation and clean technology. Central to their success is the need for the government to offer clear and achievable terms and conditions that allow businesses to secure the full benefits offered by each ITC. Of equal importance is the need for the government to clarify its intentions to support operational expenditures through tax, carbon pricing policy or public financing guarantees.

While this consultation is focused on a specific set of ITCs, the Business Council urges the government to work closely with industry to confirm its intentions to support clean growth opportunities through tax policy or other programs in markets such as biomass, biofuels, sustainable aviation fuel and for critical minerals such as aluminum and uranium.

Finance Canada’s consultation provides an immediate opportunity to clarify several aspects of the emerging ITC regime. We respectfully provide the following comments on behalf of our members.

There is an urgent need to finalize the ITCs

The federal government has committed to developing ITCs for clean technologies in its last three budgets. As of today, none are in force, minimizing their ability to support final investment decisions in the near term. For example, the government committed to developing an ITC for CCUS in Budget 2021. This commitment was met with enthusiasm and represented a chance to close the economic shortfall of carbon capture investing in Canada versus other jurisdictions.

Companies, interest groups and other stakeholders rushed to participate in numerous consultations and exercises to help shape the design of an ITC that holds the potential to position Canada as a global leader in CCUS technology and deployment. Yet roughly two years later companies and investors continue to wait for answers about how the ITC will treat specific investments (e.g., pre-combustion equipment, investments in transnational projects) while Budget 2023 added a new consultation requirement for labour and prevailing wages.

While draft legislation has been published for CCUS and clean technologies, the ITCs for hydrogen, clean manufacturing and clean electricity (including nuclear) remain conceptual and are of limited use to firms or global investors considering projects in Canada. Delays in finalizing the terms and conditions of each ITC through law effectively freezes capital and diminishes Canada’s ability to achieve its emissions reductions targets and fulfill important commitments such as exporting clean hydrogen to Germany by 2025⁷.

Canada is in a global competition for investment dollars in the low carbon economy, thus timing matters enormously. Tens of billions of investment dollars are contingent upon Finance Canada’s ability to move swiftly to finalize the ITCs and to create the commercial case for clean technology investment in Canada. We urge policy makers to work with companies and the investor community to move expeditiously and finalize the terms for all ITCs.

Ensure simplicity

Just one year after coming into force, the IRA has ushered in billions of dollars of private sector investment into ZEVs and battery technology, renewable energy, hydrogen, biofuels and CCUS. Comparatively Canada’s ITC regime remains nascent with notable investments in the energy transition driven by hallmark programs such as the Strategic Innovation Fund (SIF) and bespoke government spending.

Success under the IRA is not coincidental. Rather, U.S. policymakers deliberately revamped the country’s tax credit structure by designing incentives that provide business with long-term predictability and clarity. With most tax credits in place for at least 10 years, investors, manufacturers, utilities, and developers have enough time to plan and build projects well into the 2030s. Further, ensuring that the full value of credits will only start to decline after emissions reductions targets are met relieves Congress of the painstaking exercise of letting credits periodically expire only to be renewed at the last minute. The broad-based nature of the U.S. regime and the transferability of tax credits to anyone with a tax liability are also key features of the IRA’s success.

The Business Council is concerned that the design features of Canada’s ITCs are overly complex and inconsistent with the objective of using tax policy to attract higher levels of investment. Claw back provisions, differing phase out schedules, narrow and confusing eligibility criteria, knowledge sharing requirements and a high-level auditing risk are just some of the provisions that could discourage companies and investors from using the ITCs. Meanwhile questions remain about the stackability of certain ITCs amongst themselves and with federal programs such as the SIF and projects supported by the Canada Infrastructure Bank, Canada Growth Fund, or provincial governments.

Clean Electricity ITC

The evidence is clear that an electrical grid that is twice as big by 2050 will be necessary to electrify our homes, buildings, businesses, and longstanding industrial practices⁸. Finance Canada should be commended for creating a tax credit to support investment into new electricity capacity, storage, and transmission through the proposed ITC for clean electricity. However, the Business Council is concerned that the requirement for a competent authority to commit to achieving the federal government’s goal of a net zero electricity sector is overreach and unnecessarily politicizes the use of tax policy. Such a requirement will create a political barrier that delays rather than accelerates investment in new forms of electricity capacity or into areas where it is most needed. If not defined properly, the requirement could also exclude independent power producers from investing in electricity projects in a province or territory that has not committed to the federal net zero target.

Of note, the IRA constitutes a paradigm-shifting federal investment in clean power that does not impose a binding emission reduction target or political commitment as a condition of participation. We encourage the government to follow the U.S. example and remove the

proposed requirement for a competent authority to commit to the net zero target. Finance Canada should also simplify the guidance for private companies and independent operators to build new or augment existing assets that reduce emissions and respond to new demands for clean electricity.

Clean Hydrogen ITC

Several Business Council members have a strong interest in pursuing hydrogen production technologies and appreciate the government’s efforts to design a tax credit based on a “cradle- to-gate” life-cycle approach. Finance Canada needs to strike the right balance, setting ambitious carbon intensity tiers for hydrogen that are realistic and flexible, taking into consideration the relative carbon of a local grid. An overly prescriptive approach that permits access to the highest tax benefit based on the lowest carbon intensity could minimize Canada’s potential to be low- cost high-volume producer of affordable hydrogen.

The approach to measure various hydrogen production processes should be technology-neutral and considerate of a broader range of technologies, such as pyrolysis or gasification, providing the appropriate carbon intensity tier requirements are met. Canada’s carbon intensity requirements should be aligned with international best practices and consistent with models widely used and accepted in the U.S. and Europe. This will be especially important given that major trading partners such as the European Union will move forward with their Carbon Border Adjustments policy for hydrogen in September.

Lastly, the design features released in Budget 2023 do not sufficiently address ammonia-related expenses or other derivatives used to transport hydrogen such as methanol. Excluding transportation-related expenses from the hydrogen ITC would be a shortcoming that holds back Canada’s potential to become a major producer and exporter of hydrogen.

Finance Canada needs to send a clear and bankable market signal articulating the details of its ITCs. The sooner it does so, the sooner companies can invest in emerging technologies and equipment.

Keep coverage broad and allow capital formation through diverse partnerships

Clean technology projects are integrated, and no project works without its constituent parts. In real terms, project budgets include costs beyond specific technology.

Finance Canada should ensure that a broad suite of capital assets is eligible under each ITC. Assets should include a range of clean technologies and the equipment and infrastructure required to support major projects, such as dedicated roads, building structures, power, and water treatment facilities. Ensuring that the ITCs capture a broad suite of projects will help level the playing field with the U.S. and can better position Canada as a global destination for investment in emerging clean power technologies.

Companies and investors have a proven ability to create partnerships and consortiums designed to pursue project opportunities. New partnerships have no tax history and will not be able to generate revenues until their projects are operational, which could take several years. Investors seeking to leverage the ITCs may be impeded by the fact that partnerships or consortiums can include entities with varying levels of tax liability. Of all the ITCs, only the Clean Electricity ITC is accessible to non-taxable entities. While this is a good first step, Finance Canada should ensure that all owners and forms of partnerships, including tax-exempt groups such as Indigenous peoples, can benefit from the proposed ITCs. Doing so would unlock the full potential of Indigenous groups interested in pursuing clean technology projects while advancing Canada’s commitment to economic reconciliation.

Reconcile project and ITC timelines

Clean technology projects often have long and unpredictable regulatory, permitting and construction schedules typical of modern infrastructure projects in Canada. The federal government has recognized the challenge to building major projects in Canada and committed in Budget 2023 to outline a plan to improve the efficiency of project approvals and permitting processes by the end of this year⁹.

Unexpected project delays introduce a binary risk that project proponents manage through their relationships with infrastructure lenders and various financial instruments such as non-recourse project debt financing or equity. Securing financing for major projects takes time and evolves over the duration of a project and the risks it is exposed to, altering project schedules and their respective timelines. As currently written, the ITCs include hard cut-off dates and eligibility criteria contingent on clean technologies coming into service.

While these design features are intended to drive near-term project development, they can limit the use of ITCs for longer-lead time technologies and projects that start before and continue after the ITCs wind down, inadvertently discoursing investment. Consideration should be given to developing a safe-harbour provision, similar to what exists in the U.S., where qualified capital expenditures will continue to benefit from treatment after the hard cut-off date.

Only the CCUS ITC permits tax benefits when expenses are incurred rather than when eligible properties become available for use. We recommend that Finance Canada aligns the timelines of all ITCs with the CCUS ITC so that companies can maximize the full value of tax benefits offered by the government. Doing so will allow companies to deploy capital to projects more efficiently and reduce the need to borrow or find other sources of capital during a project’s construction phase.

The Business Council also recommends Finance Canada delay the assignment of a date of expiration of its ITCs until the government has confirmed how it will improve the regime for approving and permitting major projects in Canada.

The business community appreciates that all tax credits are refundable. Estimated project costs can vary, with some exceeding billions of dollars in investment. Quarterly rather than annual remittance can help ensure that project proponents will benefit from a reliable and predictable cash flow.

Labour conditions and prevailing wages

Canada’s major employers share the government’s vision to create good careers and opportunities for Canadians during the energy transition.

Canada’s economic security and climate objectives urgently require a record level of investment, and the proposed ITCs are helpful in this regard. Capital and a strong and nimble

workforce are needed to mobilize projects in support of sustainable growth and in accordance with the country’s emissions reduction targets. Firms deploy a mix of trade and non-trade workers through a variety of collective bargaining agreements negotiated between workers, employers, and unions regardless of trade versus non-trade affiliation.

At the same time, wage growth in Canada is accelerating while the national joblessness rate is amongst the lowest in decades. For its part, Canadian firms employing more than 500 people offer the highest average weekly working wages¹⁰ and the most comprehensive training programs in the country. However, the Canadian labour market is aging, and the construction sector is no exception with its record high vacancy rate leading to shortages of labour and skilled trades.¹¹

We urge the government to think carefully about imposing unduly restrictive labour requirements so that capital can quickly be deployed to projects that create more employment opportunities for Canadians. A race for clean energy talent is underway, with the U.S. already drawing on the international workforce to support projects incented by the IRA. Canada needs to be careful.

The proposed labour conditions include a very narrow interpretation of an eligible labour agreement. We recommend that any collective labour agreement, existing or forthcoming, regardless of trade versus non-trade affiliation, that is registered with a Labour Relations Board of a province fully satisfies the government’s eligibility requirements under the respective ITCs.

Clarity about important items such as how a prevailing wage will be calculated and the work or property it should apply to is also necessary so that project owners can determine their ability to maximize the benefits available under each ITC. Additionally, geographic and demographic conditions may create apprentice shortages where skilled workers are not available to work on a project, limiting a company’s ability to fulfil the proposed requirements for apprentices.

Finance Canada should consider adding a “good faith effort exception” to account for potential labour shortages that are outside an employer’s ability to control. Clarity on how the Canada Revenue Agency will determine ‘gross negligence’ is also necessary.

Labour requirements need to prioritize certainty, clarity and minimize the administrative burden associated with compliance. Requirements need to be flexible and recognize the diverse skillset and availability of trade and non-trade workers in different sectors and in various locations across the country.

As written, achieving the proposed requirements will be challenging and could result in a 10 per cent reduction in the ITC rate, forcing companies to either delay their final investment decision or pay the proposed penalty to access the full credit. Much work remains to be done before the proposed labour provisions become law so that businesses can invest with confidence and unlock the full potential of clean technologies offered through the ITCs.

Reciprocal treatment

The federal government is exploring potential measures to address domestic content requirements and develop reciprocal treatment for countries with mutual agreements or pre- established trade agreements.

Businesses require unfettered access to a diverse supply of equipment and services provided by a fluid global supply chain. Domestic content requirements should be pursued with caution and Canada would be wise to work with its trading partners to create rules that are compliant with World Trade Organization rules, the General Agreement on Tariffs and Trade and respectful of major trade agreements such as the Canada-United States-Mexico Agreement.

Requiring Canadian businesses to source inputs from certain countries over others can significantly increase project costs thereby impacting the business case for proceeding with the project in Canada – undermining the very purpose of the ITCs. In addition, requiring Canadian businesses to source critical inputs outside their normal supply chains increases the risk of costly delay-causing disruptions.

The Business Council urges the federal government to decouple its objectives concerning reciprocal procurement measures from the proposed ITC regime. At a minimum, a domestic content requirement should not compromise a company’s ability to achieve the maximum base rate offered by an ITC.

Conclusion

Successful uptake of the proposed ITCs will require clear terms and conditions that are easy to understand, applicable to companies, and useful for project budgeting and financing purposes. In broad terms, the success of the ITC regime will be judged on the amount of investment it can drive towards clean energy technology projects.

The government’s ability to be disciplined and implement a broader policy framework that focusses on encouraging higher levels of investment will also be key to the successful uptake of the ITCs. New regulations focused narrowly on reducing emissions in specific sectors could jeopardize the government’s objective to level the playing field with the U.S. and discourage the record levels of investment Canada requires in the near term.

1. https://www.canada.ca/en/environment-climate-change/services/environmental-indicators/greenhouse-gas- emissions.html
2.  https://ourworldindata.org/per-capita-co2
3.  https://business.bofa.com/en-us/content/bank-of-america-institute/sustainability/IRA-ripple-effect.html
4. https://www.brookings.edu/articles/economic-implications-of-the-climate-provisions-of-the-inflation-reduction-act/
5. https://thoughtleadership.rbc.com/the-2-trillion-transition/
6. https://www.budget.canada.ca/2023/report-rapport/chap3-en.html
7. https://www.canada.ca/en/natural-resources-canada/news/2022/08/canada-and-germany-sign-agreement-to- enhance-german-energy-security-with-clean-canadian-hydrogen.html
8. https://climateinstitute.ca/reports/big-switch/
9. https://www.budget.canada.ca/2023/report-rapport/chap3-en.html#a7
10. https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410021701 https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1410021701
11. https://cibccm.com/en/insights/articles/in-focus-if-they-come-you-will-build-it-canadas-construction-labour-shortage/

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Dear Deputy Prime Minister,

Please accept this letter as the Business Council of Canada’s submissions in response to the government’s consultations regarding the draft Digital Services Tax Act. Given the Council’s primary concerns about Canada’s unilateral imposition of a DST are based on trade priorities not tax policy, our comments do not seek to address any of the technical aspects of the draft legislation only the coming into force provisions.

The BCC would have been forced to oppose the introduction of the draft Digital Services Tax Act if it had the legal effect of requiring the government to impose the tax on January 1, 2024. Yet, our reading of s.123(2) – the second subsection (2) in bold type found in the Legislative and Regulatory Proposals Relating to the Digital Services Tax Act consultation document – is the Act would not have that legal effect.

This second s.123(2) of the draft Act says regulations will come into force “on the day that is fixed by order of the Governor in Council, but not earlier than January 1, 2024.”  We note this language differs from that found in other draft legislation, also the subject of ongoing departmental consultations, which states those other acts or regulations shall “come into force or is deemed to come into force on January 1, 2024.”

In addition, s.123(2)also requires that in fixing the date for the coming into force the government must consider the intent of the Organization for Economic Co-operation and Development (OECD) statement in support of a two-pillar solution to address tax challenges arising from the digitization of the economy; Canada’s preference for a multilateral approach; and the status of the international negotiations.

Our interpretation of s.123(2), then, is the government is expressly preserving the option of deferring the imposition of any DST until a date after 2024, which would be consistent with what was agreed to by the vast majority of OECD countries earlier this summer. If this interpretation is correct, we support the government’s chosen direction as we urge you to defer imposing a DST pending the ongoing OECD negotiations.

As we have written to you previously, we are concerned Canada’s unilateral imposition of a DST in 2024 would undermine our vitally important bilateral trade relationship with the United States. The Biden Administration has made clear, with the support of leading Democrats and Republicans in Congress, that if your government does so it would leave them “no choice but to take retaliatory measures in the trade context.”

Any retaliatory trade action would severely harm our national interests.

Yours very truly,

Goldy Hyder

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Madam Chair, committee members, thank you for the invitation to take part in your meeting on Canada-U.S. softwood lumber trade.

The Business Council of Canada is composed of 175 chief executives and entrepreneurs of Canada’s leading enterprises. Our member companies directly and indirectly support more than six million jobs across the country and hundreds of thousands of small businesses.

Since our establishment more than four decades ago, the Canada-U.S. partnership has always been a top priority for our members. We played a critical role in the supporting the development of the first trade agreement in 1987 and its expansion into NAFTA, as well as with our new framework, CUSMA.

Today, Canada and the United States enjoy a strong, mutually beneficial trade and investment relationship. 2022 was a record year for exports, and in the big picture, the future of bilateral trade looks bright, in large part due to the greater certainty provided by the CUSMA.

Unfortunately, this certainty has not extended to the softwood lumber industry nor to the various industries that rely on lumber inputs, such as homebuilders.

Softwood Lumber Agreement

We believe the only workable long-term solution to provide certainty and stability for the industry would be a new softwood lumber agreement.

We are disappointed that eight years after the expiration of the last softwood lumber agreement, there is no new agreement in its place, nor are there active negotiations toward a one.

A new agreement would clearly be in Canada’s interest, but also in the interest of American consumers as well.

We understand that there has been resistance by certain industry groups in the United States to negotiate a new deal, and as a result, this has not been a priority for the administration.

However, we know there are many supporters as well. Just last year, Members of Congress called on the United States to return to the negotiating table.

We were especially encouraged to see United States Senators Menendez and Thune, a Democrat, and a Republican, respectively, call on the administration to negotiate a new deal to benefit industry and consumers, particularly to reduce home building and housing costs.

Following up on this initiative, the Business Council of Canada sent a letter calling on the government to work with these congressional leaders, as well as other supporters in the United States, to build some renewed pressure toward a new deal. This is still possible, and we encourage Canadian officials to intensify efforts with likeminded partners in the United States to make progress toward negotiations this year.

Extending CUSMA

Securing a deal becomes more important as we approach the review and what we hope will be a smooth extension of CUSMA in 2026. While there is still considerable support for the agreement across a range of stakeholders, we should not take support for granted.

To create the conditions for extension, it should be a priority for Canada to reduce the number of irritants and disputes facing the trilateral trade relationship. Reaching a long-term solution for softwood lumber would certainly improve this discussion.

WTO

Another challenge in resolving this dispute has been the state of the WTO Appellate Body. This concern extends well beyond softwood lumber, but this dispute also demonstrates how important this institution is for Canada.

We were encouraged that at the 12^th Ministerial Conference the United States and other WTO members agreed to restore full functionality of the dispute settlement system by 2024.

We urge Canada and its partners in the Ottawa Group to work closely with the United States this year to overcome longstanding concerns and restore this important system.

Buy America

The recent expansion of Buy America rules to include a broad range of construction materials further threatens to harm Canada-U.S. lumber trade. We reiterate the importance of Canada securing a carve into any proposed restrictions placed on government procurement.

Conclusion

We urge Canada to prioritize securing a softwood lumber agreement. The Business Council of Canada and its members stand ready to support efforts to build a more stable and prosperous Canada-U.S. relationship and a competitive North America. Once again,

Thank you for this opportunity. I look forward to answering your questions.

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Re: Americas Partnership for Economic Prosperity 

Dear Minister,  

Please accept this letter as the Business Council of Canada’s submission to your departmental consultations on the Americas Partnership for Economic Prosperity (APEP).  

I had the privilege of being at the Summit of the Americas in Los Angeles last June, at the invitation of the U.S. Chamber of Commerce, when President Biden announced the creation of APEP as a catalyst for economic growth throughout our shared hemisphere. Unlike in the case of the U.S.-led Indo-Pacific Economic Framework (IPEF), unveiled just a few weeks earlier, business leaders were pleased to see that Canada was listed as a founding member of APEP.  

Canadian businesses have extensive investments and operations throughout the Americas, and not only in those countries where Canada has preferential market access or investment treaties. Strengthening vital hemispheric supply and value chains, as well as the rules governing free, fair, and open trade in the region, will greatly benefit our national economic security and economic growth. It is in Canada’s interests, then, that we play a leading role in APEP. 

Canada can show leadership by ensuring that in the ongoing APEP negotiations member-countries prioritize the collective competitiveness and productivity of our respective economies. This includes alignment on the development of the hemisphere’s concentration of critical minerals and energy resources while at the same time expediting the approval and construction of integrated trade-enabling infrastructure to ensure access to those resources.  

Any discussion of increasing hemispheric competitiveness and productivity must include labour mobility. Canada is currently experiencing an acute shortage of skilled labour, one which could be addressed in part by enhanced economic immigration. Many of our hemispheric partners have a demographic advantage in terms of their working-age populations. Indeed, many of them work for companies with operations in Canada, some even headquartered here. 

In addition, we believe Canada could further show leadership within APEP by encouraging those countries in our hemisphere who have yet to join to reconsider their participation. At present there are key markets, such as Brazil and Argentina, who have yet to sign on. If Canada were to leverage its bilateral relationships with those two governments, and successfully persuade them to join APEP, it would represent a significant contribution to the group. 

While APEP isn’t a trade agreement in the traditional sense, it complements and supplements the existing bilateral and multilateral agreements Canada has throughout the hemisphere. This includes the Canada-U.S.-Mexico Agreement (CUSMA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), as well as our bilateral trade agreements with partners such as Chile, Peru, Panama, Colombia, Costa Rica, and Honduras.  

Of course, the importance business leaders assign to APEP – and, for that matter, to IPEF – is due to the fact that Canada’s economy is so inextricably intertwined and interdependent with that of the United States. Any initiative the U.S. undertakes to design or develop new standards and rules for trade and investment has a direct impact on Canadian businesses. If Canada does not have a seat at the table when decisions are made, we’re at a disadvantage. 

It is critical that Canada remain engaged with key U.S. stakeholders who are driving the American approach to economic integration in our hemisphere. This engagement must include outreach to those not in the Administration. As an example, Canadian business leaders are closely following developments around the Americas Trade and Investment Act as proposed by Senator Bill Cassidy, M.D. (R-LA) and Representative Maria Elvira Salazar (R-FL). 

To that end, we support the united ‘Team Canada’ approach you have advocated in this and other areas. Working together, government and business can be Canada’s strongest advocates both across our continent and around the world. In this, we also acknowledge the efforts of those in Opposition, such as Member of Parliament for Prince Albert, Randy Hoback, who have also been working on these important bilateral and multilateral Americas issues. 

For our part, the BCC and its members remain firmly committed to working with government to advance Canadian interests anywhere and everywhere around the world. If there is anything we can do to assist you in your APEP work, please don’t hesitate to let us know.  

Yours very truly,   

Goldy Hyder

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The Business Council of Canada is pleased to offer its views in response to the federal consultation on potential reform to the Competition Act (hereinafter the “Act”).  The Business Council represents 170 of Canada’s largest businesses, which are active in all sectors of the economy and all regions of the country.  Business Council members are significant players in the economy and recognize the benefits that vibrant and competitive markets bring to all Canadians.  The Council has a long history of engagement on major reforms to Canadian competition law, beginning with the creation of the modern Act in 1986. While we appreciate the opportunity to provide our views, the extremely broad scope of the consultation paper (hereinafter “CP”), and the sheer number of issues raised, makes it extremely challenging for the business community to adequately respond.

It is our view that, as a fundamental piece of Canada’s market-based legislative framework, the Act has worked remarkably well over the last few decades in protecting consumer interests and the state of competition in Canada.  We remain to be convinced that major reform of the Act is warranted. We would have serious reservations about a major overhaul that would lead to years of debate and litigation over new powers and new legislative language.  Canada’s reputation for a stable and predictable policy framework for business has been essential to drawing investment, both domestic and foreign, that contributes to the quality of life which all Canadians enjoy.  Lessening the test for what constitutes anti-competitive behaviour, while also increasing the powers of the Competition Bureau (“the Bureau”) and the penalties for conduct subsequently found to be non-compliant, would erode the policy and market predictability that has been a hallmark of Canadian public policy. The result would be to make Canada a less attractive place to do business.  

The reality is that if the government were to move forward with even a modest number of the ideas raised in the CP, it would arguably constitute one of the most significant overhauls in the legislation in Canadian history, since the Combines Investigation Act was replaced by the Competition Act in 1986.  Such a far-reaching set of proposals should not be lightly considered.  Extensive consultation should be undertaken focused on areas where the evidence clearly suggests a specific challenge with the current Act and where effective and well-tailored solutions can be found.

Canada is highly dependent on trade for its economic prosperity and Canadian firms operate in an open and extremely competitive international marketplace.  Accordingly, it is important to be cognizant of developments in other countries – particularly in the United States, Britain, the European Union and Australia – aimed at fostering enhanced competition. At the same time, we should be cautious and not rush to adopt the latest reform efforts in those countries.  For one thing, they may not be well-suited to Canada’s particular market attributes. The EU in particular has a much higher degree of regulatory oversight and bureaucracy that would not translate well to the Canadian market and Canadian corporate law which is more principles-based. As well, many of the most often cited reforms in other countries are still in their early stages. Accordingly, further experience is needed to judge whether they are actually having the intended positive effects on competition, or whether they might unduly hinder innovation, efficiency, and economic growth.

The CP cites issues such as inflation and inequality as predominant concerns among Canadians today, but it is far from evident that the Act is best suited to address these issues, nor for some of the other potential challenges mentioned in the CP.  In some cases, sector-specific regulation may be the best course. In other cases, relaxation of the restrictions, such as foreign ownership requirements, that limit competition in a sector may be a more effective approach.  In terms of offering greater choice and lower prices to consumers, two areas are ripe for change: reduction of interprovincial barriers to trade and reform of supply management in agricultural products.

Merger Review

Efficiency defence. For several years, various scholars and the Bureau itself have tried to make the case that Canada’s statutory defence of “efficiencies” is a relic of the past and no longer fits with a modern competition law. The mere fact that Canada is one of the few countries to maintain efficiencies as a statutory defence is not in our view reason enough to remove it. Of the many thousands of notifiable mergers reviewed by the Bureau over the years, it is clear that the efficiencies defence has played a substantial role in only a small number of them.   

The CP cites the decision of the Supreme Court of Canada in the Tervita case as part of the rationale for eliminating the defence.  Yet the majority decision of the Court was fairly clear:

“…the Tribunal retains the discretion to reject the efficiencies defence, but must clearly explain the reasons for its decision. The reasons must be seen to be rational even though they reject what the quantitative analysis would otherwise strictly indicate.”

We are not convinced that the existence of the statutory defence makes our law substantially different from how other major countries assess the impact of a merger.  Nor does it prevent the Bureau or the Competition Tribunal (“the Tribunal”) from a careful assessment of the full range of factors relevant to a proposed merger’s potential impact on consumers and the marketplace.  

Takeover of nascent firms.  The CP raises the question of whether the Bureau should be given greater powers to review mergers that might otherwise fall under pre-notification thresholds in cases where a larger, perhaps dominant, firm is acquiring an innovative start-up company. The CP suggests that the purchase of an emerging firm with a new technology, product or service to offer could impede competition in that a potentially vigorous competitor is eliminated from the market before it can establish itself.  But that suggests a level of clairvoyance that the Bureau does not possess.  The CP floats the concept of an “appreciable risk” to competition from the acquisition, but how would that be reliably assessed before the fact?

A broad power of this sort could actually have unintended and negative consequences. It would be exceedingly difficult to establish a priori whether the nascent firm could have become an able competitor.  The reality is that many innovative start-ups reach the point where they need a significant injection of capital to commercialize their innovations and move forward with production at scale.  Seeking outside capital becomes essential to their growth and indeed, in some cases, their ability to survive.  Refusing to approve such a merger hardly guarantees the success of the nascent firm.  Rather, it may hobble the potential acquiror, reduce or eliminate the efficiency and productivity gains it might have achieved through the merger, and actually reduce its ability to offer highly competitive goods or services going forward.

Ability to challenge a merger after it has closed.  The CP raises the possibility that the time period beyond which the Bureau could challenge a non-notifiable merger after it has closed could be extended from the current one-year to three years.  The 2009 amendments to the Act lowered the limitation period from three years to one, but as the CP notes, that was balanced with the enhanced power given to the Bureau to issue supplementary information requests (SIRs) that provided a much stronger basis on which the Bureau can assess the impact of a merger. In today’s fast-paced marketplace, it is troubling to suggest that parties may have to wait three years before being assured that their merger will not be undone.  This would lead to considerable uncertainty, deter investment and complicate the closing of the transaction.  Equally important, it could delay the integration of the merged parties and reduce the efficiency, product alignment and other benefits that were the rationale for the merger in the first place. For firms that decide to proceed with integration notwithstanding the uncertainty created by the three-year limitation period, it may be extremely difficult to unwind the combined business structure and attempt to return the two firms to what existed pre-merger.  The Bureau would still have all of the criminal and civil review provisions of the Act available should it become apparent that the merger is having an anti-competitive impact. 

Exemptions to pre-merger notification requirements.  The CP suggests that there may be a need for reform to ensure capture of “mergers of interest” which are not now caught by the existing pre-notification regime.  We suggest there is also a need to examine whether the current process too easily captures transactions that do not raise competition issues. 

The limited resources of the Competition Bureau should be focused on cases where there is a substantial risk of competitive harm, and not tied up in reviews that do little to serve the public interest.  Such reviews involve substantial transaction and legal fees for the notifying company.  More importantly, the lengthy review process can delay closing and create execution risk, needlessly in most cases, for both parties to the transaction.

Real estate transactions would appear to garner a significant number (approximately one in six) of the mergers subject to mandatory pre-notification.  We are not aware that any real estate transaction has ever occasioned enforcement under the Act. Indeed, most such transactions take place within fragmented and highly competitive markets and are unlikely to raise any serious competition issues. Similarly, upstream oil and gas companies are fairly active in the buying and selling of hydrocarbon reserves and associated exploration and production assets, yet such transactions rarely raise competition concerns.

The Act contains certain limited exceptions for mergers which present no appreciable risk of harm to competition, but too many pro-competitive or neutral transactions are still caught.  The federal government should consider amendments that more closely mirror what exists in the United States under the Hart-Scott-Rodino Act and provide exemption for a broader class of real estate and hydrocarbon asset transactions.  

Unilateral Conduct

The CP raises a number of issues with respect to the abuse of dominance provisions of the Act.  We have serious concerns about suggestions to move the law in the following directions:

• The replacement of the “substantial lessening or prevention of competition” test, around which a large body of case law has developed, with a lesser and potentially vaguer standard, for example an “appreciable risk” of competitive harm;
• The adoption of presumptions, “bright line”, or reverse onus rules designating certain actions in concentrated sectors as reflective of abuse of dominance; without full consideration of their actual effects or the context in which such actions are taken;
• The possibility of the Bureau issuing remedial orders without the necessity to show an intent to cause competitive harm or demonstration of actual harm;
• The potential to label a firm or firms as “dominant” based solely on market share, without consideration of other relevant indicators of the state of competition in a particular market.  

Such reforms could lead to substantial confusion among businesses as to precisely what conduct is off side the Act, as opposed to an instance of vigorous competition.  Far from improving competition, these proposed changes could lead firms to be overly cautious and forego actions and collaborations that could be pro-competitive and of benefit to consumers and the economy as a whole.  Relaxing of the standard is particularly inappropriate given increased powers of the Bureau to seek remedial orders or multi-million-dollar fines and the newly created right of private parties to initiate abuse of dominance proceedings. 

The CP appears to take particular aim at the competitive impact of large players which allegedly control digital platforms.  However, the language used is broad enough to encompass business-to-business platforms. Such B2B platforms are invariably developed to stimulate innovation and should be considered based on what they contribute to innovation and pro-competitive markets, rather than be caught by some per se definition.  This potential reform could have significant unintended consequences because it appears to stem from concern over a select few digital players whose conduct differs from the way other market players utilize digital platforms.

Competitor Collaborations

The CP raises the prospect of further intervention by the Bureau to examine collaborations amongst competitors, including with respect to buy-side agreements.  We would be concerned by any movement towards defining competitor collaborations as problematic by definition and potentially subject to the criminal conspiracy provisions of the Act.  We equally question the suggestion that the law should “deem or infer agreements more easily” for purposes of making them subject to the provisions dealing with civilly reviewable conduct.  Nor would we support lowering the standard of a “substantial lessening or prevention of competition” in such a review.

Such collaborations are often aimed at pursuing innovation, product development and new market entry and are most often benign and even pro-competitive.  The CP even references research to this effect.  Companies are collaborating more often on research and development to help solve some of the more perplexing product innovation and development challenges and in areas where the cost of such R&D may be prohibitive for any one firm.  Indeed, many such cooperative efforts are designed to pursue positive outcomes for society. For example, several Canadian retailers have established joint programs that reduce and recycle packaging waste. Canada’s oil sands companies are sharing research on technologies that can greatly reduce greenhouse gas emissions. As well, the ability of energy industry competitors to share infrastructure and avoid redundancy lowers the costs to users of the infrastructure and reduces the environmental impacts of multiple, separate facilities. Such competitor collaboration also creates new avenues for Canada to achieve the Competition Act goals of facilitating the export of Canadian products and enabling Canadian industry to compete more effectively in global markets.  In the financial sector, Canada’s banks share information to mitigate the risk of fraud and money laundering, and yet technically this could be considered an “arrangement” to withhold services from a customer or group of customers.

In the case of buy-side agreements, they also are likely to have a pro-competition and pro-consumer impact. Joint-buying is particularly beneficial for small to medium sized companies that do not, on their own, have the buying power to secure inputs at costs that would facilitate being able to offer a more competitive price to consumers.

With supply chain disruptions occasioned by the pandemic and the war in Europe, more companies have established arrangements that ensure access to essential inputs. This has allowed them to offer goods to consumers on a more timely and cost-effective basis.  Companies that rely on critical minerals to produce products as varied as electric vehicles, cell phones, computers and solar panels are also likely to look at joint buying as a means to secure supplies at reasonable cost and to thwart efforts by some unscrupulous countries to seek to control supply of essential materials for geopolitical reasons.  

Artificial Intelligence

The CP raises the possibility that the Act could be used as a tool to regulate firms which may seek to use artificial intelligence (AI) as a means to avoid detection of anti-competitive behaviour.  Whether or not this is a real threat is an open question.  As the CP itself acknowledges, the potential to use AI to facilitate collusion without actual human direction is at present a “theoretical challenge”.  More importantly, Bill C-27 is currently before Parliament and would, amongst other things, create the office of AI and Data Commissioner with the responsibility to regulate the use of AI.  The government should be careful not to create confusion and overlap between the roles of the Competition Bureau, federal and provincial agencies responsible for privacy and this new AI and Data Commissioner.  Such an outcome would lead to further fragmentation in the regulatory landscape and could easily stifle, rather than promote, innovation and competition.

Administration and Enforcement of the Law

We appreciate the view of Bureau officials that they often find themselves without sufficient resources to investigate and take action against what appear to them to be cases of anti-competitive conduct.  We agree that upholding competition in the Canadian marketplace requires vigorous enforcement, and the Bureau should be provided with sufficient resources to effectively carry out its legislated mandate.  But we would have concerns with the suggestion that the Competition Commissioner should be granted additional powers to issue interim orders to halt potentially harmful conduct pending a final determination.  There may be the unusual case where justification for such intervention is manifest and necessary to prevent irreparable harm.  But as a general rule, the Bureau should not have the power to investigate, prosecute and essentially adjudicate cases.  This may result in the Bureau taking action that materially impacts a firm’s ability to carry out its business without affording the aggrieved business a chance to answer the charges, contrary to our commonly accepted principles of law.  

Right of private access. The 2022 Budget Implementation Act (BIA) granted private parties access to the Competition Tribunal (“the Tribunal”) to bring forward cases of alleged abuses of a dominant position.  The CP suggests private access might be extended to allow access to the courts to sue for damages.  Given the BIA provision is less than a year old, at the very least, the government should wait to see how this new right of access to the Tribunal works in practice and how effective it proves to be, before contemplating expanding it.

More fundamentally, we question whether the right to pursue private actions for damages will in fact lead to more effective remedies for cases of anti-competitive behaviour.  While we support strong enforcement of the Act, it is quite likely that this kind of provision would encourage class action lawsuits.  Faced with such litigation, many firms would choose to settle to avoid the cost, management distraction and uncertainty of outcome.  We are concerned about creating more impetus for lawsuits, the goal of which is often to extract a settlement from the defendant, without any real prospect of having the alleged behaviour tested in court to see if it meets the legal test of abuse of dominance. It also could encourage tactical litigation by competitors designed to chill aggressive but legitimate competitive behaviour. The CP at least acknowledges the risk that private access could lead to frivolous and vexatious litigation. However, few concrete ideas are offered as to how to control such abuse. 

Market studies.  The idea of granting the Bureau new powers to conduct “market studies” has been a feature of several past reform initiatives but has never been acted upon, and for good reason. The Bureau currently can avail itself of voluntary information requests, which strike the correct balance by encouraging firms to share their insights into markets they know well without placing them under an undue burden to generate additional data and financial information. The Retail Grocery Market Study is a recent example of the success of this approach, as is the Bureau’s 2017 study on “Technology-led innovation in the Canadian financial services sector”.

Should the government decide to proceed with providing the Bureau with enhanced market study powers, any additional powers should be tightly constrained to prevent overly broad production orders, be limited to truly relevant information and provide specific protections for privileged information.  There also should be appropriate guardrails on the ability to compel evidence and time limits placed on the duration of studies. This would avoid placing an unreasonable burden on companies and deter the possibility of prolonged uncertainty in the marketplace as to how the study would be used. And to avoid overuse by the Bureau, the Minister of Science, Innovation and Industry should be required to approve a formal market study.

Repeal of Section 49

We question the continued relevance of section 49 of the Act given that the potential for federal financial institutions to collaborate to fix interest rates or fees is already covered by the general conspiracy provisions of the Act.  We suggest that section 49 should be deleted as part of the next reform effort.  It is redundant, since similar provisions are now found in the Bank Act; it has resulted in zero enforcement actions; and it is discriminatory in that it applies only to federal financial institutions and not provincial agencies such as credit unions.

Next Steps

The CP provides little detail on the next steps in development of proposed reforms to the Act.  Our ability to offer a responsive submission also has been hampered by the lack of a clear indication of government priorities or preferred options amongst the many possible reforms discussed.  Based on past reform efforts, we expect there will be further detailed consultations and discussions before the government proceeds to place a bill before Parliament. 

The government’s decision to put forward several substantive amendments in the 2022 Budget Implementation Act without first engaging in meaningful consultation with affected parties, or careful review by Parliament, is not a practice that should be repeated.  We trust that the next stage of the reform process will consist of careful consideration, and a clear articulation, of the most evident areas for reform, buttressed by robust engagement with the business community and other affected parties. This should be followed by a draft bill with clear legislative language that is also subject to full consultation.  A much shorter list of essential issues will allow them to get the attention they deserve, improve the quality of the consultation process and ensure development of “fit for purpose” solutions without the risk of unintended negative consequences.

When a bill to reform the Competition Act is presented to Parliament it should stipulate a period of at least 12 months before it comes into force to ensure affected parties have sufficient time to make any necessary changes.  It should also not apply retroactively to impugn past lawful conduct.

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Le progrès scientifique est l’un des déterminants économiques clés de notre avenir. En termes simples, la capacité des états à transformer leur capital intellectuel en croissance économique est dorénavant un facteur déterminant de leur réussite technologique, industrielle et économique.

Policymakers need to acknowledge that scientific knowledge and science-based institutions are more than just public goods; they are essential economic enablers in a world of increased geopolitical competition.

Consequently, the ways we do science — how we empower our best scientists and researchers to do frontier work on the most pressing challenges we face, and how we facilitate that knowledge transfer in the real economy — must become central to how we conceptualize our growth potential as a country.

As a country, Canada has emphasized publicly funded research and development (R&D) as a driver of its innovation policy. As a whole, the economic returns have been insufficient, as Canada’s low productivity metrics over the last few decades show. Canada has put too many eggs in that one basket.

The goal of innovation economics is to amass innovation assets — IP, data and the talent that creates it — and then to exploit those assets when the assets are commercialized. Creating innovation assets and then divesting them before commercialization or losing out on the potential to grow companies to global scale is a failure of innovation policy. This is the difference between being a landlord nation and a tenant nation in the new intangibles economy.

Canada currently does not have sufficient and adequate mechanisms to translate R&D/ideas into the real economy. No matter what financial instrument is deployed, public “investments” won’t produce better outcomes if we don’t change the way we think, incentivize and produce innovation.

Cette fausse conception que nous avons de voir l’innovation comme principalement un processus d’adoption technologique signifie que le Canada laisse une quantité considérable de richesse économique sur la table.

C’est pourquoi il nous faut développer notre capacité en recherche appliquée et industrielle à grande échelle et créer des mécanismes de transfert de technologies.

Le modèle scientifique que nous avons adopté après la Seconde Guerre mondiale ne constitue plus un cadre adéquat pour le paradigme économique actuel. En adoptant ce modèle, on a supposé que le transfert de la recherche publique aux entreprises privées serait automatique. Aujourd’hui, nous savons que le financement de la recherche fondamentale n’est pas suffisant pour atteindre de meilleurs résultats en matière d’innovation.

Bâtir les courroies de transmission afin de traduire les connaissances scientifiques générées dans les universités en progrès technologiques, industriels et économiques est plus difficile à réaliser dans la pratique qu’en théorie. L’impératif académique de publier dans des revues scientifiques prestigieuses est certes importante et devrait être encouragée, mais il en va de même pour la création de la propriété intellectuelle. Nous ne produisons tout simplement pas assez de brevets au Canada. 

The innovation ecosystem emerging from the last decades has been characterized by a deepening division of innovative labour between universities and private firms. Universities have been essentially tasked with focusing on research while industry has been left with the application of science and technology. The problem is that using the output of university research still requires significant coordination and integration.

In the current configuration, the federal government provides funds for research and assumes this knowledge will naturally make its way to industry. It neglects all the necessary steps to commercialization — development, prototyping, testing, demonstration, product implementation and diffusion — that are necessary to complete the innovation process.

In the United States, the golden age of large industrial labs — Bell Labs, IBM, GE, DuPont — played a key role in the commercialization of R&D from the ’50s to the ’80s. But Canada never cultivated that kind of R&D industrial capacity, and where it did, like Bell Northern, it has been lost. Ensuring research is plugged into innovation networks is a critical function of an effective industrial policy.

We have long thought R&D was innovation. From R&D to development through production, application and diffusion, the road to innovation is long and hard. An intentional industrial policy requires a new institutional infrastructure to support the modern application of science and technology in highly competitive and advanced industries, and an approach focused on mandated missions.

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Madam Chair,

The lack of business investment in machinery, equipment and intellectual property in Canada is well-documented and well-known. Canadian business investment per available worker badly lags that in the United States and other OECD countries. This underperformance in business investment directly contributes to our poor productivity performance.

It is no coincidence that Canada’s export competitiveness weakened in recent years as its share of the U.S market declined. Over the past two decades, Canadian exports have risen at just half the pace of the overall economy. Without the oil and gas sector, these numbers would be catastrophic. The over-reliance of our economy on consumer spending and residential investment needs to be understood. In 2020, residential investment represented 37 percent of gross fixed capital formation in Canada.

Dans un tel contexte, bien comprendre les causes structurelles du problème est primordial car répondre à ce sous-investissement en posant des gestes rapides et non réfléchis ne règlera rien. 

À mon avis, il y a quatre causes principales, et elle sont reliées entre elles.

Cause 1: The composition of our economy

A country’s industrial composition matters a great deal. Certain sectors generate significantly higher output per employee and can increase productivity at a faster rate. Advanced industries are key to this goal because they combine significant R&D intensity and a highly qualified workforce. 

Sectors that invest heavily in technology and innovation tend to be more productive than others. 

Advanced economies will compete on the global stage over three broad families of technologies: 

1. computing-related technologies, including microelectronics, quantum and AI 
2. biotechnologies and bio manufacturing and 
3. clean energy technologies

This is where the intangible economy meets the tangible one – and where the new frontiers of economic competitiveness are being drawn. And this is why Canada needs a new modern industrial strategy for advanced industries. It should not be designed around corporate subsidies, but rather on boosting mission-driven industrial R&D, technology transfers mechanisms, and IP creation and protection. Think about the successes of DARPA and NASA in the U.S, or the Max Planck and Fraunhofer Institutes in Germany. 

Cause 2: Scale

Le Canada est essentiellement une économie de PME. Il n’y a rien de mal avec les PME bien sûr, mais si nous voulons accroitre nos investissements privés, surtout en R&D, il nous faut plus de grandes corporations. À titre de comparaison, quand on compare les Etats-Unis au Canada, le ratio est de 3 pour 1 pour l’indicateur des grandes corporations versus PME. 

De 1993 à 2000, le Toronto Stock Exchange (TSX) a enregistré une moyenne de 41 offres initiales publiques (initial public offerings) par année. De 2001à 2021, la moyenne annuelle est passée à 15 seulement. 

This means a lot of our most promising businesses get absorbed by larger companies too early. These larger companies are almost always foreign, because in most advanced industries, we don’t have enough scale to become the purchasers.

Cause 3: Our science and technology architecture is not generating innovation

Canada’s science and technology organizational structure has not adapted to the 21st century. We still rely too heavily on incremental innovation or safe bets. Furthermore, our research strengths (mostly in social sciences) do not align with our industrial advantages and needs. We are not generating enough IP, and we are not providing enough protection of the IP we produce. Science is to be translated into productivity growth and future prosperity. Many countries have understood this, but we have not.

Cause 4: Macroeconomic environment

When it comes to business investments, tax and regulatory incentives are obviously key to capital formation. Permitting and regulatory hurdles specifically are to be prioritized. À quoi bon par exemple une stratégie sur les minéraux critiques si nous ne sommes pas en mesure d’extraire ces minéraux dans des délais raisonnables? Les corporations qui sont prêtes à déployer le capital nécessaire évalueront ce risque très sérieusement. 

In a speech at the Brookings Institute last October the Deputy Prime Minister suggested that we had to “fast-track the energy and mining projects our allies need to heat their homes and to manufacture electric vehicles”. Following through on this commitment will be paramount and time is the essence in this new geopolitical challenged environment.

Watch highlights of the Q&A

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