INST Committee Meeting

STANDING COMMITTEE ON INDUSTRY, SCIENCE AND TECHNOLOGY

COMITÉ PERMANENT DE L'INDUSTRIE, DES SCIENCES ET DE LA TECHNOLOGIE

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 15, 2001

• 0902

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order pursuant to Standing Order 108(2), consideration of the science and technology policies.

This morning we're going to have a round table on research and development at universities.

Before I turn to the witnesses, I just want to give committee members a bit of notice of what the committee is doing for the next couple of weeks.

We'll be starting Bill S-17 this afternoon. We'll have one meeting this afternoon and one meeting on Thursday. We're not here for a week, and then we'll finish it when we return.

During that same time period, we have the researchers actively working. First, Geoff Kieley is working on our Lobbyists Registration Act review, and Dan will be working on our paper on science. On Thursday I'm hoping we'll have a few minutes to discuss some thoughts on those two issues. You might want to take some time to think about it for Thursday, and at the end of Thursday's meeting we'll try to see if we can give them a little bit of direction for the week we're off while they're in the process of drafting some information for us and putting some stuff together.

Now I'm going to turn to the witnesses. We're very pleased to have with us this morning four different groups: from the Expert Panel on the Commercialization of University Research, we have Mr. Pierre Fortier; on Canada's Role in International Science and Technology, Dr. René Simard, the chair; from the Canadian Association of University Research Administrators, Mr. Bruce Hutchinson, the past president; and from the Association of Universities and Colleges of Canada, Mr. Robert Giroux, the president.

What I would propose is that everyone make their opening comments, which hopefully are no more than five minutes each, and then we'll turn to questions, because the committee has a lot of questions for everyone. I would propose that we go in the order as listed, unless there's a different agreement amongst the witnesses.

That being said, I will begin with Mr. Pierre Fortier.

[Translation]

Mr. Pierre Fortier (Chair, Expert Panel on the Commercialization of University Research): Thank you, Madam Chair.

Now that the report has been released, I would be happy to summarize it for you. I do not intend to talk about each of the slides that I have prepared, but I would like to draw your attention to a few of them, particularly the second one.

The 1994-95 report said that Canada was suffering from a technology gap. A technology gap means that too much time elapses between research and a transfer of results to the private sector. The report stated that this had an impact on the productivity of Canada's economy.

• 0905

I will now skip quickly through the other slides and go to the one numbered 8. The title of my presentation is "The Commercialization of University Research—comparison between the United States and Canada". In the report we published in 1999, we say:

[English]

Success should not be measured by the number of licences negotiated or the number of spinoff firms created, but rather by the economic and special social benefits generated by these activities.

[Translation]

Unfortunately, I feel that we waste too much time comparing performance by quoting figures on patents that we were awarded or on spinoffs that were created. We should spend more time measuring

[English]

the economic impact on the economic development of Canada.

Through the Canadian government, the taxpayers of Canada invest $1 billion into research in Canada, and I think Canadian taxpayers expect that eventually there will be some results for the economic development of Canada.

At the bottom of slide 8, you see a line showing the performance of Canadian universities, and then a green line slightly above it, showing, in 1998, 2.87% of revenues out of research performed by American universities, compared to 0.82%, and if you take the top 15 universities, it is much higher. So there is a tremendous difference between the revenues generated by American universities compared to Canadian.

Having said that, we're not quoting these figures to stress a lack of performance, because many Canadian universities have very good performance, and it's a fact that Canadian universities were late in getting into the picture. If you note the fact that the University of Southern California adopted a policy on commercialization in 1926, and MIT and the University of Wisconsin established their policies in the 1960s, and Canadian universities came to commercialization only in the 1990s, that explains to a large degree the difference in the successes of commercialization.

Slide 11 contains a quote from a report of the OECD on the new economy, really concluding that the difference in performance was the Bayh-Dole Act. In other words, they say the policies the U.S. adopted in 1980 were clearly responsible for this economic development, because technology developed by the American universities quickly got into the economy, and this was surely a success for the development of the U.S. economy.

We establish in our report four barriers: lack of government policy; lack of university resources; shortage of people with the skills to bridge the research and business communities; and insufficient accountability. In our report we stress these four barriers and the reasons why, although, for example, if you take the lack of university resources, recently some provinces have given some money to their universities in order to help them in commercialization. In Quebec last year, a special fund was created, but this came very late, and we still believe there is a lack of resources if we want universities to perform in this area.

Going from there to slide 14, there is a need to have a clear Canada clause, because we just cannot leave it open. Although many Canadian universities do what they have to do in helping the Canadian economy, some researchers may think they have the liberty to do what they want and even sell it to American companies. I don't think we should allow that to happen.

Finally, we go to slide 17. I know you have discussed this, because I've read the minutes of some presentations you had during the last few weeks. I believe there is insufficient accountability for the fact that the federal government contributes over $1 billion into research. It's very difficult to get statistics. Statistics Canada has tried over the last two or three years to get someone, but there's no obligation.

In some cases, universities don't make it an obligation for researchers to disclose their research innovation; therefore the statistics are very poor and it's very difficult to make sense out of them. So we need better accountability.

• 0910

Our recommendations are summarized in slide 18. There is a need to have a “benefit to Canada” clause. There is a need for researchers to disclose federally funded IP that they commercialize to their university, which in turn must disclose it to the government. We have to have a policy on IP ownership. There is a need to have incentives, and universities must submit policies that adequately reward innovative researchers for federal approval. On funding, we recommend that the federal government sponsor the universities to the tune of 5% of the amount of research in order to help their commercialization offices to be as strong as they need to be.

The comparison with the United States is normal. Our panel examined what's going on in Europe and around the world, and the comparison must be made with the Americans, because they are the best in the world in this area.

[Translation]

Thank you, Madam Chair.

The Chair: Thank you very much, Mr. Fortier.

[English]

We're now going to turn to Canada's Role in International Science and Technology, Dr. René Simard.

Dr. Simard.

[Translation]

Mr. René Simard (Chair, Expert Panel on Canada's Role in International Science and Technology): Is it my turn to present?

Thank you, Madam Chair.

[English]

With your permission, I will make my presentation in both French and English.

[Translation]

My presentation this morning will focus primarily on the conclusions and recommendations with respect to Canada's role in international science and technology, pursuant to a mandate that the Prime Minister's Advisory Council on Science and Technology gave the expert panel in 1999, a panel which I had the pleasure of chairing.

The study includes a series of recommendations outlining clear guidelines on how Canada should be using its international science and technology activities so that the country is perceived as being a real leader in the knowledge-based economy. The expert panel's mandate comprised three questions.

First of all, what are the best mechanisms to fulfil scientific requirements? This is a question that is for the scientific community, regardless of whether it is located in the universities, in government laboratories or in businesses.

Secondly, what are the best mechanisms for filling the technological requirements of our businesses, particularly those that we were focussing on, namely, the small and medium size businesses?

Thirdly, what are the best governance mechanisms for setting priorities, coordinating activities and considering issues pertaining to trade and investment? This is a question that is primarily for the government and it's science and technology policies.

First of all, why are international science and technology activities so important for Canada? I think that it is worthwhile spending some time on this issue. In the knowledge-based economy, these activities formed the basis for trade and investment. Canada derives better returns from products and services with a high-knowledge component and foreign investment in highly specialized technological activities is what generates high calibre, well paying jobs.

I would remind you that Canada imports 65% of the new technology that it uses, indicative of its dependence; twenty-five percent of our Canadian patents involve foreign participation, compared to 4 or 5% in the United States and we produce only 4% of international scientific literature, meaning that we must therefore have access to 96% of the knowledge coming from other countries.

Thirdly, a knowledge-based economy requires skilled labour. I am talking about skills. It is difficult to attract and retain the most competent people in the world if Canada does not project an image of being a society that is focussing on knowledge and innovation.

Fourthly, in terms of the environment, solutions to problems such as global warming and sustainable development will depend on an in-depth and common understanding of these problems and on multilateral action.

Fifth, in terms of health, epidemics such as AIDS and the West Nile Encephalitic Virus, not to mention epizootic diseases such as foot- and -mouth disease and mad cow disease, as well as the rapid migration of diseases owing to the ever-growing mobility of people, necessitate a coordinated approach by all nations.

Sixth, regulations form the very basis of the international trade system and protect the Canadian people. In the world economy, a good understanding of the knowledge generating new products is essential to maintain public confidence and provide access to foreign markets.

• 0915

Finally, and seventh, it is the individuals, the research networks, the centres of excellence and the companies located throughout the world that generate ideas and innovate technologies.

The expert panel held consultations in three phases. During the first phase, we gathered and assessed information gleaned from consultations held via the mail and by telephone at both national and international levels. We then held six workshops across the country, from Halifax to Vancouver, in order to consult representatives from the government, business and universities. Finally, I met personally with executives from the government and, on several occasions, I met with them to advise them of the status of the report and the approach it was advocating.

Three messages emerged from the broad consultation process and from the analytical work of the expert panel. First of all, there's little synergy between the international science and technology activities of the various federal agencies. Accordingly, we rarely reach the required critical mass, and Canada's influence and credibility suffer as a result.

I will give you an example. Here science and technology activities are decentralized, distributed throughout each of the departments. When we went through budget reductions, everyone cut where it hurt the least; consequently, everybody cut back in international activities, the result being that our trade partners do not have a very good perception of us. I will give a few examples. Canada withdrew its funding from IIASA, the International Institute for Applied Systems Analysis, although it was one of its founding members. It withdrew part of its funding from the Ocean Drilling Program, despite the fact that we are surrounded by three oceans. Canada also opted out of the Human Frontier Science Program, to the point that we were hearing, during our international consultations, that Canada was being perceived as a freeloader, namely, a government that wants to get invited to all the receptions but doesn't want to pay for its ticket.

Secondly, most other countries have more effective mechanisms or a more centralized system dealing with the horizontal issues pertaining to international system and technology activities. I will give an example. Industry Canada is responsible for developing science and technology policy and yet it is the Department of Foreign Affairs and International Trade that makes these policies known abroad. There is very little liaison between the two departments, at least this is what the scientific advisors we consulted in their embassies were telling us.

Thirdly, Canada lags behind other countries in terms of special funding enabling people to participate in international science and technology activities. Although Canada has signed nearly 500 bilateral and multilateral agreements with other governments or other science and technology organizations, it has no funding to support these international agreements.

I will now deal with the recommendations.

[English]

The final report includes three recommendations that I have regrouped under four headings in my presentation: governance, policy, science, and technology. Let me start with the recommendation on governance.

Canada needs a focus for decision-making in international science and technology and a better means of coordinating activities in this area. The panel recognized that Canada has a decentralized approach to its science and technology policy, and thus the recommendation must reflect this in order to be acceptable for government.

In that context, we recommend the creation of an executive committee chaired by the deputy ministers of Industry Canada and International Trade. A similar executive committee approach is currently being used with success in the case of Investment Partnerships Canada. This approach would ensure the necessary synergy between the two lead agencies for international S and T. It already enjoys support from both agencies.

Membership in this committee would include major science and technology stakeholders from the academic, government, and private sectors. The committee would be supported by a small secretariat to be headed by someone of stature from outside the government. There is no doubt that this recommendation could be easily implemented and at very little cost.

• 0920

Regarding policy, Canada needs to bring science and technology more to the forefront of its international relations. To date, science and technology considerations have been evident by their absence from our foreign policy. At least this is what we heard from the consultation with our science counsellors posted abroad.

Our effort to build an international image as a leading knowledge-based economy will continue to be hampered unless science and technology trade and investment are integrated into Canada's foreign policy. The results of international study are increasingly important for the negotiation of international agreements and partnerships. For example, studies on climate change were and continue to be the basis of the negotiations leading to the Kyoto Protocol.

Given that there are only six science and technology counsellors and five technology development officers posted in a limited number of Canadian embassies and consulates abroad, and given the increasing importance of science and technology issues, the panel felt that there is a need to increase the level of understanding and knowledge of S and T issues of the many other Canadian representatives posted abroad.

The Chair: Dr. Simard, I'm going to have to ask you to wrap up very quickly, because we're going to run out of time.

Dr. René Simard: I will.

Regarding science, we recommend the creation of a new fund to enable access to international S and T programs and activities. The fund should be open to the academic, government, and private sector and be administered by an existing, non-departmental organization.

The fund would provide additional support of a limited duration for international partnership and collaborative research, Canadian participation under bilateral and multilateral agreements, Canada's participation on international S and T organizations and programs, and Canada's access to international facilities.

The recommended criteria for the allocation of grants from the fund would be excellence, strategic need, and impact on innovation. And allocation should give full consideration to the provincial international S and T strategies.

The last recommendation is on technology. We recommend the expansion of the industrial research assistance program, IRAP, of the National Research Council of Canada to international markets. We recommend a focus on small and medium-sized enterprise, and we recommend that IRAP support company-to-company deals.

Thank you, Madame la présidente.

The Chair: Thank you very much, Dr. Simard.

I'm going to turn to the Canadian Association of University Research Administrators, represented by Mr. Bruce Hutchinson, the past president.

Mr. Hutchinson.

Mr. Bruce Hutchinson (Past President, Canadian Association of University Research Administrators): Good morning, bonjour. Thank you for the opportunity to appear before this committee.

I'm here this morning representing university administrators and staff from the smallest to largest universities in Canada, including their research institutes and members from colleges who are now involved in research.

Our members are involved in the whole range of research administration at universities, from setting institutional policies on research to details of research account administration.

We provide information to researchers on new and exciting research funding opportunities; help researchers prepare applications for programs; ensure that all regulatory conditions are met; open and monitor research accounts; set up management structures for large projects; oversee the development of large institutional projects and report to agencies on how funds were spent; and provide information for promoting the results of research. In many universities, our members are also involved in the commercialization of research.

We are a personal membership organization and members join to gain access to our e-mail list server, to attend our annual meeting, and to make contact with others doing similar jobs across the country for self-help and professional development. Members from small and large institutions regularly seek information and advice from one another through our list server.

I thought you might be interested to know that our membership has increased from just over 200 in 1997 to almost 400 in 2001, an almost doubling of our membership. This increase in membership represents an increase of existing employees in our institutions who now feel the need to belong to this organization and many new people who institutions have hired to respond to the availability of increased funding and increased partner investments.

Why am I bringing this to your attention? The reason is the people who are involved, who are members of CAURA, represent one of the indirect costs of performing research in our universities and research institutions.

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The increase in the membership of CAURA is a proxy for the kinds of increases in indirect costs that institutions have had to undertake over the past four years, with no provision for support for these indirect costs except through the Canada research chairs program. It is clear to those of us on the ground, so to speak, that increased research activity leads to the need for increased expenditures in library and information sources for professors and their students, increases in information technology infrastructure, in human resource departments, and other indirect costs, including those represented by CAURA members.

While we have welcomed the new programs for support of research like CFI, the Canada research chairs program, Genome Canada, and the Canadian Foundation for Climate and Atmospheric Studies, they bring a new administrative burden, which costs those institutions that apply real dollars. In addition, to provide matching funding for some of these initiatives, provincial and regional programs have been created, which also require time to promote and administer.

We will not be on a level playing field with our major adjacent competitor until the issue of indirect costs is met. Our universities and research institutes across the country have a significant role to play in the innovation agenda. We need to be equipped to do the job.

Provision of indirect costs will allow universities to upgrade their information technology services for transfer of research data and to take advantage of the high-speed communication links between institutions; to upgrade animal facilities; to provide for safe, high-quality animal care for assessment of new treatment methodologies; to provide better support for human ethics reviews; and to provide the administrative support for more rapid uptake of approved projects.

In addition, information on library resources for researchers will be able to be adequately supported. That is the kind of equipping universities and their research institutes need to be competitive.

While the new programs I've mentioned above are an essential contribution to the innovation agenda, these programs, and the major renewal of faculty required over the next ten years, will put an incredible amount of pressure on the granting councils for support of research.

Granting council funding is the engine on which other, more applied, programs are built. For the universities and research institutes to be successful in recruiting internationally for the research staff we will need, we must have a research environment that will support their basic research.

If we don't increase this funding, we're simply not going to have enough high-quality people we need to train the increasingly sophisticated workforce Canada needs and to provide the next wave of professors we need in our institutions. This will require major increases in granting council funding.

Since a number of members of our organization are involved in the commercialization of research, I would be remiss not to indicate our support for assistance in the commercialization of research from universities. While a small number of universities could claim to be internationally competitive, the majority are not equipped at this time to build on their potential to contribute to the regional and national economy.

Mr. Fortier and others here this morning have prepared reports on this topic and CAURA has not. Therefore, I will not comment further, except to say that support is needed in this area.

Wrapping up, to meet the government's goal to move from fifteenth to fifth in terms of gross expenditure on research and development, we have to build a lot of capacity in Canada. Building capacity in universities is a time-consuming and people-intensive business. It can take eighteen months to two years to get a major research infrastructure project installed and ready to produce research results.

But I can report to you that there's a real air of excitement amongst the researchers at our universities because of the increased opportunities to become internationally competitive that these new programs have unleashed. To sustain this excitement, we know, as research administrators, that we need to provide the institutional infrastructure to support our research leaders and the new people we need to hire.

In closing, I want to stress how important the issue of indirect cost is to universities and our research institutes and the need to increase funding to the granting councils to support the research base.

Thank you very much for your attention.

The Chair: Thank you very much, Mr. Hutchinson.

We're now going to turn to the Association of Universities and Colleges of Canada, represented by Dr. Robert Giroux, the president.

[Translation]

Mr. Robert J. Giroux (President, Association of Universities and Colleges of Canada): Thank you, Madam Chair, for giving me an opportunity to appear before the committee.

In the 2001 Speech from the Throne, the federal government asked Canadians to embrace a bold and visionary innovation agenda. As you know, its key objective is to ensure that, by 2010, Canada will assume its rightful position as a world leader in research and development by catapulting Canada from 15th to 5th place among the OECD nations in terms of its relative R&D investment.

AUCC applauds and supports the federal government in this objective. Yet Canada will not reach this ambitious target of moving from 15th to 5th place simply by wishing it.

• 0930

As this slide demonstrates, in 1999, Canada, with a gross expenditures in research and development compared to gross domestic product ratio of 1.6%, trailed well behind other OECD nations in its relative R&D effort. As the red arrow suggests, Canada will need to achieve at least a 3% ratio in order to position itself in the race for a spot among the top five.

However, as you may know, this is over a 10-year period. Meanwhile, other countries are also making progress. Some countries, such as Sweden and Finland, are already on target to reach 4% by 2010. Other countries, such as Great Britain, Japan and the United States, also have the objective of increasing R&D support. Hence this will be a very big challenge for Canada. In our opinion, Canada will need to triple its investments by 2010 if it wants to come close to meeting its goal of being within the top five.

The federal government by its actions in the last five years has recognized that universities are essential partners in the quest to achieve these ambitious R&D objectives. The government's investments over the past five years attest to this partnership. However, to ensure that universities can contribute to the innovation agenda, we must resolve the current crisis facing universities.

[English]

Madam Chairman, as a spokesperson for Canadian universities, I am here today to tell you that universities cannot be the central partner in the innovation agenda the government wants them to be and knows they must be unless the indirect cost of research is reimbursed. Indeed, universities have reached a point where they will no longer be able to sustain federally sponsored research unless the issue of indirect cost is substantially addressed.

I'm not telling you anything you do not know, Madam Chair. Two years ago your committee recognized in its report to government that the absence of indirect cost reimbursement is seriously compromising universities' abilities to sustain a vibrant and internationally competitive research environment. In the past several weeks your committee has also expressed serious concerns about the ability of universities in all regions of the country to be full partners in the innovation agenda. These two matters require the government's immediate attention and are the key issues I wish to discuss with you today.

Madam Chair, Mr. Hutchinson has already talked quite a bit on the indirect cost of research. Let me just underline here that since universities do not receive reimbursement for the indirect cost of federally sponsored research, they must recover these costs from other sources of revenue. This inevitably means that universities continue to divert significant sums of money from teaching and maintenance to supporting the research enterprise. This not only creates an unproductive tension between teaching and research but also results in suboptimal research support. The slide you have there itemizes the various categories of the indirect costs of research.

This historic oversight in the funding of university research must be redressed. AUCC contends that the federal government should reimburse the indirect cost of research at a nominal rate of 40% and adjust this rate upwards for smaller universities to reflect the fact that the real costs of research they incur are higher.

Committee members, let me tell you why we believe the 40% rate is a minimum requirement. Since 1970, study after study has shown that the indirect cost of federally sponsored research represents a minimum additional cost of 40% over and above the direct cost of research and the cost assumed by universities to pay the salaries of principal investigators.

Indeed, based on this growing consensus, it is now common practice in many universities to seek a rate of reimbursement of at least 40% for the indirect costs of contractual research. A report by the Advisory Council on Science and Technology submitted some months ago also supports that rate. Moreover, some provincial governments are calling on the federal government to pay this rate.

In the United States, one of our major points of comparison, the average rate of reimbursement is over 50%, and the payments are allocated for a broader base of research expenditures. Governments in many other countries are also paying the universities for the indirect cost associated with the research they sponsor.

Our second key message today is that in addition to reimbursement of the indirect cost of research, smaller universities will require assistance to develop their research capacity in a sustainable way. As you well know, the potential to innovate exists in all of our 92 universities across the country. Many of our smaller universities consistently demonstrate that they can excel by exploiting their strengths. No one institution or region owns the monopoly on good research ideas. They can and should be encouraged in all parts of the country.

• 0935

It's time for a federal initiative that would develop sustainable research capacity and enhance underdeveloped research streams within smaller institutions to serve that purpose. This initiative would allocate funds to smaller institutions on a competitive basis to help them establish the foundations and address the challenges they face in building regional programs or initiatives that reflect both institutional and regional priorities.

Madam Chair, the specific challenges before you in the chart show the kinds of initiatives that could be put in place. We started with the challenge of moving Canada from fifteen place to fifth in research, with the recognition that universities are a key partner in reaching this objective. Clearly, that movement from fifteen to fifth place will require more faculty to conduct more research and participate in more knowledge-based transfers in more universities, across more discipline areas.

To realize this agenda, funding for the granting agencies will need to be significantly increased. More direct support will also be needed to educate the large pool of graduate students who will be required to undertake innovate research—not only on university campuses, but in government research centres and in private sector laboratories.

However, in order for this direct research to be supported, the issue of indirect cost and research capacity-building must be resolved. New initiatives to address these two challenges will noticeably strengthen the research resource base of the universities. They will lay a solid foundation upon which Canada will continue to build its future prosperity as one of the most innovative countries in the world.

Once these two fundamental building blocks are in place, we can look forward together to the new challenges that lie ahead—and there are many.

Thank you, Madam Chair.

The Chair: Thank you. We're now going to turn to questions, beginning with Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, CA): Thank you all for your presentations today. I very much appreciate your being here.

My first question deals with Mr. Fortier's presentation and his chart comparing Canadian and U.S. universities. How is that measured? What criteria did you use?

Mr. Pierre Fortier: As I said, the statistics for Canadian universities are poor. About the only measure we have is the AUTM report. Some universities do report to a private association in the United States, and out of this you can get a comparison of the 12 best universities that report to AUTM.

The slide on page 8 is on the revenues of licensing income/sponsored research. Well, that's only one measure. Another measure we should have, and we don't, is the creation of spinoffs: what jobs are created, and what impact does that have on regional development. Unfortunately, I must admit that Canadian universities have very little knowledge of the impact of their research on Canada's economic development. I think this could be cured by improving research in this area.

But as I said in my presentation, when David Strangway came here, he quoted a report by Bruce Clayman. To me, Mr. Clayman felt in the same trap we mentioned in our report, about the number of inputs in the economy.

I come from the private sector, where normally we look at the bottom line—that's the true measure. It's not what you do, it's the results. And because university research is very important for Canada's economic development, and in some cases for the regional development of some provinces, the measure here should be economic benefit. Economic benefit is measured by jobs, by new enterprises, by expansion of existing enterprises—and unfortunately we don't have too much information in this area. Usually, the information we have is on the licensing income/sponsored research. This says our performance is, on average, about half of the American performance.

Mr. James Rajotte: You said we know about the licensing impact but not about the jobs and the new enterprises. Shouldn't we have that information first, before we make the decision to make substantial new investments in research—even to cover the indirect costs?

• 0940

Mr. Pierre Fortier: No, I don't think so, because you just have to look at the Americans. We're very jealous, I think. Many countries are jealous of the economic development of the United States, and this report from OECD says one of the reasons for that was their commercialization policy. It's not the only reason, it's an important reason. So if we know that, I don't think we should wait too long doing more research to find out what has an impact over the economic development of Canada. We just have to look at the United States and say, if it's good for them, it's good for us, so let's move in to this area.

Mr. James Rajotte: In respect of relating to the U.S., then, you talked about regulatory reform, and I believe there was a Bayh-Dole Act you mentioned.

Mr. Pierre Fortier: That was the Bayh-Dole Act in 1980. Of course, as I said, some universities initiated commercialization policies much before that, but in 1980 the intellectual policy developed by research funded by the American federal government was owned by the federal government in Washington. This was very much centralized, and the results were very poor. So one of the key policies that was made in 1980 was to pass legislation to say that from then on, when researchers develop intellectual property, it wouldn't belong to the government, it would belong to the university where the research was performed, with the obligation for that university to organize a commercialization office and to commercialize, and to do it in such a way that it favoured American enterprises, preferably the SMEs, the small enterprises. Obviously, that policy worked very well. This is why, in a sense, what we recommend is similar to what happened in the United States in 1980.

Mr. James Rajotte: I have another question. You mentioned modifying the tax system with respect to capital gains and stock options and tax treatment. Can you provide some specifics there?

Mr. Pierre Fortier: Let's say a university researcher does research and finds a good invention, and then there is a spinoff company created, and eventually that company becomes public. I'm not an expert in taxation, but I think one of the things that happens is that once the company goes public, the fact that he's given some shares in the new company has a taxation impact, and of course, if he is a professor at a university, you know the kind of salary he's got. If the invention he's made is very good, the tax impact may be very large, and he should be allowed to keep his shares without paying that kind of taxation. That's one of the examples we give in our report. It's the fact that when the spinoff is organized and it becomes public, it has a tax impact on the researcher himself.

The Chair: Last question, Mr. Rajotte.

Mr. James Rajotte: As to the indirect costs—this is for Mr. Hutchinson—the university I know best is the University of Alberta, and they had their best fundraising year ever last year. So they're raising all sorts of money. The money they're raising is not going towards lowering tuition. So how is it that the universities are not affording these indirect costs? Second, what would be the best way of funding these indirect costs, through a fund like the CFI fund, or through setting up another fund?

Mr. Bruce Hutchinson: Most universities are doing fundraising for capital campaigns, for buildings. We're fundraising at Queen's, the university I represent, for professorships to enhance the teaching and learning environment for students, and we find that our alumni are more prone to give money towards things they can touch and feel and towards professors than towards adding one more university research administrator, I have to be honest with you. Nice as we are and complimentary as we are, that's one of the issues.

Second, our organization doesn't have a position on how best to fund this. We have found ways to distribute funds for Canada Foundation for Innovation and the Canada research chairs program. My own view is that some of our programs are based on the amount of granting council funding one gets at one's university, and a percentage of that would be a very welcome addition. There are a number of mechanisms for sorting out how this is done. I'm not an expert in implementing those kinds of policies, but if we had that as a start, we would be very happy in the university community.

• 0945

The Chair: Thank you.

I'm going to move to Ms. Torsney, but I want to remind everyone that we do have another group of witnesses at 10:30. So try to be brief.

Ms. Paddy Torsney (Burlington, Lib.): It seems to me that what I heard you talking about, Dr. Simard and Mr. Fortier, would really revolutionize our universities. Is there general support for this amongst the universities in Canada, Mr. Giroux?

Mr. Pierre Fortier: You're talking of commercialization?

Ms. Paddy Torsney: Yes.

Mr. Pierre Fortier: There was a report done in Quebec recently where they took a focus group of university professors, some of them being involved in commercialization, some of them not. Of course, you have to realize that if you're a professor in literature or psychology, commercialization is not your objective. But for those who were heavily involved in commercialization, the report concludes that their performance was among the best in respect of follow-up on master's and Ph.D. students, research being sponsored, research being performed by them.

Recently I had the pleasure of debating with Mr. James Turk. He's the executive director of the university professors...

Mr. Robert Giroux: CAUT.

Mr. Pierre Fortier: This was at McGill University, and he represented those people in universities who say, the hell with it, we don't want it, it doesn't make any sense. I was talking of the technology gap, problems of productivity in the Canadian economy—and this is substantiated by OECD, Industry Canada, and Statistics Canada. He was negating all that. He said all the statistics are no good. Of course, if you don't believe that our economy needs to be buoyed, needs to be developed further, then you reject anything to do with commercialization.

Maybe Monsieur Giroux can talk about it, because I'm not a spokesman for universities, but I know there's a lot of support now. Universities have come to support the commercialization policy we proposed strongly, plus or minus a few little details.

The Chair: Dr. Giroux.

Mr. Robert Giroux: Very briefly, Madam Chairman, we do support commercialization. In fact, we have developed a position paper on this—I don't know whether we've sent it to the committee; we might have sent it to your research—which establishes the parameters within which the universities see the commercialization issue proceeding. We do cite statistics, and we say that if all the right policies are in place, if the right kind of support is in place, and that includes the indirect costs and the capacity of the smaller institutions, we feel universities can triple the situation they're in right now, patents, licensing, spin-off companies, and a number of these activities, particularly the revenues they get from commercialization.

So the universities are in favour of it. They recognize, however, that on the campuses themselves this is not a full consensus issue, as Mr. Fortier has said, and our intellectual property policies at universities are quite diverse across the country. This is the difference from what has been established through the Bayh-Dole Act in the United States. But given this, our paper illustrates that we can make some very strong steps forward in the area of commercialization.

The Chair: Mr. Hutchinson.

Mr. Bruce Hutchinson: I would like to put this in a broader context. One of our missions at the university is transfer of knowledge to society. That includes social sciences and humanities, health sciences, and natural sciences.

• 0950

The other fundamental issue for universities is respect for academic freedom. If a university professor makes an invention, he or she should have the right to publish that information. We want to protect that right, so we want to respect academic freedom.

I want to indicate that large research-intensive universities in Canada already have policies that support commercialization of research from university inventions. Some of them have been very successful. I can give three examples. I think we would all recognize one, the University of Waterloo, where the inventor owns; the University of British Columbia, that's been quite successful, where the university owns; and my own university, Queen's University, that has been quite successful in commercialization of research and where, again, the inventor owns and we have agreement around how one can commercialize research and get benefits from that.

I think we would all point to those three examples, with their different policies, as having a significant impact on their local economies and on commercialization of research. In fact, at Queen's University, after 15 years of sustained effort, we're now in the black. This is a commercialization effort that the university is actually proud of. It benefits our overall teaching and learning environment because we're now able to plough some of those resources back into further research.

So this isn't a major shift in the road for those that are research-intensive. As Mr. Giroux has pointed out, we'd like to see this advantage provided to universities across the country and in regions where there are smaller universities, and support to help those universities and those kinds of efforts.

The Chair: Thank you.

Dr. Simard.

Dr. René Simard: Mr. Hutchinson has covered what I wanted to say.

The Chair: Ms. Torsney, last question.

Ms. Paddy Torsney: Let me just tell you that I'd really like to see you guys analyse the cons of doing this, because on the pro side I could certainly see that it would generate lots of money for the universities, that it could make some professors very wealthy, and that perhaps it would help pay for some of the indirect costs you want covered.

On the con side, I could really see that there would become two different types of universities, that both within small and large universities you'd have very successful ones and very not successful ones and that you would have different faculties with completely different access to revenues and funding, without some support for the philosophy and arts professors in a different way.

For instance, when I was at McGill—it was a long time ago now—there was a huge problem in that the government had decided engineering, sciences, and business would be supported, and arts would be hurt in that funding formula. There were huge fights as to who would pay for the economics classes we took, which were really humanities classes, not business classes. It was “Well, the business faculty is rich and wealthy, and so is engineering, but the rest of you guys, forget it, there's no money for you”. That creates a problem within the universities, a problem in terms of what people are going to study.

While we definitely have a productivity gap and we definitely have to do things to improve what's going on and to feed this great engine that's there, I think we have to be really careful about the other part of Canada, our culture and the humanities. I really want to know how you are going to cover all that.

The Chair: Thank you, Ms. Torsney.

Dr. Fortier.

Mr. Pierre Fortier: It's true, I guess, and I'm sure Mr. Giroux will talk about it, that within universities there are differences. If you're in engineering it's different from being in literature, obviously. But the key point I want to make is that in our report we stress the fact that we don't believe commercialization should be developed to bring new revenues to the universities. What we're saying is that if the federal government spends $1 billion a year on research, plus 40%, which makes $1.4 billion, this is a strategic investment, and it should support the economic development of Canada. Therefore, the objective is not to bring more revenue to the universities—it will bring a little—but to have an impact on the economic development of Canada.

I'm pleased to see that the university is now recognized. At the beginning, when I presented the draft report, I recall some university professors saying “Don't say that we will become a kind of tool of the federal government to develop the economy”. But you know, all that money comes from taxpayers, and taxpayers would like to see some results. Some taxpayers don't understand all of the intellectual advantage of research at universities and all that, but if they see results like this, favouring the economic development of Canada, it will surely make it easier for both the Minister of Finance and the provincial ministers of finance to give more money to the universities, because the public will say, “Gee, we're getting something in return”.

• 0955

Mr. Robert Giroux: Perhaps I can add to that. When we talk about commercialization, we're talking about a certain activity of the university. There's no doubt there's a desire to do more, because, as Pierre has said, universities are recognizing that it contributes to economic development, and that's good. But universities have many other roles to play.

You've hit on a very important role—namely, the teaching, the production of knowledge workers. We're not talking only knowledge workers in the sciences here. We're talking knowledge workers in all phases of university activities. More and more employers now are saying, “Give me a philosophy graduate. I don't mind taking that person on. I need a person who can think, who can challenge, who can look forward, who can learn more.”

So I don't want to leave this committee with the impression that all we're focusing on here is commercialization. We have very strongly supported more support for the universities. We have expressed concerns about some of the targeted funding that is happening in certain parts of the country. We are now developing a campaign to bring forward the value and the importance of a liberal arts and science formation, and the importance of having the university as an organization that is well resourced to fill all of its mandate. The major mandate, of course, is community access and community development, dealing with the social and other problems that take place as a result of the impact of economic development, globalization, and so forth.

So you're quite right, and I'm glad you raised that concern. Commercialization is a small part. It's something that's essential for economic growth. At the same time, a healthy university can have an impact in a number of areas that are just as important as the commercialization function.

The Chair: Mr. Hutchinson.

Mr. Bruce Hutchinson: Just very briefly, I agree with what Dr. Giroux has said. Most universities have in fact shifted their internal funds to give more support to research in social sciences and humanities, because there are external funds available to support other areas. I think you need to trust universities to in fact rearrange their resources given the external environment. These program areas are very important to us.

I would add, I guess at the risk of pushing too hard, that if we had indirect costs for the social sciences and humanities research funding that comes to our university, that would certainly allow us to put those resources into helping those people in that area, to provide support for research.

Again, even if you invest in commercialization, it's a small portion of our overall activity as a university, even at a university like ours, where we have a significant and successful commercialization activity. It has a very small impact on the overall university.

The Chair: Thank you very much, Ms. Torsney.

[Translation]

Mr. Brien, please.

Mr. Pierre Brien (Témiscamingue, BQ): First of all, I would like to thank you all. I think that you have made some very concrete and interesting suggestions that will stimulate research and development in our academic milieu.

My first question is for Mr. Giroux. Right now, what is the future like for a small university without specialization or without any specific research niche? I am very concerned about small universities that haven't carved out a niche in a particular sector where research is being conducted.

Mr. Robert Giroux: Mr. Brien, everywhere in the country there are many universities that have carved out niche areas for training in the arts and science sectors. These universities train people for the job market as well as people who obtain their undergraduate degree and then move on to other universities in order to get their master's degree or their PhD. Some universities are very successful at doing this, as shown by the report that appeared in Maclean's magazine. The third category that appeared in the Maclean's report shows that many universities have built their reputation, not on their ability to do research, but on their success in training graduate students.

Nevertheless, every university realizes how important it is to have a good mix of training and research. Research helps students gain more in-depth knowledge and be able to contribute more to the knowledge-based economy.

Many small universities have developed interesting niches, but these niches must be supported and receive more assistance in order to have even more of an impact in their community.

• 1000

We can discuss Quebec, which you know well. The Université du Québec en Abitibi-Témiscamingue developed a significant niche mining research. It established partnerships with mining companies. Pulp and paper has always been a great interest for the Université du Québec à Trois-Rivières. Maritime and marine sciences research has always been interesting for the Université du Québec à Rimouski, for example.

Therefore, niches have been developed, but we must help universities develop them even further. They have trouble getting funding from granting councils. They don't have the internal infrastructure to compete and succeed in competitions. Therefore, let us give them the necessary assistance so that they can be more successful in competitions, increase their excellence and develop their regional capacity. The result will be they will have an impact on innovation at the regional level. Secondly, they will produce graduates who are better prepared to enter the labour force and put the knowledge they have acquired to use.

Mr. René Simard: I wanted to cite the examples of certain small universities in Quebec who each have their own niche of excellence but I think that Mr. Giroux has done so. There is no doubt that pressure will be exerted on smaller universities to develop niches of expertise, and I think they have already started doing so.

Of course, there will always be a major difference between these universities and those that are highly developed in health sciences and that attract a great deal of money, not only from federal granting councils, but also from philanthropic bodies which are also very involved. These universities attract a great deal of money in the health sector because there are a lot of existing resources for that.

In general, smaller universities don't have a faculty of medicine or of health sciences, but they do develop niches of expertise and I believe they do so very successfully.

Mr. Pierre Brien: I will continue with you, Mr. Simard. You say that there should be a fund for international research, taking into account what is done in the provinces for niches they have developed on the international level.

Are provinces very active in international research partnerships? What is the situation right now, as we speak?

Mr. René Simard: There are at least four provinces that have set out policies for science and technology at the international level. British Columbia is one. It is always focussed on Asia and it has very specific niches of expertise. Of course, Quebec may be the model for this. It may be the province that is best organized in terms of international relations. Ontario and Alberta also have international science and technology policies. They chose their niches. For Quebec, it is very clear. I believe there is a white paper on science and technology that has just been published by the Ministry of Research, Science and Technology. These four provinces, at least, have niches. With regard to the fund that we suggest creating, one of the criteria for subsidies would have to be obtaining the support of the province that would be providing these funds.

The other provinces do not have clear priorities in this area, but the four that I have mentioned told us that they did have priorities and that they would like these priorities to be respected if any projects come from their province.

Mr. Pierre Brien: This question is for Mr. Fortier. If the universities succeeded in improving the marketing and development of intellectual property, would this create a widening gap between small and large universities? Are there any concerns in this regard? Would there be some equalization in benefit recovery?

Mr. Pierre Fortier: Up until recently, in Quebec, the Offices of Industrial Liaison were quite poor as you know, even at the University of Montreal. I was discussing that earlier with Mr. Simard. They had an Office of Industrial Liaison with four or five employees. There was not enough competent staff to assess the projects and negotiate with venture capital companies.

• 1005

We allude to this in our report. In fact, the Quebec government's policy, which was just adopted, and which I believe is also followed in other provinces is to create critical masses. The government provided funds which are administered by Valorisation- Recherche Québec, but it insisted that the University of Montreal work with the École polytechnique, the École des hautes études commerciales and affiliated hospitals. It also insisted that McGill University be associated with Sherbrooke and Concordia with the University of Quebec.

In other words, in the area of marketing, there is a need to have critical mass. In order for a marketing bureau to be effective, there have to be experts in various fields in that office: patents, legal negotiation, financing, negotiation with venture capital companies. On the whole, one can say that you need an office with 10 or 12 people. Now for an office with 10 or 12 employees, if you count $100 000 per person, all included, you are talking about over a million dollars.

Clearly, a small university will not be able to afford an office like that. That is why the small universities must... As a matter of fact, when I discussed the project mentioned in our report, I went to the Maritime provinces. The governments of New Brunswick and of the Maritime provinces in general are in favour of this system of marketing offices that are grouped together to serve several small universities. Even in Quebec, during the negotiations that took place recently for the University of Montreal project, certain hospitals wanted to do their marketing themselves. They wanted to maintain a certain autonomy. They said that they wanted to work alone. With good reason, the government of Quebec insisted by saying that if it was going to provide the funding, this had to be done in a centralized office to serve the University of Montreal and its affiliated hospitals.

There is a need for critical mass because sending $50,000 to a small university is pointless. You need a critical mass to have a marketing office that is well structured in order to have effective results.

[English]

The Chair: Thank you. Merci, Mr. Brien. Again we have three people still on the list and we're quickly running out of time.

Mr. Alcock, please.

Mr. Reg Alcock (Winnipeg South, Lib.): Thank you, Madam Chairman.

Thank you. I enjoyed the presentations, particularly as I substantially agree with the arguments on commercialization. There is a benefit both to the university community and to the country in moving down that road. Some of the concerns raised have been addressed in a number of universities south of us that have expanded their efforts around commercialization.

I do have a question. Mr. Hutchinson, I enjoyed your presentation on behalf of all of the universities. I note that the AUCC seems to have increasingly taken a position that we should focus on five universities at the expense of others. I'm interested in this issue of infrastructure support. We've debated this internally quite a bit. There's broad support for providing this kind of support as an addendum to research grants.

The dilemma though—or one of the questions often raised—focuses on transfers made to the provinces under the CHST, which are often credited with being support for infrastructure. Then the excuse becomes that we have already given money to the provinces and it goes through to the university; there's your infrastructure support.

One of the arguments raised in an earlier meeting looked at whether or not it would be useful to offer the money in the form of infrastructure attachments to research grants and simply withdraw the CHST support flowing to the provinces. The argument is simply that there's no guarantee this money goes to universities, any more than it is guaranteed to go anyplace else. If we want to maximize our investment in universities, we would find a mechanism to ensure that money goes directly to the university.

Mr. Robert Giroux: You weren't addressing the question to me, Mr. Alcock, but I'd like to take it.

Mr. Reg Alcock: No, I wasn't.

Mr. Robert Giroux: First of all, both on the CHST and on the research support fronts, there is a very strong need of increased resourcing to the universities. The latest agreement the federal government has signed with the provinces on CHST has been entirely dedicated to health. There's been very little growth in CHST support overall.

For a period of time the provinces had to reduce funding to their universities but have now started in many areas to increase funding. But they recognize a very strong demand in the area of teaching and other university functions. There will be a growth of between 20% to 25% in students. There will be a tremendous turnover of faculty. Therefore the federal government should not consider reducing whatever CHST support is in place now.

• 1010

That's of course where the emphasis has been, on the importance of the indirect cost of research. Because as a result of growth on the research side, which the federal government has done very well on in the last few years, more and more pressures are being put on the university's overall sources of revenues, on its overall revenue base, some of which has been diverted from the teaching and maintenance side to supporting the research function—and all of those activities Mr. Hutchinson described.

So there's a need—and we've been saying this all along—to support on both the CHST front and the front of provinces giving support to their universities' base operating budgets, with the federal government increasing its support on the research side.

The Chair: Mr. Hutchinson, you also wished to respond?

Mr. Bruce Hutchinson: While the question's addressed to me, I'm not an expert on these issues. Monsieur Giroux has given a very good answer in this regard. I'm here to tell you that, on the ground, there are real problems, that we need indirect costs for support for research. The mechanisms the CHST provided have not been studied by our organization—we're not experts in this area—but from the point of view of the people doing the work, we can see the real need for this to be improved.

The Chair: Mr. Alcock.

Mr. Reg Alcock: No, that's fine. Mr. Giroux has made the case on behalf of the five largest universities, and we'll have to figure out what to do with the rest of them.

Thank you.

Mr. Robert Giroux: Madam Chair, allow me to point out that we have 92 members, with new ones being added every year. We represent all universities across the country, and this of course is our purpose today in coming to you with the two-pronged approach.

Thank you very much.

The Chair: Mr. Alcock, your last question.

Mr. Reg Alcock: Well, since Mr. Giroux raises it, I'll ask if he canvassed his 92 members when the AUCC made the decision to differentially distribute the research chairs, weighting them heavily towards the five largest universities. Was this a decision made by all of the AUCC, or by a few people sitting at the table at the time the decision was taken?

Mr. Robert Giroux: Madam Chairman, Mr. Alcock of course knows that the distribution of the research chairs was based on the university's success in the past in granting-council funding; this strongly influenced where the chairs would be going. The AUCC made strong representations at the time to have a different distribution mechanism, allowing some of the chairs going to the more successful universities to go to the smaller universities instead. We have succeeded partially—maybe not as much as we could—but there has been a redistribution of the chairs towards the smaller universities on this basis.

Again, Madam Chair, we have the same very serious concern we have had all along. Our brief to the House finance committee last September indicated clearly we needed to do something to strengthen the research capacity of all universities across the country. That's why I'm coming in front of you today with the same concerns. And by the way, the payments of indirect cost with a formula that weighs a little more heavily in favour of the smaller and medium-sized institutions will do much to increase their research capacity.

Thank you.

The Chair: To clarify then, Mr. Giroux, the AUCC didn't support the way the chairs were distributed? They had a different proposal?

Mr. Robert Giroux: The AUCC was part of the process in the development of the research chairs and made proposals to ensure a different distribution to the smaller universities not reflective of the traditional proportion attached to straight application of granting-council funding. As a result, 6% of the chairs were redistributed to the smaller universities.

The Chair: Thank you.

Mr. Reg Alcock: If there are documents demonstrating this, perhaps they could be shared with the committee.

The Chair: Would this be possible, Mr. Giroux?

Mr. Robert Giroux: I'm sorry, Madam Chair, I don't know if there were any specific documents. I was part of the process, and certainly I will stand by what I say.

The Chair: Thank you.

Mrs. Desjarlais, please.

Mrs. Bev Desjarlais (Churchill, NDP): To follow up on that request, if you were part of the process then you would be able to give us something in writing as to how it was proposed rather than how it ended up happening. Is that possible?

• 1015

Mr. Robert Giroux: Yes, I can undertake to describe the process—although this information, Madam Chair, is very much available in the granting councils. In fact, SSHRC, the granting council administering the research chairs, can explain the process of allocation very clearly.

Mrs. Bev Desjarlais: Right. We're looking for the AUCC's position. You indicated the AUCC had a different proposal from the one that appears to have been used. We are interested in knowing that there was another proposal there and about process this other proposal suggested. This is what we want to see.

Mr. Robert Giroux: Let me clarify, Madam Chair. We were part of the process of application. We made a proposal and supported very strongly an approach that did not 100% adhere to a straight proportion of research chairs based on granting-council funding. As a result of our input—and of course this government's sensitivity to it—6% of the research chairs were allocated to the smaller institutions. This meant 6% more chairs were allocated to them than would have been allocated had we gone on a straight proportional allocation of the chairs overall.

I can certainly send this in, because we supported this approach and were instrumental in putting it forward.

Mrs. Bev Desjarlais: Was your proposal then the 6%, or did it suggest there should have been more of the smaller universities receiving these positions?

Mr. Robert Giroux: We supported the 6% reallocation.

The Chair: Thank you, Mrs. Desjarlais.

Mr. Cannis, please.

Mr. John Cannis (Scarborough Centre, Lib.): Thank you, Madam Chair, and thank you to the presenters.

Certainly these are new frontiers we're all embarking on. Having heard from previous presenters and from you today, I'm quite encouraged that today we're using such words as “commercialization”. In years past it seemed to be considered almost a form of voodoo; it was a sin to talk about commercialization.

I'm actually quite pleased to hear Mr. Fortier talking about the universities and researchers selling the publicly funded IP to American companies. Obviously, there is a concern here. Perhaps you can tell us about some of the obstacles and why they exist.

Is it because of regulations? Is it because our system internally seems to be cumbersome, with new innovations coming forward without proper mechanisms in place to secure compliance—regulatory compliance, for example? Is this part of it, or would it be that investor capital is not readily available, that Canadians are not risk takers to the same extent as Americans? Could you elaborate on this?

You also talked about the universities not being able to equal the economic development in Canada, which perhaps universities in the United States picked up on a long time ago, while here in Canada we focused primarily on the intellectual side as opposed to the commercialization side. Is it possibly because things are more out in the open in the last eight to ten years that we are now seeing this, and the commercialization aspect would help us eliminate, or bridge, or minimize whatever gap exists?

Mr. Pierre Fortier: Your first point was right. I come from a province that many, many years ago was called “priest-ridden”, where it was wrong to make money. Even Quebec has changed a great deal, because now we don't mind making money. I'm pleased to see even universities now accept the fact that one of their objectives is to help in building Canada—that's good.

You're right about the fact that we came very late to commercialization when you compare us with the University of Southern California, which had a policy in 1926. In 1926 there were not too many Canadian universities with such a policy.

What you have to realize is that at the moment there's no policy. The key point of our report is that the federal government at the moment gave $1 billion in research money to researchers—not to universities, to researchers—and there's no policy. I'm not saying it's mismanaged most of the time, but my point is we have to have a policy in Canada.

• 1020

If you get $1.4 billion a year and if we agree with the 40% Mr. Giroux was talking about and Mr. Hutchinson, basically what I'm saying to the Canadian government and we're saying in our report is that we have to have a policy regarding who it should benefit. As there's no policy, a researcher in any university is free to do what he wants. If he wishes to sign a consulting agreement with an American company to get a consulting contract, and by this process he transfers the intellectual property, there's nothing wrong, because we don't have any policy.

We have to institute a policy in Canada, which would be a Canada clause policy, where we would say that the IP has to be to the benefit of Canadian companies, and preferably SMEs in Canada, by spinoff or otherwise. That's very important. I didn't go through this at the beginning of my presentation, but there's more research performed in Canadian universities than in other OECD countries, except Italy. That's quite critical. In other words, it's part of the strategy for economic development of Canada. Because of that we have to have a policy, and the policy has to be instituted by the federal government. Basically, we're saying to the federal government, Institute the policy, and when you get money in the picture, you have to say, we're giving the money, but if we give the money, you have to abide by certain rules.

The Chair: Thank you, Mr. Fortier.

Dr. Simard.

Dr. René Simard: I could give many examples involving our best researchers or staff funded by the federal granting council, who, when they had an invention, would take the patent in the United States. Because of the absence of any commercialization policy, it pays off much better for them to take the patent in the United States. Most of the time this is a complete loss of exploitation of a Canadian invention. There are many examples of that.

Mr. John Cannis: Words such as “exploitation” and “commercialization”, as you said, Mr. Fortier, are no longer negative words. I'm please to hear that people from your side of the world are using them.

Mr. Pierre Fortier: We would not like to pass the message that this is the majority of cases, but even if it is a minority of the cases, that's too much. We just cannot afford that loss.

The Chair: Thank you.

Before we move to our next group of witnesses, I want to ask one question. We have these traditional universities that do, I guess, traditional research, and we give them a certain number of chairs based on that tradition. I come from an area where there's a smaller university, but aside from that area, what I hear from other universities, what I hear from other areas, and what I hear from industry is that we're not moving in the right direction. We're not listening to industry. We're never going to move from fifteenth to fifth just by throwing more money at the same problem or the same research or the same issues. If we keep funding the same stuff and we don't do anything really innovative and really new or industry-driven, we're never going to move ahead and we're never going to create the jobs. At the end of the day, that's what we want to do with our research. It's not just doing research, at the end of the day we want to ensure that Canada has jobs and that Canadians can remain employed. It's all well and good to say we're doing research, but if at the end of the day we don't maintain those jobs...

I'll just use the best example I know, and that's the automotive industry. We all know there are 60 to 80—too many—car plants in the world today. That's as many as we have in Canada. What are we doing to ensure that we're innovative when we're at the forefront of that, to ensure that those jobs remain in Canada? I just don't see it. I see us doing the same thing, funding the same thing, and I see this peer review process, which I think is interesting, through all the researchers, where there's a hierarchy, and engineers come somewhere at the bottom of that. Yet in reality, they're the ones who create our jobs.

So somewhere we have to do things differently. I get concerned when I hear that 6% went to the smaller universities. What if the smaller universities had 80% of the new ideas? Why do they get 6%? I don't care what the past is.

An hon. member: You should.

The Chair: And the past is that all these universities got all these dollars—

Mr. Reg Alcock: They believe in competition.

The Chair: —and did all these things. I care about the now and the future. The past is great, but it's the now and the future we need to be looking to, and funding. That's one of my big concerns, that Canada's going to stay fifteenth, no matter how much money we throw at the problem. That's a real concern of mine, and I would appreciate a final response before we move to our next few witnesses.

• 1025

Dr. Giroux.

Mr. Robert Giroux: First, there's no doubt that going from fifteenth to fifth requires a tremendous effort from all of the players. Universities have 21% of the research activity. So it's not by throwing money all at universities that you're going to achieve that. It's very important that universities play their part. It's very important that universities be well resourced to do so. But universities in Canada are probably the best in the OECD in respect of partnerships with the private sector, the corporate sector. We have about 12% to 13% of the private sector doing their research at universities, and 5% of their contract research is with universities. That's the best in the OECD. So I have a lot of difficulty when we say that is not a solution, that is not the way to go. I think it's one of the ways to go.

Another of the ways to go, of course, is to increase our receptor capacity in the private sector itself, to ensure that they are able—and we're talking primarily about the small and medium-sized enterprises—to establish partnerships with the universities. That's where universities in the regions and the smaller universities become extremely important in establishing this. That's why we saying, let's give them all the help we can to augment their capacity to do these kinds of things.

If you look at the recommendations we've made, Madam Chairman, we're going in that particular direction. I know the committee has had some concerns about the approach that is being used to provide grants. This is a peer review process, based on excellence, which has led to getting a large part of the activities going. However, when you speak to people internationally, to those who are the experts in how you best distribute or give out the money for research and development, they always come back to saying that the peer review process is the best guarantee of excellence. I think we have to work with it, and we have to develop other policies that will move us in the direction we want to go.

Mr. Pierre Fortier: I want to stress one point about transfer of technology, to SMEs particularly. There was a study done in Quebec a few years ago that demonstrated that many SMEs did not have on their staff any engineer or anybody with a scientific background. You have to realize that it's very difficult for any university to transfer technology to an SME if they don't have at least one engineer.

The Order of Engineers of Quebec campaigned and visited, literally one by one, many SMEs across the province to convince them that they should have on their staff at least one engineer. You must have technology in a university where people know exactly what they're talking about and transfer that technology to somebody. When you talk about transfer of technology, you're talking about transferring technology to an individual, to a human being. If you don't have a human being in an SME who understands what he's talking about, you're wasting your time, because when you transfer technology, you don't transfer a document, you transfer knowledge, you transfer ways of doing things. That's a point that IRAP, in particular, has helped a great deal to solve. I don't know if there should be a program for SMEs. I think there's one in Quebec, but there is a need to have a program in Canada to make sure that SMEs will have at least one engineer on their staff.

The Chair: Any final comments? Dr. Simard?

Dr. René Simard: No.

The Chair: Mr. Hutchinson?

Mr. Bruce Hutchinson: The issue of peer review is, I think, an important one. Most universities would support competition based on excellence of the research. There are programs, for example, the Networks of Centres of Excellence program in automotive, which in fact is based at your university in Windsor. This is a national program that is being led from a regional university. So I think there are programs to provide this, but it's based on the excellence of the research people.

I would just back up Mr. Giroux's comment. I've come from industry. I entered the university system. The matching programs that have been put forward by the government to require industry to be involved are in fact significant. At my own university about 20% of the funding that comes in for our research is actually industrial-based. We're a medium-sized university. We've set a policy of being a research-intensive university. We wouldn't want the influence of industry to get much higher, because a lot of the inventions that are going to drive our economy don't come from the industry-driven side, they come from the curiosity of researchers who lead ideas into new areas. I think there's a real danger in going too far down that road.

• 1030

The Chair: Thank you.

I would just say I fully support excellence. I don't think there's any doubt that everyone at this committee supports excellence. I also think it's important, Pierre, that you should also talk about and consider innovation as well.

Anyhow, we're going to move now to our next set of witnesses. I want to thank you for being here. We're going to stop for about three minutes while we change places.

• 1031

• 1036

The Chair: I'm going to call the meeting back to order.

For our second round table we're very pleased to have with us representatives from the three granting councils. From the Natural Sciences and Engineering Research Council of Canada we have with us this morning Dr. Thomas Brzustowski, president; from the Social Sciences and Humanities Research Council of Canada we have Dr. Marc Renaud, the president, and Dr. René Durocher, the executive director of the Canada Research Chairs Program; and then from the Canadian Institutes of Health Research we're very pleased also to have with us Dr. Allan Bernstein, the president.

What I would propose is that we all give our opening statements and that we then move to questions together. I will go in the order on the agenda, beginning with Dr. Brzustowski, unless there is some other agreement.

Dr. Thomas A. Brzustowski (President, Natural Sciences and Engineering Research Council of Canada): Thank you, Madam Chair.

[Translation]

Thank you for inviting me again to provide you with information about university research.

[English]

I've prepared a very short paper for committee members. I hope you don't mind that it's only two pages long.

The Chair: No, that's great.

Dr. Thomas Brzustowski: What I've got are three points I want to make using a diagram that illustrates—and this is something we've prepared in order to put it on one sheet of paper—the complexity and the fragmentation of the way in this country that we support university research in science and engineering. Even this complicated diagram isn't complete, and I'll indicate very briefly how.

I'd like to draw your attention to the line about two inches down from the top heading labelled “People” on one end and “Tools” on the other. If you look at the expenditures starting at the left, the PIs—the principal investigators, the people without whom research would not take place—are paid for largely by the university. When I say “university”, this is shorthand for university core funding as provided by provincial transfers and student tuition fees; that's what I mean by university. Some are paid for by the Canada Research Chairs Program and, in 170 cases out of about 9,000, by the NSERC chairs program. The rest of the professors, then, are paid out of university budgets.

NSERC—and remember, please, this is the box just below the top, called “HQP discoveries and innovations”—supports people, discoveries and innovations. We do all three things: the training of highly qualified people; basic research, whose aim is discovery; and programs of innovation, whose aim is to create jobs, precisely the purpose you, Madam Chair, were articulating at the end of the last session of this committee.

We support people—undergraduate, graduate and post-doctoral students—in two ways, and that's why there are two sets of arrows pointing to students. One is through scholarships they win in their own name, and another is out of the research grants of the principal investigators. They can be paid either way. In fact, roughly equal numbers are supported in each of these two ways. We also support dedicated technicians and research associates.

• 1040

The fourth column from the left is labelled “Operating costs”. These are the direct costs, the costs of doing research the principal investigator faces. This is what we give our research grants for in many cases in addition to supporting people.

If you would to move over directly to the right-hand column, I want to contrast the operating costs with the indirect costs, about which you heard from the previous group of witnesses. These are the costs to the universities of being in the business of having research done there. These are very important, and they are paid for largely by the universities, and the Canada Research Chairs Program picks up some of those as well.

In the middle, under “Tools”, we have the research infrastructure where CFI and partners put in the major capital. Under the operating costs I've put a question mark; it's not clear who's paying for them. CFI has received some money to pay for some operations but not for everything going back to the beginning of their program, so that's very much a question mark.

That's the diagram, and I hope you find that useful. In those areas where there are industrial partners working with NSERC, the industrial partners share the student costs and research staff and operating costs.

Now, let me make the three points I wanted to make on the first page.

The first one is that in this last competition held in February, a competition with about 3,000 applications, 761 were from new applicants. These were professors appointed at Canadian universities who have met the criteria for appointments and who were new applicants, first-time applicants to NSERC. There was no budget; we had no budget increase to accommodate these people. We have decided to fund 567 of them at 39% of the funding requested, so the fraction of applicants funded is large. However, the percentage of the funding requested that was actually provided is small. That is, we give many more people much less than they asked for, as opposed to what we do on the industrial side, which I'll mention very briefly.

We've had to do this out of our cashflow since we can't run a deficit. We'll have to suspend competitions in other programs quite soon to provide that cashflow. This was a conscious decision at the NSERC council; because the research grants to professors are the very foundation of the pyramid everything is built on, that was our priority. We will not cut programs, but we will suspend competitions in order to make up for that overspending in one of our programs.

The second point is the one about CFI, which I've already made.

The third point concerns the indirect costs of research. At an earlier appearance before this committee I reminded committee members that a number of us from the senior management of NSERC visited eleven universities in Atlantic Canada and five in the prairies to find out what their problems were in capacity building. Our conclusion was that most of them are in that right-hand column of the diagram. They simply, for whatever reason, don't have those facilities and the capacity to provide those services. We believe that capacity building in the smaller universities needs to focus first and foremost on providing these services. That will allow the faculty members there to become more productive and to succeed better in the national competitions.

My last point is about research supported jointly with industry. When research is sponsored jointly with industry in our university-industry partnership programs, typically $1.60 to $1.70 of industrial money goes to university research for every $1.00 of ours. That's the ratio, and it's been increasing with time. In this case the success rate is small as maybe 30% of the applications are funded, but the ones that are funded are funded almost at the full level. You either do a project or you don't. In the research grants area, we give people enough money to get started, so that is a big difference.

Let me end there, Madam Chair, and I look forward to the questions at the end.

• 1045

The Chair: Thank you very much, Dr. Brzustowski.

We are now going to turn to Dr. Marc Renaud of the Social Sciences and Humanities Research Council of Canada.

[Translation]

Mr. Marc Renaud (President, Social Sciences and Humanities Research Council of Canada): Good morning, ladies and gentlemen. Thank you for inviting me.

[English]

If you don't mind, I'm going to speak French. The last time I came in front of this committee, somebody said to me, “Marc, if you don't speak French there, who the heck will?” I thought that was a good point, and therefore, if you don't mind, I'm going to make my opening remarks in French. I'll try to talk slowly.

[Translation]

Interpretation service is available. There is a document that could be distributed to you which contains a more elaborate version of what I am going to say. The document contains a brief two-page text and a series of figures and tables.

If I have understood correctly, the question put to us here this morning is whether or not...

I apologize, I forgot to introduce René Durocher.

[English]

René Durocher is the executive director of the chairs program. I wanted him to be here in case there are questions on the chairs. As you probably know,

[Translation]

the Canada Research Chair Program reports to three granting councils and to the Canada Foundation for Innovation. There is a steering committee made up of the three presidents, and the president of the CFI and a representative from Industry Canada. René Durocher is the person who runs the program on a day-to-day basis. Therefore, I wanted René to be here in case you have questions about this specific program.

To get back to my main point, the question you are asking, if I understand correctly, is how the humanities contribute to innovation and progress. That is also related to the issue of what the government of Canada could do to optimize this contribution.

In the paper that was distributed to you, there are four sections. The first explains what the SSHRC is. Essentially, the SSHRC is the main granting council for all the humanities in Canada. The SSHRC funds researchers in the humanities, social sciences, schools of administration and business, educational sciences and fine arts. The SSHRC truly covers all the social and human aspects of these various fields.

The humanities represent over half of the academic body in Canada. The humanities are represented in all Canadian universities, from the smallest to the largest, of course. The role of the SSHRC is therefore to do its best to support research in this field.

Now the question put to us is: how do the humanities contribute to innovation? The first question one must ask is what is innovation? Of course, innovation is the introduction of technological change, but we often tend to limit innovation to the introduction of a technological change. In fact, innovation is much broader than that. It is one's entire capacity to develop new ideas, new knowledge and to apply that knowledge. In that context, the question that arises is not only that of technological change, but also the adjustment of our organizations, our institutions and so forth, to technological change. It's also our own adjustment in our way of thinking, doing things, behaving, because of the changes that arise more generally in our environment.

If that is innovation, what is the contribution of the humanities? They contribute to very specific knowledge. There are all kinds of examples in the text. They contribute to all sorts of things to help us understand change, change our behaviour, our organizations, our institutions. Once again, it is difficult to answer that question without giving several examples. I don't have time to do so here today, but there are a number of them in the text which are extremely diverse because once again, the amount of grey matter invested in humanities research in Canada is phenomenal.

Now the second question is: what could we do to help the humanities develop better in Canada and make a greater contribution to our collective future? Last October, the Minister of Finance announced an additional subsidy of $100 million a year for the SSHRC, that is $20 million a year for five years, to help Canada gain greater benefit from our entry into the new economy. The announcement will be made officially by Minister Tobin on May 28, in Toronto. This money is a blessing for us, because it is an opportunity to ask our colleagues in universities to roll up their sleeves and figure out how Canada could participate better in the new economy. We are happy about that, but at the same time, one has to understand that this type of investment is extremely targeted. It essentially involves people in faculties of commerce, economists, and those in the field of education.

• 1050

More generally, the SSHRC is confronting huge difficulties. If you look at the various tables presented in this booklet, you will see that over the years, if you look at the balance here, as governments invest it this field there was an enormous amount of money earmarked for natural sciences and what was accomplished was quite extraordinary. Of course, the humanities will benefit. The fact that Canadian Institutes of Health Research will be open to humanities research will change things. The fact that the Canada Foundation for Innovation will finally invest in humanities will also lead to some progress. But the fact remains that a profound imbalance has occurred, which means that today, this year, $1.5 billion is being spent on natural sciences and only $200 million for humanities and social sciences.

Clearly, the problem has to do with the fact that the people balance is very different, with social sciences and humanities being more predominant in our academic institutions.

I will skip over all the implications. Naturally, there are implications for the small and medium-sized universities, but it causes us gigantic problems at the SSHRC.

I will give you just one example. At the bottom of page 6 of the document, you will see a pie chart. This year, there was a 20% increase in applications for SSHRC standard research grants. Sixty per cent of these 20% additional applications were from people who are five years from completing their doctorate, who therefore are very young. In order to keep up a reasonable success rate—

You don't have it? It's pie chart like this one. We will look at the English version: Standard Research Grants 2001-2002, Outcome of Competition.

This diagram shows that, despite suspending the CURA, the Community-University Research Alliances, and despite limiting our investments in all kinds of other programs, we still find ourselves with a real success rate of 36% this year.

What is significant, moreover, is that when the peer committees do their assessments, they recommend more than 36% of them to us. In fact, they recommend—and you can see this at the bottom of the diagram—32% of the other project applications, for which we do not have funding resources.

On the next diagram, we have a comparison of the success rates for the SSHRC and the NSERC. This is not a criticism of the NSERC; on the contrary, the NSERC is doing what needs to be done. The NSERC, with the exception that Tom just mentioned, supports a much greater number of projects, proportionally speaking. For example, last year, we provided grants to 46% of returning applicants, as opposed to 76% at the NSERC.

This has significant implications. If the SSHRC were able to provide funds to all those who were recommended to us, the result would be what you see in the table entitled: Increase in SSHRC Standard Research Grants by Region with Funding of 4A's. “Four A's” is our way of saying “recommended but not funded.” The diagram shows that, if the SSHRC funded all the small and medium-sized universities that were recommended, their relative share would be far greater. For example, the increase in research grants would be 139% in the Prairies region, 136% in the Atlantic provinces and only 56% in British Columbia.

This means that the peer committees are doing what we expect them to do, namely, they are putting on top of the pile, in the first third, the people who have an extraordinary curriculum vitae and who, in many cases, are working in institutions where there are huge numbers of graduate students and collaborators. However, there are small institutions—and I recently visited the Atlantic provinces for 15 days—where some phenomenal things are taking place. If only we could give them more support! What happens is that projects submitted by the small and medium-sized institutions tend to be put in the second third. The peer committees feel that they are very good projects, but they are less certain that they will manage to succeed.

I am telling you all this to make it clear that, if we want to ensure that the social sciences and humanities in Canada really make a greater contribution to innovation than in the past, we have to do for the social sciences and humanities sector what we are doing this year for the new economy, namely, invest more money in it. That is all I have to say.

[English]

The Chair: Thank you very much, Dr. Renaud.

We're now going to turn to Dr. Allan Bernstein of the Canadian Institutes of Health Research.

• 1055

Dr. Allan Bernstein (President, Canadian Institutes of Health Research): Thank you very much, Madam Chair.

I wasn't planning on talking that much about CIHR itself, because I know your major interest is innovation and the role of the federal government in that. Let me just begin, though, with two or three words of background.

Some of you may recall that CIHR was created by Parliament almost exactly a year ago. Minister Rock launched CIHR last June 7, so our first birthday is a few weeks away.

CIHR is a new way of defining, organizing, funding, and catalyzing health research. It has a very broad mandate that spans everything from very basic, fundamental laboratory research, right up to social sciences and humanities as they pertain to health—population health, health-services research. Our programs and structures now reflect that very broad mandate.

We have four, I would say, broad pools of funding.

One is investigator-initiated research—an individual from across the country can apply for a grant.

The second is strategic initiatives. Our institute directors are 13 scientists from across Canada who represent the 13 institutes. Those institutes include institutes like the Institute of Aboriginal Peoples' Health and institutes for cancer research, genetics, etc., which are busily now developing strategic initiatives. I'll come back to that.

The third is major capacity building. We fund, as my colleague indicated for NSERC, students and post-docs, or trainees in general, with grants, by direct competition.

In addition, we've just announced a new initiative, a block training-grant initiative, an initiative to train health researchers for the 21st century in areas where Canada needs capacity building. That will be a $4 million investment on our part, and we're hoping to secure various partners from the private sector, the provinces, and the health charities to at least double that amount. So in total we support about 5,000 trainees across the country through these various programs.

The fourth area is in the area of technology transfer and innovation.

I'll be happy at another time to talk more about CIHR. I will say our success rates are also very low. In fact, they're probably the lowest of the three federal agencies represented here this morning.

This has been called the “century of health research”, the “bio-century”, the “century of genomics”—you name it. I think it's a reflection of the great excitement that has been generated by the sequencing of the human genome. We now are in a position, of course, to understand the molecular basis of human biology, health, and disease. The implications and ramifications of that new information are going to be all-pervasive. They're going to pervade not just research in universities and hospitals but also the health care system and industry in terms of the explosive growth of the biotech sector in Canada and around the world.

I think Canada has a unique opportunity, given the importance of R and D in general, and of innovation and the health care system, to really build on that solid foundation for this new century we're in.

To me, a couple of points are self-evident. One is that for this new economy, this high-tech sector, which includes both the IT sector and the biotech sector, several things are key. One is the centrality of ideas and innovation. Innovation and the new economy are based on knowledge, and those are the true engines now of economic growth. Within that, there is the centrality of people, of human capital, of highly qualified individuals to create that new knowledge that is the pipeline of discovery.

I think there is the need on the part of the federal government to match words with action. I must say if I were giving this talk five or ten years ago, one would have to say there's a long way to go in terms of where the federal government is in the support of R and D and the innovation agenda. I think over the last five years in particular, if you think about the new programs emanating from Ottawa to support R and D, it's really quite remarkable. It's really been a sea change in the levels of support for research in this country.

Are we where we need to be in this new century? No, but I think the trend lines are very clearly in the right direction.

• 1100

I think all governments in this area have two interests. One is to harness the power and the pace of scientific advance to achieve economic success, coupled with the need to educate the population so that all Canadians are able to benefit from this new economy and support it.

I think there are clear reasons to worry... that the public needs to be brought along. If you think about issues of confidentiality around genomics and genetics, for example, we need to have an ongoing dialogue with the Canadian public so they understand the issues and the potential benefits and downsides of all this new science. Of course, the rest of the world is not standing still either.

I have been invited by the Australian government to visit Australia in two weeks to talk about the CIHR experiment. I will be visiting six cities in Australia to do that.

This, Madam Chair, is Australia's response to the innovation challenge. It's called Backing Australia's Ability: An Innovation Action Plan for the Future. This is a very impressive set of documents about what Australia is doing in this new century. It's my only copy, but I'd be happy to get more. It encompasses the kind of science that is represented in front of you this morning.

Of course, our nearest neighbour is the United States. They're also the closest not just geographically but culturally, so it's a huge sucking noise, a challenge we face continuously in this country. They are not sitting still either.

I'll just quote from a speech that Dr. Charles Vest, president of the Massachusetts Institute of Technology, gave last week. Looking at the United States, the huge amounts of money the federal government puts into R and D, science, and technology in that country, Dr. Vest said the following:

The engine [of innovation] can only run if governments supply the fuel of support for fundamental research... as a nation

—that being the United States—

we are not doing what we must do to ensure our future strength in innovation.

We need to persuade federal leaders that broad-based, fundamental research is an investment, not a cost. That innovation is not something that will just “take care of itself”.

Those are interesting quotes coming from the United States, where they invest, certainly in the health research area, six times more per capita than Canada does. So it's a very interesting perspective.

In the handouts I provided, on page 14—I'm not going to go through these—I've listed what I think are a couple of the key factors that will contribute to innovation in this country.

The first of course is that we need outstanding people. It's under the heading “Factors driving innovation”. We need critical mass in clusters. I think this is all about critical mass. We need infrastructure—I think that's well taken care of now by the CFI, although we can talk about that. We desperately need internationally competitive levels of operating support for our researchers. In health, we're about halfway there. We're not close to being internationally competitive, in my judgment.

If I were to be critical of my own country, I would say we need to be more nimble. Science is moving very quickly, particularly in the health area, in the biotech area. As Canadians, we spend a little too much time talking about what we should be doing and not quite enough time doing. We need to be more nimble at all levels—federal institutions, our host institutions—in terms of jumping on new areas. We need leading-edge technology transfer. We need knowledgeable technology transfer.

If you turn to the next page, or maybe the page before, you'll see a pipeline diagram somewhere.

A key part of the whole innovation agenda is to have a venture capital community that understands the biotech area. Unlike the high-tech area, biotech is still very much based on fundamental research, the intricacies of what's going on in the lab and increasingly at the population level. The venture capital community in this country has come a long way to becoming knowledgeable about the biotech area—they still have a long way to go. So part of CIHR programs, looking forward, will be to develop programs for the venture capital community to help them get up to speed about what's going on.

• 1105

The next-to-last one is our own vision for innovation. It lists there a number of programs that we are embarked on, starting this year, to stimulate innovation in the biotech and health research areas. To me, this is a pipeline of discovery and there are various rate-limiting steps or blocks in that process. Our job is to help catalyze at each of those rate-limiting steps.

Thank you.

The Chair: Thank you very much.

We're now going to turn to questions, beginning with Mr. Rajotte.

Mr. James Rajotte: Thank you, Madam Chair.

Thank you very much for your presentations. I thought they were excellent.

I'll begin with Dr. Brzustowski—and I'm sorry if I mispronounce your name.

Dr. Thomas Brzustowski: That's very good, thank you.

Mr. James Rajotte: I like your talk about the complexity and fragmentation of the way we provide funding for research and development, because that's what striking me as I'm looking at the ways in which the federal government provides it. In fact, when I was speaking with someone from another granting council, it was his view that a lot of the funding provided through the CFI should actually be provided through NSERC. He wasn't from NSERC, but this was his view. Even when you look at the Canada Research Chairs Program providing funding to professors, and NSERC doing it as well, I'm just wondering whether there's some overlap there.

I don't know whether it's a fair question, but could NSERC do what the CFI and Canada Research Chairs are doing, or is it necessary to have the two separate programs besides NSERC?

Dr. Thomas Brzustowski: Let me deal with Canada Chairs first. NSERC is involved, of course, with Canada Chairs. I'm on the steering committee, as are my colleague presidents. I think it is a convenience actually to have the program administered the way it is. It's unique; it's focused; it's limited; there's a box around it. But there's a consequence. The holders of the Canada Chairs will be coming to NSERC for operating funds, and this is one of the pressures on our budget that we've been forecasting ever since the chairs were announced. Then some of the people in that left-hand column would be appearing at our door asking for research money.

Now, by the process of selection, they will be among the best people in the competition. The pressure they will exert will be, on the average, greater than the average applicant we have. These are the top 6% or so.

In CFI, I think, in terms of the fiscal arrangements within the government, the notion of creating a foundation to make one-time investments in major infrastructure is an excellent idea—one of spending money when it's available, rather than trying to make a commitment to projects, which are sometimes uncertain in their schedule and their costs. But the cost of operating that infrastructure is something that we have been bringing to the attention of the finance committee and this and other committees, as well as to our colleagues in the public service, ministers, and so on for some years now. It does take money to run these things. While we now know that CFI has received some money for operating some of the infrastructure, it doesn't go back to the beginning of the program. So there are facilities that have been installed already or are being built, for which we expect to have people at our door asking for money, unless the government changes the mandate of CFI.

My view of NSERC is not an empire-building view. I recognize that we're middlemen, providing the money does go to the people who need it to do what is the right thing to do. Whether it comes through us or goes through CFI is immaterial. But the money should be where the pressure will be.

Mr. James Rajotte: So it doesn't matter, as long the government provides the cost of operating. Whether it's CFI or NSERC is—

Dr. Thomas Brzustowski: With regard to the cost of operating those facilities that CFI has paid for, I think it makes sense for the CFI to be the conduit for that. They're already familiar with the projects. We support tools, small instruments, equipment, and all those other things, and that flow will continue. The pressure for operating funds from the holders of Canada Research Chairs will come to us only.

Mr. James Rajotte: And for Dr. Renaud, I just want to touch on the social sciences. You pointed out the disparity between the funding for the natural sciences and the funding for the social sciences. I come from a social science background, but I tend to favour that disparity, because—just playing the devil's advocate here—funding the social sciences, from a government point of view, especially with the government focus on the commercialization of knowledge and focus on innovation, funding the social sciences almost seems to corrupt the social science research. That's where all the focus is. It's less on stimulating independent thought, which really cannot be measured in economic terms.

• 1110

I'd just like you to respond to that.

Dr. Marc Renaud: Of course the social sciences and humanities people are not involved as much in commercializing products as are our colleagues in natural sciences. That's obvious. That's a discussion we've had ever since I've been in Ottawa for the last three and a half years, actually.

Does that mean that social-science-type knowledge is useless? Absolutely not. If you look at all the research that can help policy formulation, there is a wide gamut of possibilities there. Just look at television. Who do you see on television explaining, debating the society in which we live? It's people from the humanities and social sciences.

There is some commercialization in some specific sectors. This is an area with incredible potential. I come from Quebec originally, and I must admit I was stunned when I saw how English Canada treated humanities and social sciences. In Quebec, the funding is much bigger, because the Quebec government has put much more money into it. The consequences are that there's probably more expertise on several topics. There's more debate. There's more animation of civil society around the issues that preoccupy us. So I think it's unfair to put everything on the commercialization side.

We're going through mind-boggling changes right now, and this new economy project we're going to launch is going to show this in spades. But the whole issue is, how do we adjust to all of this? How do we cope with that change? And it's the social sciences and humanities kinds of knowledge that are helpful there.

Mr. James Rajotte: I would certainly agree with that and I think it's very helpful. But my concern is that the government is obviously very focused on ensuring that taxpayer dollars are well spent, so they tend to focus on the benefits spun off from research. My view is that in the social sciences it's much harder to measure. From talking to people who do research in the social science field, what they say is that to get funding from social sciences they have to do something that's almost what they would term as faddish rather than research. That's something that I hear from researchers all over.

Dr. Marc Renaud: It's not true. You're welcome to look at our peer review system functions. This is extremely serious. I don't think peer review is perfect, but it's extremely serious debate about the quality of hypothesis of methodologies. We're using a lot of Americans as external reviewers. They are extremely impressed by the quality of our peer review system.

So I think it's unfair to say it's faddish. There are some fads, of course. We're talking about human issues, so inevitably there's some fashion there. But if you look at the core of what we fund, I wouldn't say that's the case.

You're asking about benefits. There are all kinds of benefits. Why is it that year in, year out, 65% of undergraduate students are in humanities and social sciences, and 55% of our kids go to graduate school in humanities and social sciences? Research is what feeds the quality of the teaching to these people as well.

Mr. James Rajotte: Thank you.

For Dr. Bernstein, one of the things that concerns us is determining where to place our research dollars. In health research often it takes 30 years or 40 years of large-scale investment to really produce a result. I was just wondering if you could help advise us in terms of how we do it at the beginning to ensure that we are making the right types of investments.

Dr. Allan Bernstein: You've raised a very good point. Research, certainly in the areas that I know best, are long-term investments. So I think the federal government would be mistaken to expect, in the suite of investments, all of them to have a quick return.

If you think about the genomics revolution, which is permeating all of what CIHR is doing, all of health research, that really started in the 1950s with the discovery that DNA was a double helix and it was the genetic material.

Nobody in those days anticipated any commercial application of that. Indeed, when recombinant DNA technology—gene-cloning technology—started in the 1970s, again I don't think anybody anticipated the payback.

• 1115

So the truth about the federal government is that you have to put the right programs and people in place. You have to review it every x number of years, where x is about five. You have to fund it at internationally competitive levels, and you have to expect a payback.

I think it's a safe thing to say that, especially now, good research, outstanding international level research, can almost always lead to a spinoff in the marketplace. I wouldn't have said that 10 or 15 years ago, but I think that's the lesson we've learned over the last few years.

So my advice would be invest for the long term, invest in excellence, and lubricate the technology transfer part of the piece, encourage it to happen. That's the best thing you could do. Expect it to happen.

The Chair: Thank you very much, Mr. Rajotte.

Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): Thank you, Madam.

Dr. Bernstein, you started to have some discussion on venture capital funding and the fact that the venture capitalists... I'm not knowledgeable, and I'm not quite sure what you were getting at, so I'd like you to go a little bit further on venture capital funding, on the difficulties in your area and what you are doing about it.

Dr. Allan Bernstein: Let me say, first of all, it's a lot better than it was.

About five years ago I was invited down to Dallas to talk to some venture capitalists about setting up a biotech company in gene therapy, an area of my own interest. I was so impressed. They knew all the scientists in the States, who was doing what. They knew the players. So they were making knowledgeable, but risky investments—because these are risky investments.

If you don't know the players, if you don't know the scientists who are involved, you get even more conservative.

At that time in Canada, there were one or two venture capital groups that were up to speed on who was doing what in the country. That has improved a lot, but we still have a long way to go.

In today's Ottawa Citizen there's a story entitled “Virus On Trial”, about John Bell, a scientist here in Ottawa at the Ottawa Regional Cancer Centre. There's a good news and bad news story here. John has been funded by us, in a partnership with the National Cancer Institute of Canada, to develop a virus that will specifically kill cancer cells. He couldn't interest a venture capital group in this country to invest in his research three years ago. So he's working with a company in Bethesda, Maryland, to develop this virus that's going to clinical trials here in Ottawa and the United States later this summer.

So the good news is great science, world-class science, potential for therapy of obviously a serious disease. But the venture capital community in this country, in their judgment, turned it down.

I don't mean to be critical. These are judgment decisions, and I wasn't privy to all the aspects of it, and so on.

To answer the last part of your question, our role at CIHR then is to be a dating service, if you will, to bring the research community together with the venture capital community so that they get to know each other, understand the science, understand the players, and also to bring the venture capital community up to speed in a very fast-moving area of science. It's very hard to keep up even if you're in the field, never mind if you're next door to it.

So we have met with the head of the Canadian Medical Discoveries Fund, Dr. Cal Stiller. We fund with NSERC a program in the prairies, called WestLink, to train people in the venture capital area. We'll be developing more programs like that to get people in the venture capital area who know the Canadian research community, who know Canadian science.

Mr. Walt Lastewka: I asked the question because, having done some studies with small business and so forth on access to capital, the conclusion that has come through very clearly is the preparedness of small business, the preparedness of researchers, to basically do a better job in explaining what they're trying to do.

We have venture capital funds in Atlantic Canada that have been sitting there now for probably five or six years, in the neighbourhood of $30 million. The last part of my last question was that I'm not sure we're doing a good enough job explaining to Canadian venture capital funds, versus the work being done in the U.S., to keep venture capital funds not only informed but in advance so that they're part of the whole system and when the time comes to request venture capital, they're already knowledgeable. We seem to want to walk in on day one rather than after doing the preparation.

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Dr. Allan Bernstein: I couldn't agree more. That's why I used the analogy of a dating game. The two communities have to get closer together and understand each other, understand the science.

Our American counterparts, American researchers, are really not more articulate in explaining their science to the venture capital community than Canadians are, but the American venture capital community is so much up to speed on the science that they know where to sniff around, they know where to look, and we need to encourage that here in Canada.

It has gotten a lot better. There are several organizations that are superb at it. We need to disseminate that and build on best practices across Canada to catalyze that further.

Mr. Walt Lastewka: Is it not then the CIHR's responsibility to make the Canadian investors, the Canadian venture capital funds, more knowledgeable, and make sure they know where the hot buttons are across the country? Isn't that part of your responsibility?

Dr. Allan Bernstein: Yes, it is. In fact, if you look at the bottom of page 5 of the handouts, on the biotech commercialization pipeline, you'll see a box that says “CIHR” with an arrow going towards tech transfer and industrialization.

The activity that's hidden under there is, in part, exactly that, to bring those communities closer together. One of the things we are going to be doing this year is developing a research portal for researchers, for venture capitalists, for Canadians interested in health research, or for kids in grade 6 who have a science project. The portal for the venture capital community will be a common meeting ground for people from that community and from Canadian researchers and tech transfer offices at universities and hospitals who have something to market, to come together as an initial contact, to facilitate them continuing that conversation.

Mr. Walt Lastewka: I'd be very interested to continue on here on what you're trying to do to educate the investors out there in advance.

Dr. Allan Bernstein: As I said, I'm very aware of this, because I went down to Dallas, and they knew everybody. When I came back to Canada, I was asked to speak in front of a major venture capital fund in Canada—I won't name the organization—and it was Genetics 101. They were really starting 20 years behind their counterparts in the States. That was five years ago.

The Chair: This is your last question, Mr. Lastewka.

Mr. Walt Lastewka: I agree with you, and I put the responsibility on your organization to make them knowledgeable.

Dr. Allan Bernstein: I accept that responsibility.

Mr. Walt Lastewka: If we go back 10 or 12 years, we were hearing exactly the same thing in the IT area. In fact, we had a conference over at the congress hall on that.

Thank you, Madam Chair.

The Chair: Thank you very much, Mr. Lastewka.

[Translation]

Mr. Brien, you have the floor.

Mr. Pierre Brien: Thank you, Madam Chair.

I think that the needs are becoming more and more palpable. I think that everyone agrees that you need additional funds.

My question is directed to both Mr. Renaud and Mr. Brzustowski. How much do you need, in the final analysis? You are telling us that you need more money. What are your financial requirements, with regard to both recurring needs and specific projects that are in keeping with your efforts?

Mr. Thomas Brzustowski: My answer will be simple. On our Web site, you will find our business case, which explains that our budget needs to be doubled over four years. The requirements and the reasons are very clear: we want a continuous budget because our needs are continuous.

Major projects are something special, they fall outside our mandate, outside our responsibilities. I believe that it was a very good idea to create the Canadian Fund for Innovation to provide funding for such projects.

Our needs call for the doubling of our budget over four years.

Mr. Pierre Brien: I see. Thank you.

Mr. Marc Renaud: Our needs are similar. They are outlined on the acetate sheet entitled “What Canada Needs to Do”.

First of all, we must absolutely bring SSHRC student support to parity with that of NSERC. At the current time, we provide funding for 5% of graduate students, while NSERC supports 10%. The amount of our grant is $2,000 lower than NSERC's.

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We do not have a master's level support program, which is disastrous for the small universities, in particular in the Atlantic provinces. We have no undergraduate support program that can get students interested in the social sciences. We would need $45 million just to bring us up to the current NSERC's level. The programs are ready to go. We would need $20 million just to bring in a master's level support program at this level. That is our first request.

Secondly, we need to bring our support program for researchers up to the same level as the NSERC's. It is important to understand that the medical sciences, the natural sciences and engineering are ten years ahead of us as far as researcher behaviour is concerned. At NSERC, 80% of the researchers apply every year. In our case, the figure was barely 15% four years ago, and now it is 25%. We find that more and more researchers are applying in competitions. The universities tell them that, if they do not obtain SSHRC grants, they will not have tenure. With this dramatic rise in applications, if we wish to maintain a decent success rate, we will need an additional $45 to $50 million.

Over the years, we have introduced new programs, new ways of doing research. One of these is the Community-University Research Alliances Program. In the first year we received 165 applications but had money to fund only eight of them. Last year, we received 135 applications; we had money to fund 15. Among these 135 applications, there were 35 that had been signed by tribal chiefs, who had specific problems to be settled. We must therefore work on supporting these new ways of doing research. In this area too, we need $50 million.

Therefore, the SSHRC would need to have its budget doubled in order to do its job properly. This represents a total of $150 million in additional funding in the next few years.

[English]

The Chair: Dr. Bernstein, did you wish to reply?

Dr. Allan Bernstein: You didn't ask me—

Voices: Oh, oh!

[Translation]

...but we have the same problem. The research opportunities in the health sector, in this century, are incredible.

[English]

The CFI capacity building and the chairs programs have also impacted, of course, on health. A third of the chairs and about 40% of the funding from CFI go to the health research area. So we also have a huge need, although I didn't make the case here today. I think that's another presentation. You're more interested today in our role in the innovation agenda.

I would say that for Canada to be internationally competitive in what's being called the “bio-century”, the century of health research, the proper role of the federal government is to provide internationally competitive levels of funding for health research and an expectation of technology transfer into the marketplace through that funding.

[Translation]

Mr. Pierre Brien: Please excuse my oversight.

I have another question that can be addressed to all of you.

I know that a science policy was adopted just recently in Quebec. How do you take it into account in your action plan? Have you had meetings? Did you participate in defining it? There is an established policy. How do you take into account a province's policy? I do not know of other cases—there may be others—but I know that Quebec has a science policy. How do you work with a province that has a science policy?

Mr. Marc Renaud: Naturally, I worked a great deal with Quebec, with Minister Rochon, with the Quebec granting agencies, mainly to discuss in a small way the issue of how to structure research in Quebec.

The major issue in Quebec... Twenty years ago, Quebec adopted a science policy that forced all the universities to work together, to create research centres. It was remarkably effective, leading to a huge increase in the success rate of Quebec researchers applying to the SSHRC, the former Medical Research Council and the NSERC. This rate subsequently decreased. The government of Quebec therefore asked itself how it could make Quebec research competitive again. On of the key points of the report and of the resulting measures was the recognition that innovation is not limited to the technological sphere but also takes place in social spheres.

You are aware that Quebec intends to create a council for social and cultural research and that it will triple funding in this area. Obviously, this is a wonderful thing for Quebec researchers in the social sciences and humanities. The problem is what is happening in English Canada. This type of research is important everywhere.

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So, we cooperate very closely with Quebec in these matters.

[English]

The Chair: Mr. Brzustowski.

[Translation]

Mr. Thomas Brzustowski: In natural sciences and engineering, we work very effectively with the former FCAR. We learned a great deal from these people, who had good ideas. We have many members from Quebec on the adjudication and policy committees, and they are very familiar with Quebec's science policy.

As far as I know, there is only one other province with a science policy, and that is Alberta. Alberta's policy is completely different, but we work with it also, with the new agency that is called the Alberta Heritage Foundation for Science and Engineering Research. Our objective is to promote mutual assistance between the two bodies.

[English]

The Chair: Dr. Bernstein.

Dr. Allan Bernstein: There are very close connections and ties between the Instituts de recherche en santé du Canada and the Fonds de recherche en santé du Québec. In fact, three of our thirteen scientific directors at CIHR are from Quebec. The FRSQ has provided each of them with funds to allow them to continue to do their research while they are acting as scientific directors at the Instituts de recherche en santé.

Michel Bureau, the president of FRSQ, is chairing our working group on partnerships, including partnerships avec les provinces. So we have very good ties right across Canada. I would say that the ties are extremely close. Indeed, many of the provinces are now realigning how they're funding health research to reflect our broadened mandate and the way we are funding health research, including Quebec. B.C. is the latest one. The new foundation announced in British Columbia, the Michael Smith Foundation for Health Research, named after the late Nobel Laureate Michael Smith, is based on partnership with CIHR.

So I've been very pleased at how well the provinces have been working very productively with us to, in a complementary and synergistic way, fund health research.

The Chair: Thank you.

[Translation]

Thank you, Mr. Brien.

Ms. Jennings.

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Thank you, Madam Chair.

Messrs. Renaud, Brzustowski and Bernstein, thank you for your presentations.

My questions will be for Mr. Renaud, because the social sciences and humanities are an area that is of interest to me personally.

I was struck by some of your tables, the one comparing the success rate among experienced researchers and young researchers, the one showing success rates among researchers in natural sciences and engineering, and the one showing the proportion of funds allocated by university size. Are we to assume that, in the social sciences and humanities, for example in medicine, in the health research field, a faculty of medicine is a must and that consequently, only large universities receive funds?

Mr. Marc Renaud: A revolution is taking place within the Canadian Institutes of Health Research: there is an attempt to move health research out of faculties of medicine. We should expect that, in 10 years, there will be more and more health researchers throughout the Canadian university system.

The table shows that, to date, they invest barely 1% of their funds in the third of institutions representing the smallest universities, while the SSHRC invests 11% of its funds in this group.

Canada's university network is made up of 65 universities of all sizes. Collectively, we must decide whether we want to keep this system or pour all of the money into the 15 largest universities.

I just spent two weeks in the Atlantic provinces because I wanted to see their problem from the inside. I was stunned by the quality I saw. Obviously, there are two faculties of medicine in the Atlantic provinces, but there are 12 or 13 other institutions. In the field of fine arts, it is one of the regions in the world where advanced research is ongoing. It is incredible to see what small elite institutions like St. Francis Xavier, Acadia and Mount Allison are doing. Moreover, I was forced to acknowledge that they are right in saying that the SSHRC does not support them well. That is why when I came back, I said that we would examine the situation in detail, because I wanted to understand why this situation arose. It was only then that I realized that the committees rank the excellent researchers from these universities who apply for SSHRC grants very highly, but because the institutions do not have students at the Ph.D. level and they do not live in an environment where there are a lot of researchers, the committees often rank them under the level required to obtain funding. So it goes without saying that if we could increase the percentage of funding available, the excellent researchers in these universities would be happy again.

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Moreover, the SSHRC has an Aid to Small Universities Program which does not exist at the other granting councils or which is not the same. It is incredible to see the results it has produced over time.

There are about 2,000 students at the University of Prince Edward Island. They set up a study centre on island life, which is recognized as one the best centres in the world in its field. It is important to find money to develop the research abilities of these institutions.

The problem also exists in medium-sized universities. The University of Windsor, the University of Saskatchewan, York University, and the University of Quebec at Montreal are universities that do not have faculties of medicine, and because of the arbitrary rule stating that a maximum of 20% of chairs can come from social sciences, these universities receive few chairs compared to the University of Montreal or McGill or the University of Toronto.

So in my opinion, we are facing a situation where there is too much of an imbalance. To answer the question the gentleman asked me earlier, I will say that it is clear that we do not need as much money in social sciences as in natural sciences for equipment, etc. But having reached this much of an imbalance, Canada is shooting itself in the foot.

In addition, as we all know, universities have a problem with respect to indirect costs. As I always say, indirect costs are fundamental. If there is not more direct funding for research in social sciences, where the situation is drastic, and in my colleagues' field, in my opinion, Canada will destroy its university network.

Ms. Marlene Jennings: Thank you very much.

In your answer to my first question, you started answering another question that I am going to ask you now. It deals with the table entitled Increase in SSHRC Standard Research Grants—New and Established Researchers—with Funding of 4A's. If I understand correctly, 4A's are requests that have been approved, but that do not receive grants because of a lack of funding. When I look at the results and the conclusions that you draw, I can see that if your budget were doubled, that would enable you to give grants to these 4A's. I have never been very good with statistics, but I am under the impression that in some regions there are more requests that are approved, but that do not receive grants. So if your budget were doubled, the approval rate for these projects in the Atlantic region would increase.

Mr. Marc Renaud: Yes. Under the peer review system, we ask people, in good faith, to tell us about the relative quality of the projects and the researcher's ability to deliver a project in light of his or her CV.

It cannot be any other way. When they see someone who has 10 doctoral students, who live in an environment where there are a host of colleagues with whom they can debate, the committee will say that the person in question, all things being equal, has a better chance to succeed than a person who teaches six courses a year, who corrects all of his or her papers, who does not have an assistant, who works in the summer and who, according to his or her CV, monitors undergraduate students. However, the committees tell us honestly that that research is valid, that the research program is excellent and that the researchers are good, but that the quality is not quite as good as the others. So they end up in the second third, in other words those that are recommended but not funded. That is where we can make a difference quickly. We push a button and if there is money for those areas we will reshape the future.

Ms. Marlene Jennings: There might well be some changes with respect to the percentage of funds earmarked with respect to the size of the universities. The SSHRC already has a better record as regards allocating funding based on the size of the universities. That means that you are going to improve the situation even more for small and medium-sized universities.

Mr. Marc Renaud: I have the chart. Unfortunately, we did not include it in the presentation. For small universities, if we could fund everything that was recommended, there would be an increase of 261%. For medium-sized universities, it would be 200% and for small ones, 171%. So the difference is huge.

Ms. Marlene Jennings: Can you give us a copy of that?

Mr. Marc Renaud: Absolutely.

Ms. Marlene Jennings: I have no further questions. Thank you very much.

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[English]

The Chair: Thank you, Madam Jennings.

Mr. Rajotte.

Mr. James Rajotte: To Dr. Bernstein, on page 10 there's mention of a partnership between CIHR and Rx&D. I'm wondering if you can just talk about what the partnership is for us.

Dr. Allan Bernstein: I'm happy to. It goes back to a point that was made about bringing in the private sector, in that case venture capital, but the private sector also includes the pharmaceutical industry in closer ties with health researchers. That partnership is an attempt to catalyze those sorts of partnerships, to make the name-brand international pharmaceutical industry more research-intensive in Canada, and to get them to invest in research in Canadian universities and hospitals.

We have built various partnerships. They range from co-funding clinical trials, research on new drugs, new treatments—if you look at the graph, you'll see that, typically, we would fund about 50¢ to $1 for every $4 or so that companies put in—to funding chairs in everything from women's health to clinical research, paid for by the pharmaceutical industry in the country. The largest part, actually, is to train young investigators in clinical research. That's a very important part of our mandate. We have a mandate to take stuff out of the labs into the real world, and part of the real world, not the only part, is the clinic. We need to do that in partnership. It's a very complicated process. The partners include hospitals, researchers, the pharmaceutical industry, and the biotechnology industry. All the peer review of these programs is mounted by us, and then we ask the company to pay for it. Within that partnership, they are funding that.

The pharmaceutical industry in other countries, particularly in Switzerland, the United States, and England, has been funding basic research to much higher levels than in Canada. One of the things we need to do is to help them identify the outstanding researchers in this country and to fund them the same way they fund them in the United States.

In the latest round—we just had a board meeting last week—I was very pleased to see there is some very good research being funding under this CIHR and Rx&D program. There's a proteomics initiative being funded, and other ones like that. So it's a showpiece program for us.

Mr. James Rajotte: When you have this partnership in a clinical trial and there is a discovery made, how do you deal with the intellectual property issues?

Dr. Allan Bernstein: That's a good point. We expect every hospital and university to have clear rules in place—not just guidelines, but rules—about, first, the right to publish any research that's being funded by public dollars. Second, if there's intellectual property generated with public funds, they are owned in proportion to our contribution to the project, according to whatever the host institution's policies are. In some universities and hospitals, the institution owns the IP, and in some the investigator owns it, but the institution gets the right to exploit it. We haven't gone into that territory, but we do expect our contribution to be reflected in ownership at the end of the day.

Mr. James Rajotte: Okay. Thank you.

The Chair: Thank you very much, Mr. Rajotte.

Ms. Torsney, please.

Ms. Paddy Torsney: Thank you. I have couple of questions for clarification, and you don't have to provide it now.

Dr. Renaud, with the “4A's” slide referred to earlier, it'd be interesting to see you break out the prairies and the various provinces, because Alberta cuts it in the prairies, but I think one of my colleagues who isn't here is more interested in Manitoba.

The Chair: Reg Alcock.

Ms. Paddy Torsney: And I wonder if you could explain what the percentage of student income from grants actually means.

Dr. Marc Renaud: The University of Toronto wanted to understand how their students were being supported. They had a lengthy survey process—it lasted a year actually. One of the striking conclusions—what's on that graph there—was that in the social sciences and humanities the proportion of funds going to students is very low, because the grants are so small. The average size of a grant is $17,000 a year. That's low. You asked us, “Where is your money coming from?” There is very little from grants, because grants are so small. That's the key difference.

• 1145

Ms. Paddy Torsney: So where is the rest of their money coming from?

Dr. Marc Renaud: I guess from their parents or their work.

Ms. Paddy Torsney: Are those undergraduate students or are those graduate students?

Dr. Marc Renaud: Graduate students.

Ms. Paddy Torsney: That's not a good picture.

The other question I had was actually for you, Dr. Bernstein. In your slide that talks about venture capital investments in Canada in 1999, because of the shading it's actually hard to tell what some of the numbers are. So perhaps you would want to give that to us afterwards. The sectors are there but not all the numbers are there.

Dr. Allan Bernstein: Sure.

Ms. Paddy Torsney: In your slides on the spinoff companies from the funding, given our earlier presentation about who should benefit from these, who is benefiting from the money that's generated from these?

Were you here for the earlier presentation?

Dr. Allan Bernstein: I only caught about the last five or ten minutes of that presentation.

There are various individuals and groups benefiting from that spinoff activity. In general, universities and hospitals—and I'm speaking from my own experience in my previous life—would take an ownership position in some of those companies. I know that's generally the case for universities and hospitals in Canada. And that can sometimes be quite considerable. Today 10% to 20% of BioChem Pharma is worth a lot of money.

Others who benefit would be the people who work for those companies. They are getting meaningful, usually well-paid jobs in the new economy, so they're a direct benefit.

The researchers we fund who are the principal investigators, the PIs, at the universities or hospitals benefit in several ways. One way is that many times they have consultancy arrangements with those companies and own some equity. Again, I know that most places have rules about what proportion of their income can be derived by that mechanism.

As a backdrop for all this, we are competing as a country in the international marketplace so we have to be competitive with rules elsewhere, in case that's going through your mind.

I think the third group that benefits is, of course, the Canadian taxpayer, because these companies are generating wealth and tax revenues, etc. and ultimately, hopefully, new treatments for disease.

Ms. Paddy Torsney: Those are all great beneficiaries.

It would be interesting to have your analysis of how it would affect your funding if we had such an act as the Bay Dole Act. You don't have to answer that right at this minute, but certainly you should see this presentation, hear the testimony and give us the benefit of your insight.

The other question I had for you is in terms of funding. I have to go and meet with somebody who is working with the Canadian Alliance of Brain Tumour Organizations, and particularly a group called b.r.a.i.n.child, which is a group of parents, families and friends. They suggest that there needs to be more funding and that one of the reasons there isn't as much funding as there should be is that there isn't the statistical information being gathered on brain tumours, for instance. They suggest that current stats exist only for malignant tumours. They're only recorded at the time of death so that a fraction of the brain tumours being reported presents the disease as less frequent. Therefore, it doesn't get the funding that it should, yet it's life-altering for all the families who have children or adults affected by it.

How do you make decisions, and are you confident that you have all the information to make decisions?

Second, in this particular case will you look at giving more funding to brain tumour issues?

Dr. Allan Bernstein: Let me talk about the particular case for a moment and then the general issue of priority setting, which is really what you're asking about.

I'm very familiar with brain tumours. I was on the board of the Gerry Spencer Brain Trust. He died of a brain tumour.

Cancer research is my own area of interest. So I'm very familiar with the situation in Canada around brain tumour research. We need to be funding more. The question is to get capacity in that area to get researchers interested.

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The other thing to remember is that particularly in cancer research a lot depends on how you label things. If I'm doing basic research on the genes that are involved in cancer, they're going to be involved in all cancers, so do I count that as brain tumours or breast cancer, or what have you? This research has wide-ranging implications.

In the example I gave of John Bell's work on these viruses that can kill cancer cells, no one would have classified Bell's work as brain tumour research, but actually I know that was one of the sites he was quite interested in as a target early on for his viruses. So a lot of this has to do with classification.

The general answer is that I think with the creation of CIHR and the institutes structure we actually now have a very good way to set priorities for the funding of health research. We did not have that before.

The old MRC, the Medical Research Council, which my colleague, Dr. René Simard, was the president of, received grants and we peer reviewed them. We will continue to do that, but in addition, the 13 institutes, through their advisory boards and in talking with the research community, will be setting research priorities. So we have very broad input through the advisory boards. Over 200 Canadians are on those advisory boards.

We have a very good dialogue with the National Cancer Institute of Canada, the funding arm of the Canadian Cancer Society. Our institute of cancer research and the National Cancer Institute of Canada, the NCIC, have agreed to do all strategic planning together with the Canadian Cancer Society, which is represented on our advisory board. There is very good input by the lay public, by the research community, by the private sector, and internationally in setting priorities. I'm giving cancer as an example, but it would be true across the board.

There will be areas that don't get funded. Like my colleagues, we don't have enough money to fund at the right level, or to fund at all, all the great research where there's a need for funding in this country. We just don't have the funds. Part of the priority setting is that we need to set priorities because we don't have adequate levels of funding.

Ms. Paddy Torsney: Let me tell you one thing.

The Chair: Last question.

Ms. Paddy Torsney: We are hoping that the CIHR will provide badly needed funds, but we must be able to access these people and that information regarding the proper number of incidents to access the funds administered by this group. The very stakeholders who you're supposed to be consulting with don't seem to have some of the ways to access you that they probably should.

I have heard from other organizations, especially in the cancer area, that they're not satisfied the Canadian Cancer Society represents them as well as it should, particularly for breast cancer. So be careful.

The Chair: Thank you.

[Translation]

Mr. Brien, do you have any questions?

Mr. Pierre Brien: Yes. I would not want Mr. Durocher to think that we had forgotten about him.

Mr. Renaud presented a scenario that would make it possible to improve the situation for small universities if we increase their funding. There is currently a lot of frustration with respect to the distribution of chairs in small universities. Are there currently any plans that would re-establish a bit more balance or do you have to wait for a political signal from government telling you that it is not satisfied with the distribution in small universities? Are you currently reviewing the situation to affirm your desire to be more present in small universities in order to give them a chance to play a leadership role, and not simply be a branch working in partnership with the other universities?

Mr. René Durocher (Executive Director, Canada Research Chairs Program, Social Sciences and Humanities Research Council of Canada): I am very happy you asked that question, Mr. Brien, because the Canada Research Chairs Program is quite exceptional precisely because of this concern, which at the beginning was to set aside percent of the research chairs for small universities. That was truly an excellent decision.

In fact, when you think about a small university with 4,000, 5,000 or 3,000 students, that receives 5 or 6 research chairs for $200,000 per year over a seven-year period or $100,000 for five years, it would need 3 million dollars in capital to establish such a chair. For a small university that receives 5 or 6 chairs, that can make a huge difference in its research ability and leadership in research. And there are some small universities that do so: The UNBC, the University of Northern British Columbia; the University of Acadia; Télé-Université. In Quebec, the University of Quebec network will have 60 to 70 chairs. That is nothing to scoff at. It is considerable.

• 1155

One of the problems is that 18 universities, one year later, have still not applied. They have three years to fill a chair. It is as if they are unaccustomed to that. I went to the Maritimes to meet with people to try and help them and explain the program. I am going to meet with people from the University of Quebec network in June.

We are looking for highly qualified researchers, exceptional researchers. When these people are in a university or in a department, there are 10, 12 or 15 people working with them. They become driving forces; they stimulate other professors, other researchers. I think we have already made some progress.

Now, we receive complaints. Some people say that there should be more. When you look at the proportion of chairs with respect to the population in each of these regions, you realize that they are quite similar. That is astonishing.

For example, we will take Ontario as an example. Everyone looks at Ontario because it is a large and wealthy province. Ontario makes up 30.9% of the Canadian population. Ontario has 30% of the chairs. Of course, there is an imbalance, but Nova Scotia, for example, with 3% of the population has 3.9% of the chairs. There are 77 chairs in Nova Scotia. That is not to be scoffed at. It will make the universities dynamic. There are provinces that are disadvantaged, like Saskatchewan and New Brunswick, but there is not just a problem with the chairs. We have some chairs left over; they have not all been distributed. We have decided that after the third year, we will look at how to distribute about 15 chairs.

There are new institutions coming on the scene. In British Columbia, some new university colleges have been set up that were not eligible before but will be now. We need some leeway. If we can do something to improve the situation for small universities, we will do so, but the standards must be the same for all universities. We cannot tell small universities that they are in the minor leagues and that they are entitled to minor researchers. The objective of the program is to find 2,000 highly qualified researchers, and that holds true for all universities. They are all capable of doing so.

Mr. Brzustowski and Mr. Renaud both went to the Maritimes and to the West and realized, as I did when I go there, that there are excellent researchers in these universities. I hope that at the end of the day, the situation will balance itself out.

The Chair: Thank you.

Mr. Renaud.

Mr. Marc Renaud: The program will be reviewed in a year and a half. In the memorandum of understanding with the government, it is clear that all the parameters of the program will be reassessed in light of our experience. That is important to point out. Obviously, we will seek input from everyone during the reassessment.

In my opinion, and I am not going to spend much time dwelling on this, one of the issues does not deal with small universities, because the 6% allocation truly gives them a competitive advantage. The real problem is for those universities without faculties of medicine. York, Concordia, Simon Fraser and Windsor are universities that lose out in the end, because of the disproportion in the number of chairs that go to natural sciences as compared to social sciences. For example, York University has about the same number of students as the University of Montreal, but half as many chairs. That will be put on the table in the reassessment.

The Chair: Thank you.

Mr. Bélanger.

Mr. Mauril Bélanger (Ottawa—Vanier, Lib.): Thank you, Madam Chair.

Does private sector involvement in university research have any influence over the way your councils distribute grants when applications are received? Does private sector involvement in a research program for which the university is attempting to obtain a grant or funding have any influence or not?

Mr. Marc Renaud: There are two programs where private sector or volunteer sector involvement is important. Often, in our case, it's less the private sector than the volunteer sector.

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The first program is the Community-University Research Alliances Program, the CURA, where people must present not only a research program, but also a partnership to ensure that clients, the people who are interested in using the knowledge, work with the developers. This is a very successful program. We had to suspend it because we did not have enough money. Under this program, there is very close co-operation between university researchers and people from the community, be it the private sector or the volunteer sector.

There is a second point. In new investments being made in the new economy, there is very explicit support from the private sector. We have held consultations with these people, and they want to be involved.

[English]

Dr. Thomas Brzustowski: I would make two points in answer to that. First, in our distribution of grants and the attribution of grants for other purposes, certainly all the programs involving industrial partners are included. But I can cite examples, and I will cite one in particular, where industrial involvement approached in a strategic way by a small university has made a huge difference for that university in the total amount of money it gets and in the reputation it has created.

[Translation]

I will cite the University of Quebec at Chicoutimi which, during an always difficult competition, won four of our industrial chairs, which are at a world-class level in their work.

Mr. Mauril Bélanger: Thank you.

[English]

Dr. Allan Bernstein: I'll give a general answer first. In a true partnership, both partners should influence each other. That's true dialogue. So I expect the private sector actually to influence to some extent the investigators we are funding at a university or a hospital.

Our interest, though, is to fund excellent science that has the potential to improve the health of Canadians. That's our mandate from Parliament.

[Translation]

Mr. Mauril Bélanger: Thank you.

When a university attempts to obtain a grant from one of your councils, is the involvement of a public institution like the National Research Council of Canada or Health Canada considered useful? Does the participation of the National Research Council of Canada in an application from a university help it obtain a grant from your councils?

[English]

Dr. Thomas Brzustowski: Can I perhaps answer that? Absolutely, and in fact, we attach so much value to it that the NRC and NSERC have a program in which we look specifically for good research that is of interest to a university, to one of the laboratories of the NRC, and to an industrial partner or two. There is money put aside for those. These are high-quality projects that are closer to moving the research out into potential application than the basic research. But they certainly exist. They're important, and we have a special program that we administer jointly with the NRC.

[Translation]

Mr. Marc Renaud: We have eighteen joint initiatives with government partners, ranging from forestry to intergovernmental affairs. People invest half of the funding and we invest the other. There is an aspect that we can understand better. The problem is that there are dozens and dozens at the door.

[English]

The Chair: Dr. Bernstein.

Dr. Allan Bernstein: The only thing I would add is that there are many projects where we want to make sure the information gained is available to other researchers and to the Canadian public, and the way to make sure of that is to have public funding.

For example, we are negotiating with a private partner and some university researchers to develop a database, several post-genomics databases. Our requirement is that if we are going to be a participant, it has to be available to all Canadian researchers at the same time as to the company. So it adds a great catalyst to what we are doing.

The Chair: Mr. Bélanger, this is your last question.

[Translation]

Mr. Mauril Bélanger: Before asking my question, I'm going to make a comment, as a gentle reprimand for Mr. Renaud.

Earlier on, you used the expression "Quebec and English Canada." I encourage you to realize that we must talk about French Canada and English Canada. I am a francophone member of Parliament from Ontario and I represent a riding that is 40% francophone. There's also New Brunswick, which is officially bilingual. Nowhere are we included in your "Quebec and English Canada."

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[English]

Why is it that... Well, I know why it is; it's because the government has so decreed. But do you agree that the NRC is excluded from CFI funding?

Dr. Thomas Brzustowski: Do I agree that it is? Well, yes, I agree that it is. Should it be? That's very hard for me to answer. My feeling is that given the size of our economy and the role that the NRC tries to fill, which is to connect research and the market in very many areas and to support a number of activities, like code-setting and standards, the NRC is about ten times smaller than it should be.

If one really increased the NRC significantly, it wouldn't matter to me where it got its money. Our programs that we do in partnership with the NRC have the effect of, in fact, extending NRC facilities to professors who might not otherwise have access.

Would I like to have seen the NRC be eligible to CFI? I think that might have been a good idea if there had been enough money for all of that, and it may turn out in hindsight that there is in the future. I just continue to say what I've said before, that the money should go where the pressure is to meet national needs, and we shouldn't suffer from that middle-aged disease called hardening of the categories.

The Chair: Dr. Bernstein.

Dr. Allan Bernstein: My colleague has said it very eloquently.

[Translation]

Mr. Mauril Bélanger: Mr. Renaud, do you agree?

Madam Chair, I would like that to be noted and for us to consider the possibility of making it a recommendation in our report: that the National Research Council not be excluded from grants from the Canada Foundation for Innovation. Thank you.

[English]

The Chair: Thank you, Mr. Bélanger. I'm sure the researcher has taken note of that, and we've all taken note of it.

Before we wrap up, I have a question. One of the things I hear from university professors who are applying for grants from the granting councils, from the CFI, is that they have what's called application fatigue, and there doesn't seem to be any dollars available. We talked a lot about these indirect costs to universities, but I didn't see anything in there about the application writing. Some of them put hours and weeks into these applications, and if they're not successful, nobody even sees that cost, other than the university itself.

Do you have any comments on that, Dr. Brzustowski?

Dr. Thomas Brzustowski: First and foremost, I'd like to agree with you. I'm on record as having said that compared with their counterparts in the United States and the other G7 countries—and I'm not sure about Russia—Canadian university researchers in science and engineering have far less time for research.

We went out to consult them and asked to what extent was peer review contributing to that load. The answer was that it is to some extent, but they find it valuable even as contributing to it. But their two biggest problems were low core funding of the university, which means heavy teaching loads and lack of support services, and writing too many applications to too many programs for too many small amounts of money.

We're able to do something about that last one. We've launched an initiative called “Alléger le fardeau”, or lightening the load—on the researchers specifically—through a combination of measures that at one end will include e-business and at another end might include consolidating programs and shortening application forms. We are consciously trying to make their life easier. We're doing that.

The Chair: Dr. Bernstein.

Dr. Allan Bernstein: I agree with what Tom has just said. I would add that we have started a process in the country involving three councils and the voluntary health sector and the provinces to do what seems like a very trivial thing but will hopefully lighten the load for our researchers, which is to develop one common form for applying to any agency in this country so the researchers don't have to spend hours figuring out how to apply to this new agency that has just been created, because it's a new form with different rules.

It seems trivial, but it's taking up a huge amount of time, and I can't stress enough, to echo and reinforce what Tom said, that our researchers are spending too much time learning how to write grants to new agencies and not enough time doing research.

The Chair: Dr. Marc Renaud.

Dr. Marc Renaud: I can only repeat what they said. The phenomenon is real. We're trying to make life easier for people. When there's a good research office in the university it makes life much simpler for the applicant, because they've got somebody to reread it and help rewrite it to make them competitive. That's why the indirect cost support the universities are asking for from this government makes a lot of sense. There's a lot of need just to help people do this.

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What I'm worried about are not so much the old researchers as the young ones who literally put their careers on the table with those grants.

The Chair: Just to follow up on that, one of the other concerns we hear is that they write these applications and in some cases early on in the process they are rejected for no reason. There are no reasons given with the letter of rejection.

Now, I know that the CIHR is relatively new; it's going to celebrate its first birthday in a short time. However, here's my favourite project again, my favourite story. I talk about this project at the University of Windsor, and everyone thinks it's probably about building cars. It's actually about health research and behavioural science research, and there is a small part of engineering involved in it too. Now, this is what I find frustrating: how do we move this forward? How do we encourage researchers to stay in the game and to stay part of the process when they don't get feedback?

Dr. Allan Bernstein: They do get feedback. We provide—

The Chair: Very specifically, Dr. Bernstein, the project I'm talking about was submitted by the Canadian Transportation Research Alliance. They received a letter of rejection from the CIHR with no reasons, none whatsoever.

Dr. Allan Bernstein: I obviously can't comment on the specific case. I will look into it. I can tell you that we provide comments for every grant that gets peer reviewed. We provide detailed comments from at least four reviewers, two on the committee and two outside. We provide all those comments.

In fact, if the applicant chooses to come back in the same year—we have two competitions a year—they don't have to write a whole new application. They can simply respond to the reviewers' comments.

We do provide very detailed feedback on each individual grant that comes through here, and I'd be very interested in looking into the one you just referred to.

The Chair: Dr. Renaud.

Dr. Marc Renaud: It would be completely unethical on our part not to provide reasons. When I'm meeting colleagues who say this, I tell them to show it to me—

The Chair: I have it.

Dr. Marc Renaud: —because it's unacceptable. People have to learn in that process, right? It's our job. We're paid to do that, to provide them with the external comments and with the committee's comments. If it's not clear enough, the researcher should complain.

The Chair: I think I'm talking about a step earlier, the letter of intent. In the letter of intent process maybe you don't provide reasons for a rejection, but I think you should. When I look at this project, I think Canadians would be shocked to think we've turned it down. I still don't understand why we turned it down.

We've talked about health research and the importance of health research, and I'm all for research, as are most people around this committee table.

Dr. Marc Renaud: It's more difficult to provide... you can talk about your council, but in my world it's more difficult at the letter of intent stage to provide comments. You basically have three pieces of paper in front of you. You compare that to x other letters of intent. What you can say is why that person falls, let's say, in tenth position as opposed to fifth, but you need to read the other ones because again it's a judgment call. It's much more difficult to explain than when you have a lengthier project with methodologies, hypotheses, and a literature review to comment on.

That doesn't mean that the decisions are arbitrary. It just means that they're harder to explain. Still, we should provide reasons.

The Chair: Just on that briefly, we do look around and compare ourselves a lot to other countries, we situate ourselves on charts, and we look at cases. In this particular case I find I still can't understand it even though I've researched it, I've looked at it, and I've talked to people. It wasn't just one university; it was a conglomerate of eight universities applying. Everyone has a tendency to think that because I come from Windsor, it's just a Windsor application, but it's never been just a Windsor application.

That being said, we rank eighteenth—eighteenth—out of twenty-some countries on child research and automobiles. It's the leading cause of death and injury for children in this country, yet when there's an application that comes forward... Somehow I don't see how these kinds of things, as a Canadian sitting back—not as a researcher, not as an expert, just as a Canadian...

I read the articles in the Toronto Star and the other papers. How did it miss the cut? If there is no feedback at the initial cut stage... somehow there has to be because this is a critical area for all Canadians.

Dr. Allan Bernstein: I agree with your comments. I will look into that one.

Just to follow up on what Dr. Renaud said, we don't usually provide feedback at the letter of intent stage. I think in the competition you're referring to we had something like 300 letters of intent.

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It would have been very difficult to provide detailed feedback at that stage, and we didn't have anything even close to the amount of funding necessary to fund 300 applications. We funded ten in that particular competition.

The other thing I would say concerns the specific point about child safety and cars. Our Institute of Human Development, Child and Youth Health is in discussion with Transport Canada in exactly this area. It's a very important one.

As to the consortium you're referring to, maybe they should get back into the loop and talk to me about how we can work together to make this happen.

Dr. Thomas Brzustowski: Can I just add a word for the record? NSERC in its most important grants, the research grants, does give comments. In addition, there's an appeal mechanism. People are free to appeal, and the appeal is adjudicated by a knowledgeable person who's not been involved in the earlier decision.

The Chair: Okay.

Mr. Lastewka, you had a final comment.

Mr. Walt Lastewka: I have one short question. Dr. Bernstein talked about research, research dollars, and the brand pharmaceuticals—

Dr. Allan Bernstein: I said brand-name pharmaceuticals.

Mr. Walt Lastewka: Yes. Do you get involved with the generic side in any research or development?

Dr. Allan Bernstein: We don't at the moment have a partnership with the generic pharmaceutical companies. There is some research being funded by them in Canada. If the researcher who's being funded comes to us, we will of course review their application and fund it or not, based on excellence. However, we don't have a formal, direct partnership with the generic companies.

Mr. Walt Lastewka: Thank you.

The Chair: Thank you.

I want to thank you all for being here. We appreciate it. Your comments and your presentations are very helpful to the committee, and we look forward to meeting with you again in the future.

The meeting is now adjourned.