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37th PARLIAMENT, 1st SESSION

Standing Committee on Industry, Science and Technology

EVIDENCE

CONTENTS

Tuesday, May 7, 2002

0900

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.))

Mr. Rock

0905

0910

The Chair

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance)

0915

Mr. Allan Rock

0920

Mr. James Rajotte

0925

Mr. Allan Rock

The Chair

Mr. Joseph Volpe (Eglinton--Lawrence, Lib.)

0930

Mr. Allan Rock

Mr. Joseph Volpe

Mr. Allan Rock

Mr. Joseph Volpe

Mr. Allan Rock

Mr. Joseph Volpe

0935

Mr. Allan Rock

The Chair

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ)

Mr. Allan Rock

0940

Mr. Stéphane Bergeron

Mr. Allan Rock

Mr. Stéphane Bergeron

Mr. Allan Rock

Mr. Stéphane Bergeron

0945

Mr. Allan Rock

Mr. Stéphane Bergeron

The Chair

Mr. Andy Savoy (Tobique--Mactaquac, Lib.)

Mr. Allan Rock

0950

Mr. Andy Savoy

Mr. Allan Rock

The Chair

Mr. Scott Brison (Kings--Hants, PC)

0955

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

Mr. Scott Brison

Mr. Allan Rock

1000

Mr. Scott Brison

Mr. Allan Rock

The Chair

Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.)

1005

Mr. Allan Rock

1010

Mr. Dan McTeague

Mr. Allan Rock

The Chair

Ms. Cheryl Gallant (Renfrew--Nipissing--Pembroke, Canadian Alliance)

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

1015

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

The Chair

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

Ms. Cheryl Gallant

Mr. Allan Rock

1020

Ms. Cheryl Gallant

The Chair

Mr. Brent St. Denis (Algoma--Manitoulin, Lib.)

Mr. Allan Rock

1025

Mr. Brent St. Denis

Mr. Larry Bagnell (Yukon, Lib.)

Mr. Allan Rock

Mr. Larry Bagnell

Mr. Allan Rock

Mr. Larry Bagnell

The Chair

Mr. Allan Rock

The Chair

1030

Ms. Cheryl Gallant

The Chair

Ms. Cheryl Gallant

The Chair

CANADA

Standing Committee on Industry, Science and Technology

NUMBER 080

1st SESSION

37th PARLIAMENT

EVIDENCE

Tuesday, May 7, 2002

[Recorded by Electronic Apparatus]

¿ (0900)

[English]

The Chair (Mr. Walt Lastewka (St. Catharines, Lib.)): Pursuant to the order of reference of the House dated February 28, 2002, main estimates for the fiscal year ending March 31, 2003, we are dealing with votes 1, 5, L10, L15, 30, 35, 40, 45, 50, 55, 70, 75, 80, 85, 90, 95, 100, 105, 110, and 115 under Industry.

It's my pleasure this morning to have the Honourable Allan Rock, Minister of Industry, with us this morning for a fifteen- to twenty-minute opening and then questions.

Mr. Minister, welcome to the industry committee. We'll begin with your report.

Hon. Allan Rock (Minister of Industry, Lib.): Thank you, Mr. Chairman. Good morning to members of the committee. I welcome this opportunity to speak to colleagues about the Industry Canada department's broad priorities and current plans.

I want to start by thanking the committee for their reports on innovation, particularly in April 2000 and April 2001. Your suggestions on a wide variety of issues, from research and development to productivity, did not fall on deaf ears.

One of the first things I did in mid-January, after I arrived at Industry Canada, Mr. Chairman, was to read the two reports, from April 2000 on “Productivity and Innovation”, and from June 2001 on “A Canadian Innovation Agenda for the Twenty-First Century”.

Although in the months since January I've received a number of briefings from many different sources, I would be hard-pressed to find two other documents that presented as comprehensive and coherent a picture of Canada's challenges and strengths in the years ahead.

Indeed, I did more than read the reports, Mr. Chairman. They were used as a basis for the innovation paper we published in February. I'm sure members of the committee would have recognized their work in the innovation papers.

In mid-February, Jane Stewart and I launched Canada's innovation strategy, which is essentially a blueprint for Canada's economic and social future to the end of the decade, calling on Canadians to summon up imagination, ingenuity, and determination to achieve excellence in building a knowledge economy for Canada.

As you know, this is not an easy task. As with most things in life that are worthwhile, becoming the best in a knowledge economy is rarely realized in ideal conditions. It's going to require determination. It's going to require a good plan. It's why the work of the committee in developing the plan has been so important.

[Translation]

Canada's Innovation Strategy lays out a number of goals, targets and federal priorities to make Canada more innovative and competitive by 2010 and has four main elements. First, it is about creating new knowledge et bringing it to market more quickly. Second, it's about assuring that Canada has the skills it needs to compete in the new global economy. Third, it's about creating the right business and regulatory environment that will help, not hinder, progress and entrepreneurship while protecting the public interest. Finally, it's about ensuring that all these elements come together in communities throughout our great nation that both attract investment and continue to be attractive places in which to live.

¿ (0905)

[English]

The innovation strategy picks up key elements of your reports, such as the need for the private sector to increase its R and D investment; such as addressing access to venture capital and financing issues; such as the commercialization rate in what you call the government-university-industry research triangle; and the role of the federal government through the granting councils and S and T programming.

The next step in the innovation strategy, Mr. Chairman, is the engagement process, and on Thursday of this week that will be launched.

In the course of the months ahead we will be having meetings with 50 sectors of the economy. We'll be asking each of them to develop action plans for their sector to achieve our targets. We'll be holding 35 public meetings in regional round tables throughout Canada, in places large and small, urban and rural. I'll be having a meeting with my provincial and territorial counterparts in June to discuss the agenda and the governmental agreements that are required.

A separate process will take place with young Canadians to make sure that we are in touch with their aspirations and that they understand their role in all of this. And of course members of Parliament will be an important part of the process, as we'll be asking them to go to their ridings, convene round tables, encourage discussion, use workbooks and materials we will provide on Thursday, and feed into the process from the real grassroots.

All of this will culminate in a national summit on November 5 and November 6 in Toronto, when we hope there will be consensus across all sectors of Canada's economy on a concrete plan with specific targets over a determined timetable, where all of us, as Canadians, regardless of party, regardless of place, express a commitment to doing our part to addressing the shortcomings in Canada's economy and improving our standard of living, and thereby our quality of life, in the years ahead.

So the innovation strategy is the centrepiece of the government's economic policy in this mandate. It holds the promise of invigorating our economy, improving our standard of living, and protecting our quality of life.

If I may respectfully suggest it, Mr. Chairman, there may be roles that the committee wishes to consider in all of this, apart from the enormous contribution you've already made through your past reports. In particular, it would be very useful, in my view, if the committee were to focus on the community development aspect of the strategy as a crucial part of our overall effort.

The fourth element of the innovation strategy talks about strengthening Canadian communities, making them platforms for growth and development--not only wonderful places to live, but very vigorous economic engines. We've been experimenting at Industry Canada with something called the Canada community investment program. It's a pilot. It's been in various places around the country.

So far the results are extremely encouraging, but it's not perfect. There may be other ways it can be improved. The question is, should it be broadened into a more general effort across Canada? I'd be grateful for the committee's views on that and related issues concerning community development as part of the innovation strategy.

Part and parcel of this, of course, is the whole idea of the urban strategy, clusters in cities, and how we encourage and support them. To me, the whole urban strategy is about innovation, and innovation is about the urban strategy. It's not just in urban Canada that we have to innovate, but the cities are now the place where some say as much as 80% of our population lives. Does the committee have views on how we can focus on community development, particularly in the urban context, to favour innovation for Canadian economic growth?

The second broad area, which I know the committee has looked at in the past, is access to capital. I'm thinking particularly of venture capital, and I'm thinking of the kinds of intermediate capital that Cal Stiller spoke to you about when he testified in front of you during your hearings on innovation. At different stages of their growth, whether it's start-up, mid-term, or in the longer term, companies need access to capital. And I believe that need has still not been met, notwithstanding our efforts in the past.

On venture capital, can pension funds do more in Canada? Are there impediments to pension funds participating as actively as they do in the United States? How can those impediments be addressed? How can assurances be given that will make sure a larger percentage of pension funds are made available for venture capital in this country?

[Translation]

Let me now mention a few other priorities of Industry Canada for the coming months.

Another of my Department's priorities is to make Canada the most connected country in the world. We are making huge progress here. Our successful SchoolNet program allows students, teachers and parents to learn about the world of ICT and how it can be used to enhance education. SchoolNet readies learners for a knowledge-based society. It champions life-long learning and the creation of world-class educational resources through information and communication technologies and partnerships. Through our Community Access Program, Canadians in all parts of the country have been provided with affordable, convenient access to the Internet.

Next month, Canada will chair the G-8 Summit where the G-8 Digital Opportunities Task Force will present its final report. The Task Force, a partnership between governments and businesses in G-8 and developing countries, has been exploring ways in which information technology can best be used to improve social and economic conditions in the developing world.

¿ (0910)

[English]

Improving Canada's position as a preferred location for domestic and foreign investment is obviously also a priority, Mr. Chairman. One of our goals is to dramatically improve Canada's share of North-American-bound, foreign, direct investment in the course of this decade. Two programs in particular that underscore the Government of Canada's commitment to these priorities are Technology Partnerships Canada and the industrial research assistance program.

Technology Partnerships Canada is in fact a key element in the federal government's innovation strategy. It leverages $4 for every $1 invested by the government and it promotes private sector investments in pre-competitive R and D in our leading-edge technologies. It has supported more that 35,000 jobs since its creation, and key investors have started to repay their loans. The committee has obviously recognized the importance of TPC. In the past, you have recommended, and I agree with this, that the budget of TPC be increased and that its goals be diversified.

The industrial research assistance program, as the chair of this committee knows, is a highly successful federal initiative dedicated to the stimulation of innovation. You've commented on the businesslike approach that it takes to its work; unlike so many other government programs, it's lean and it's efficient. Each year IRAP provides technical advice to more than 10,000 small and medium-sized enterprises and financial assistance to more than 3,000 companies in support of research and development projects. You've suggested, as a committee, that we double the budget of IRAP, and I agree.

While leading-edge technologies and businesses command much of the spotlight today, we have not forgotten the importance of our traditional industries. In shipbuilding, the government has also been hard at work. In June 2001, the government released its new shipbuilding policy. Realistic and balanced, the policy focuses on opportunities, growth, and innovations, in markets where we can compete successfully. From the auto sector to steel, to high tech and telecom, Industry Canada is at work with Canadian business to achieve our full potential as a country.

[Translation]

In conclusion, Mr. Chairman, I would like to thank the Committee for allowing me this opportunity to outline my Department's plans and priorities. The coming year will be an exciting opportunity to draw together all sectors of our economy and to devise a national action plan.

I will now be pleased to answer your questions on Industry Canada. Thank you.

[English]

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

Before I begin with questioning, I would like to take the opportunity to mention that we have people in the room who are participants of the spring 2002 Canadian Parliamentary Cooperation Seminar. I understand there are some senior staff from the parliaments of Hong Kong, Jamaica, India, and Scotland, who have journeyed here to receive procedural and administrative training at the Parliament of Canada. They will be observing our committee this morning. I would like to take the opportunity to welcome them. Welcome to the industry, science and technology committee.

We will begin with questioning. Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Mr. Chair. I'd like to welcome our guests as well, and of course welcome the minister to our committee.

Thank you very much for your opening statement. I do have some very specific questions I'd like to put to you. If you don't have time to answer them all, I'd appreciate it if you could send the answers to the committee.

I do want to offer some general comments on innovation strategy. The first comment would be that it is very general when you read through it. It seems to lack a lot of specifics--a lot of meat. There don't seem to be any firm commitments on funding, nor estimates of cost in terms of total cost or particular costs.

The first thing both your department and Human Resources has to do is to provide some estimate of what the innovation strategy will cost and some specific policy guidelines as to what will be implemented.

My second general comment is that obviously you're aware that there are different perspectives on how to improve Canada's innovation. We in the Canadian Alliance certainly have one view and the government certainly seems to have another. I'd like to convince you of our view, obviously, but judging from your opening statement we have not yet done that.

If you consider the current government's industrial policy in terms of relying on TPC loans and relying on government interference in the economy, based upon the past record of doing that, I think you've recognized that it has not led to increased productivity. In fact, you were the minister that pointed out that Canada's productivity is still very much behind that of our major trading partner.

I would strongly encourage you to consider a different industrial policy for Canada, one that basically seeks to create a business-friendly environment to create long-term high-paying jobs. The way to do this is frankly by cutting taxes, by paying down our national debt, by increasing the value of our dollar, and by seeing that innovation, productivity, and the value of our dollar are all interconnected.

Not only people in the opposition are saying this, but in fact the finance committee, under the chairman of the current Secretary of State for Science, Research and Development, recommended cutting corporate taxes, specifically cutting the capital tax as a way to improve innovation. I'd like your specific comments on that. But they also asked for better tax treatment for investments and new technologies and productive capital, and I'd like your comments on that.

I certainly appreciated your comments about venture capital, because according to a lot of articles and a lot of researchers, the biggest threat to innovation in Canada for universities such as the University of Alberta and other universities is a lack of venture capital to bring innovative thinking to the market. They've set up places like Innovation Place at the University of Saskatchewan, but the biggest obstacle is venture capital and overregulation. How is this innovation strategy going to address that if we do rely on what I would call the old industrial policy rather than embracing a new industrial policy?

¿ (0915)

Mr. Allan Rock: First of all, I thank the member for his thoughtful comments and questions.

Taking his points in order, the innovation strategy for the most part is general. I'm always frank when I describe it to people in saying that there's nothing much new in there. People have been talking about this for years, and the committee, of course, talked about it very eloquently.

I think what is new, though, and what's noteworthy is that for the first time the national government is putting this at the top of the country's agenda, pulling together all these elements and saying this is a real priority. Let's work together to achieve it. Enough talk; let's now move to action. So I think that's what's new. It's now an important part of the public policy of the national government that we have to get on with this plan. Enough of analysis; let's move.

That leads me to your comment about it not being costed and there being no firm commitment on funding. I want to emphasize that the innovation strategy is not a government program. It's true that the government has a role to play. But if we're going to achieve the innovation we need, the private sector in partnership with universities, labour, and all the other sectors of the economy have to do it themselves. The government can clear away unnecessary regulations. It can make the marketplace more efficiently regulated. It can certainly do its part in R and D and S and T programs. But we can't do it ourselves. So when you ask how much it's going to cost, the reply is that it's not a government program.

That having been said, there are money commitments in the strategy. For example, the Government of Canada commits to double by 2010 its investment in research and development, compared to $3.3 billion in 1999. We commit to doubling the scholarship availability for post-graduate students. We committed to the program that became the Trudeau fellowship program. We committed to indirect costs, which have since been announced.

In terms of how general the innovation strategy is, anticipating that we'd need something to make it concrete and to motivate people to action, we tried as best we could to identify specific targets. That's why we took the horizon to 2010. As you'll note, in every one of the four elements of the strategy, we've said by 2010 let's be here in these six areas, whether it's a million more adults in continuous learning or doubling Canada's share of foreign direct investment coming to North America. So we tried to make it concrete in that way.

The last comment I'll make on that point is that the whole purpose of the engagement strategy between now and November is to give all sectors a chance to respond to this proposed strategy, and if they have more concrete goals to suggest or specific action to propose, we can build it in by the time we come to our final plan in November.

Turning to the second point you made, Mr. Rajotte, about Technology Partnerships Canada, I have expressed concerns about Canada's productivity, but TPC is not the problem. I think it's part of the solution. I think part of our reason for not having the productivity we should have is our failure to innovate as much as we should. You've pointed it out yourselves. What is innovation? Innovation is simply finding new and better ways to make products or provide services, ways that no one has thought of before, ways that give you a competitive advantage, and then taking them to the marketplace quickly and exploiting that advantage.

TPC takes new ideas at their earliest stage and puts out patient capital to enable those ideas to be brought to the market. We take an investment in that idea, we do due diligence in advance, we require the private sector to put in four times as much, and then we wait for the payoff when it hits the market. Every other developed country in the world has programs like that. Some do it through their defence establishment. We don't happen to have a $300 billion defence establishment. But we do have an opportunity through TPC to get into the high-tech, high-yield, high-growth areas and enable the birth of ideas that will lead to productivity.

I know I'm going on a bit, but I think these questions are important.

Lastly, on taxes, you're right, we have to remain competitive. That's one of the targets we set out in the document. Look at where we've come in the last few years: capital gains from three-quarters to one-half, by 2004 corporate taxes are going to be on average five points below the American competitive rates, and personal income taxes down 35% for families with kids. We're going in the right direction. Is there more to do? Of course, and the Minister of Finance and the Prime Minister have said we will remain competitive as time goes on.

¿ (0920)

In terms of being business friendly, one of our goals, one of the four elements of the strategy, is to look critically at the way we regulate and to make sure we regulate in the public interest, but without placing an undue burden on the investor or entrepreneur. That means improving our timing on the approval of new drugs in Health Canada. That means cutting down paperwork that's unnecessary. That means services online that are more accessible. That means looking to see whether we need to have overlapping regulation federally and provincially. Can we simplify the burden? That's our objective.

I think the member's observations are thoughtful. I'm delighted to engage in the discussion with him. I look forward to his constructive contribution to how this document can be improved.

Mr. James Rajotte: I would like a specific response on the capital tax. It was something endorsed by a Liberal committee, the finance committee, last November.

In terms of the TPC payoff, the payoff to date has been 1.3%. I don't know how anyone can argue that this program is actually reaping benefits. With a payment of $1.6 billion put out since 1996 and $20 million given back, with a 1.3% payoff, I don't know how anyone justifies that, frankly.

In terms of the government meeting its R and D spending, in the last budget there was a 9.4% spending increase and just 6.6% of this was geared towards research and development. Considering the fact that the government is not even meeting its own targets and it's allocating money to areas like TPC, frankly, they should take that money and put it in areas like the National Research Council and NSERC.

There is a limited amount of money to put into R and D. If you're funnelling it into programs like regional development and TPC and these programs, that's less that you're going to put into areas like basic research, the indirect costs of research, which the official opposition very much supports. If we are going to truly build an innovative economy, I would very strongly suggest that's where we gear our limited government resources.

I have one specific, final question. In terms of Industry Canada's affairs in and of itself, we notice on your website that your department only completed two internal audits in 2001. This number is down from 2000, when the department completed four, and 1999, when the department completed ten audits. Could you please tell us why you feel as a minister that you do not need to audit your department as much? Could you please table with this committee all the draft internal audits that were not signed off on during 2000 and 2001?

¿ (0925)

Mr. Allan Rock: Speaking to the last point first, I don't know the answer. I'll find out and provide a written response to the question of why there were fewer audits than in the past. I won't undertake to table the draft audits that were not signed off on because I don't know enough about it to give that undertaking, but I will give you a written response on internal audits.

On your broader questions about TPC, people like to focus on the 1.3% repayment. I saw that in the newspaper on the weekend. With all due respect, that's lazy reporting, lazy analysis. It's an easy headline. I think what's more important is to dig beneath that and do the homework to find out what TPC is all about, what other countries are doing about this kind of investment, and why we have to do it to stay competitive.

TPC enabled Canada to secure worldwide mandates in three important areas of research and development. Pratt & Whitney brought to Canada the development of a brand-new gas turbine engine because TPC was there to provide the initial capital to induce them to do that. They could have taken that work anywhere in the world and they brought it to Canada. There were two other examples of where Canada became the home of a mandate for worldwide product development for major international companies through TPC.

If we don't have an instrument like TPC, we're putting ourselves at a competitive disadvantage with all the other economies of the world we compete with. Let's not overlook the 35,000 jobs that have come from TPC. Let's not overlook the analysts' forecast that it takes between five and seven years to get a return on investment in this kind of situation.

As for us not being on target for doubling our R and D spending, I disagree. We're well along the way to doubling from 1999. This past budget was a bit of an anomaly because it was devoted for the most part, as you know, to security and border issues. I'll tell you that not withstanding all that, the budget contained $210 million for NRC for cluster development and $110 million for CA*Net 4, which is a very sophisticated, research-based Internet communication capacity. It contained more money for SchoolNet and CAP. It also increased the CIHR budget, the health research budget, by 15%, and 7% for NRC and SSHRC.

So I disagree that we're not on target, and I say that we can do all this at once. We can invest in R and D, we can keep our tax system competitive, we can reduce the burden of regulation while protecting the public interest, and we can strengthen communities as magnets for investment. That's what the strategy is all about.

The Chair: Thank you very much.

Mr. Volpe.

Mr. Joseph Volpe (Eglinton--Lawrence, Lib.): Mr. Minister, thank you very much for your vigorous explanation of government policy for the benefit of the Alliance colleagues opposite who would like to cherry-pick on policy and inevitably find themselves in--

Mr. James Rajotte: That was a question.

Mr. Joseph Volpe: I listened as you explained the connection between innovation and productivity. I was especially interested when you talked about the fact that failure to innovate is the most important factor that contributes to lack of productivity. You made special mention to the health sciences and pharmaceutical scientific research industry.

Perhaps taking this down on a little different tack, as opposed to having a series of government policies, I guess one would say that government legislation and regulations have as much to do with the area of innovation, especially in this sector, as virtually any other type of incentive program. In fact, I would argue at any rate that legislation is probably a greater incentive than any of the other financial inducements because the impact financially is much more significant.

When the House was considering Bill S-17 and bringing Canada into compliance with world standards for patent legislation, your predecessor gave us an indication that he would welcome the committee reviewing the regulations, specifically section 55.2 under the Patent Act, as they related to the pharmaceutical medical science research industry. He did that for a couple of reasons. In part, it had been an ongoing concern of members of this committee and other committees. Secondly, the question of innovation on the part of the pharmaceutical sector in particular had been under scrutiny and often suspect.

I think you know that in your former position as Minister of Health the pharmaceutical industry in Canada, despite the advantages it had, and continues to enjoy, failed to come up with one breakthrough drug in the last...go back as far as you'd like to go.

I'm wondering whether it is your intention to follow up on your predecessor's commitment in the House to have the committee review those regulations under the Patent Act.

¿ (0930)

Mr. Allan Rock: The committee is a master of its own process. The committee can do what it wants. So if it wants to look at any regulations, it's at liberty to do so. Obviously, whether it's pharmaceuticals or anything else, I think the government should always be looking critically at the way it regulates.

I mentioned earlier, in answer to Mr. Rajotte, that part of the innovation strategy is to look critically at the whole suite of government regulations. This is to make sure that while protecting the public interest we're not creating an undue burden on the economy or a disincentive or impediment to entrepreneurs or investors. So if the committee wants to look at it, it could do exactly that.

I lived with these issues for four and a half years at Tunney's Pasture, as you know, and I know that the NOC regulations, as we call them colloquially, are an issue. I think there are other important issues that you and I ought to look at too, for instance, the whole issue of market access. After drugs get approved by the Department of Health, whether they're generics or brand-name drugs, how long does it take to get them onto the market? It takes a long time, and that's an impediment to innovation. It's also an issue in the health sector getting treatments to patients.

When I was at the health department we negotiated with the provinces a single common drug review on the issue of market access after the department's approval for safety and efficacy. I think we should follow up on that. We should make sure this happens. The whole issue of market access is terribly important for the patient and for all the companies.

So I think there are any number of things we can look at, Mr. Chairman, all for the reason of making sure we have a marketplace that's fairly regulated, in the public interest, but without constituting an impediment to innovation.

Mr. Joseph Volpe: So I take it then that you would agree with me that under the Patent Act, when in legislation we guarantee that an innovator has the exclusive benefit for a 20-year period, it should not mean less than 20 years, but it should not mean more than 20 years. What we need to do, then, is examine how legislation and regulation either enhances or diminishes that right under the act.

Mr. Allan Rock: If I remember correctly, when I was asked about this in Health, what I always said is that we should give full force and effect to patent protection because it encourages innovation by rewarding ingenuity and protecting the financial interests of those who thought of a new idea--that's what patents are all about.

At the same time, entirely consistent with that protection, generics should be allowed access to the marketplace for the sake of competition and public interest as early as possible, consistent with protecting the patents of those who have innovated. That balance is always something that's under review. This committee did a review in 1998. Is that right, Joe?

Mr. Joseph Volpe: It was 1997.

Mr. Allan Rock: So it's always under review to check whether we have that balance correct, and there are always some people who think it should be more in this direction and more in that direction. I think as legislators it's our collective responsibility to make sure we do our best to strike that balance.

Mr. Joseph Volpe: I'll finish off by saying that the review was a legislative review of the act itself. One of the things that didn't happen was a review of the regulations, and the regulations seem to go in a direction that's inconsistent with the intent of the legislation itself. So I'm taking from this that you're very much in sync with the suggestions made much earlier by your predecessor that we maintain our obligations, not only under the WTO but under the act, but at the same time review all the regulations that either reward--I think that was the word you used--innovation, while at the same time ensuring that there's competition in the marketplace on a timely basis.

¿ (0935)

Mr. Allan Rock: I've said it's up to you to decide what you review. I'm not calling upon you to review anything; you can review whatever you want. I've said part of our innovation strategy should be looking at the way we regulate everything in Canada to make sure that.... It's in our innovation document; it's in writing. Look at the way we regulate in the marketplace to make sure we're there in the public interest but we're not an impediment to innovation. If this committee wants to look at the regulations under any act, it's free to do so.

The Chair: Thank you, Mr. Minister and Mr. Volpe.

Mr. Bergeron.

[Translation]

Mr. Stéphane Bergeron (Verchères—Les-Patriotes, BQ): Thank you, Mr. Chairman.

Thank you, Mr. Minister, for being with us today and for your comments. It will not come as a surprise to you that my own comments are not as emphatic and laudatory as Mr. Volpe's comments. I am indeed very pleased that you have come to meet us and I must say that we are fortunate to have you with us because you did not seem to be overly eager to come and meet with the members of the Industry Committee when you were appointed to your present position. Even this session today will not be enough, in my view, to let us discover all your kindness and generosity since we only have one hour and a half to deal with two major issues, the Main Estimates for the fiscal year ending March 31 2003 and the Innovation Strategy. God knows those are major issues. No wonder in those conditions people claim that Members of Parliament are not able to properly do their job of controlling government activities.

Since we only have a few minutes to deal with this, I will start quickly. You know probably better than anyone else that the airline industry and the travel agency industry have been among the industries which were most affected by September 11.

Ironically, the best thing the government found to help the airline industry was to slap on an additional tax. With respect to travel agencies, of course an amount of $20 million was added in the wake of September 11, but our Committee had analyzed the impact of September 11 and had highlighted the difficulties which those two industries were facing.

Looking at the Main Estimates for next year, we see that there has been only a very minor increase of about $700,000 in the budget of the Canadian Tourism Commission. In view of the problems that this industry has been faced with as a result of September 11, are you satisfied that this is a sufficient increase?

Mr. Allan Rock: As you may know, immediately after the September 11 events, we added some $15 million to the budget of the Canadian Tourism Commission in recognition of the fact that those events had seriously impacted the tourism industry here in Canada. In order to attract U.S. citizens especially, we spent more money to promote the virtues of tourism here in Canada.

We increased the budget of the Canadian Tourism Commission for the present year. Of course, I could identify some 12 or 20 items in my Department's budget for which I would like to have more funds. This is not surprising. But when you are trying to get more funds for a department or a program, you are always competing with other government priorities. I am quite confident that in your next questions or this afternoon in the House of Commons or tomorrow or next week, you will be asking for more funds for other programs. However, we have a fixed amount of money and we cannot run a deficit. Funds have to be allocated responsibly. We managed to get more funds for the Canadian Tourism Commission. I urged the officials to spend those funds cautiously, and that is what we are intending to do.

¿ (0940)

Mr. Stéphane Bergeron: I appreciate the deficit argument, Mr. Minister. I must say I fully agree with that concern since the Bloc québécois advocated a long time ago that legislation be passed to prohibit federal deficits. However, with a surplus of over $10 billion, I believe that we can afford to make the tourism industry, which suffered greatly from the September 11 events, one of the government's priorities.

Putting that aside, Mr. Minister, you say in the Estimates report that the elimination or reduction of trade barriers is one of your Department's priorities. This is a recurring theme with the Department of Industry. I would like to know where we stand now in terms of reducing interprovincial barriers. Are the provinces closely involved in the Department's efforts to reduce trade barriers?

Mr. Allan Rock: We have to because those barriers are provincial barriers. We are the leaders. I co-chair the meetings, but the other co-chair is a provincial representative. Those barriers are provincial barriers. We urge the provinces to drop them and find a way of harmonizing them to help us have a more productive and competitive economy. This is an ongoing effort. I have frequent discussions with my counterparts on that issue, and I intend to carry on with my predecessors' efforts in that area.

Mr. Stéphane Bergeron: Mr. Minister, since you mentioned your predecessors, I would say that your immediate predecessor was deeply committed to a project, the broadband project, which we supported. In fact, every IT initiative is usually wholeheartedly supported by the Bloc québécois. I would like to know how much progress we have made on that broadband project since you were appointed at the head of that department.

Mr. Allan Rock: You read with us the budget of December 10 last year. We pledged a funding for that program to implement broadband within the next few years. We have repeated in Canada's Innovation Strategy the federal government's commitment to make broadband available everywhere in Canada within three or four years.

As a former Minister of Health, I understand why this is truly a priority. Broadband is not just a technical achievement, but also a tool which helps governments provide means of improving people's quality of life in the regions. For instance, broadband allows for major health services to be delivered through Telemedicine. Broadband allows doctors to access remote medical training and links rural communities and major urban communities. It is an important goal for all kinds of reasons and this is why I am intending to maintain it as a priority.

Mr. Stéphane Bergeron: Mr. Minister, you mentioned in the Innovation Strategy that immigration policies and procedures might have to be changed to help Canada retain foreign students who come here to study. I would like to know how you plan to change those immigration policies and procedures. Are you planning to involve provincial governments--I am thinking in particular of the Quebec government--which are closely involved in that issue of hosting foreign students and immigration issues? And how do you reconcile this goal of encouraging foreign students to settle in Canada with the principles put forward by Canada in terms of international cooperation and developpement assistance? How will we help developing countries develop if we keep their students who have come to study in Canada?

¿ (0945)

Mr. Allan Rock: Firstly, Mr. Chairman, we set out our goals and targets in the Innovation Strategy, but we did not specify or develop all the means required to reach those goals. That is why we will be launching on Thursday the engagement process to open a constructive dialogue with all the sectors of our economy, all the stakeholders, to further develop the various parts of that strategy.

Regarding immigration, I would say the same thing. We intend to work to harmonize our economic priorities and our immigration strategies and policies. Provinces will of course be involved, especially Quebec, by virtue of the agreement in that respect between the Government of Canada and the Government of Quebec.

We will be holding a round table with my provincial counterparts between June 19 and 21 in Vancouver to have an overall discussion of the Innovation Strategy and get their feedback on that strategy. I am expecting every province including Quebec to be at that table to express their views and I am looking forward to constructive cooperation with Mrs. Marois and all my counterparts in this respect.

Industry Canada offficials told me that at the last intergovernmental meeting on that issue--surprise, surprise--there was unanimity around the table. All the participants agreed on the elements of that strategy, on that common effort. Regardless of partisan opinions, regardless of differing opinions on the major national issue, there was a convergence of interests expressed at that meeting. I am very pleased with that, because it is the first time this has happened as far as I am concerned.

Mr. Stéphane Bergeron: Do I still have a little time left?

[English]

The Chair: Mr. Savoy.

Mr. Andy Savoy (Tobique--Mactaquac, Lib.): Thank you, Mr. Chair, and thank you, Mr. Minister, for coming today.

First of all, I appreciate IRAP. It's one of the most successful programs that the Government of Canada administers and has put forward. It's very beneficial to small and medium-sized enterprises, and on the ground as well. As you know, in various areas of Canada we spend, I guess, after five or six months and in some areas the entire budget. So it's a program that's well used, specifically in value-added.

In terms of venture capital, we all understand the problem with the pension funds investing less in venture capital in Canada, but specifically with regard to angel investors, we don't have the clusters or the critical masses in some areas that the U.S. has--Silicon Valley, for instance. Hence, we don't have the angel investor environment or community in Canada. In addition to capital, they bring a lot of knowledge capital, financial capital. They bring a lot of knowledge capital to the industry and are very much mentors for growing companies.

Is there a plan to address this deficiency, specifically in terms of knowledge capital that is gained from angel investors?

A second area on a totally different topic that I'd like some attention brought to is the present review and approval process for drugs in Canada and internationally--and I think specifically of the United States. We had a thrust about four or five years ago to get the number of days down for the review and approval process. I think we were at 1,200 and we got down to close to 500. The U.S. is 300 to 400, as I understand it, but presently we're at about 750 days. So for us to foster an environment for R and D and approval drugs in the global community, we need to be very competitive in that area. I wondered if that was part of the renovation strategy, or something you'll be addressing.

So those two areas, angel investors and knowledge capital, and number two, the review and approval process for drugs in Canada.

Mr. Allan Rock: I think on the whole continuum of investment we can do a lot better as a country--angel investors, capital at risk, patient capital. Let me quote from your report of June of last year when you quoted, in turn, from Calvin Stiller, who had appeared before you. Calvin said the following:

Seed investment is a different type of venture capital than expansion capital. Expansion capital is different from that of mezzanine, and junior capital markets are different than senior capital markets. Are any of them the answer? No, it's a continuum.

And I agree. All of those levels of investment have to be available if we're going to get ideas to market in a continuous and efficient way. Angel investors are of growing importance, but they're only a part of the picture.

I might mention that CCIP, which is the Canadian community investment program that I referred to in my opening statement, Mr. Chairman, and which exists on a pilot project basis throughout the country, is all about angel investors. It's about encouraging people to come forward, helping with due diligence, introducing them to opportunities, giving them a higher level of comfort when it comes to putting that first dollar in.

That's one of the reasons I want the committee to consider looking at this pilot to see whether it's worth expanding, whether it can be improved, and whether we're on to something here that could be a national program to encourage early investment.

On the second part of your question, about drug approvals, I hesitate to answer with respect to another minister's department. I'm just now, after three months, losing that sense of ownership I had for all of those issues in Health Canada. But I hope the minister there would forgive me for saying that, when I was at Health Canada, I was never satisfied that we were meeting our targets because we never did. I always asked for more money for drug reviewers so I could meet the targets.

I think we have to make a decision; either we put more money into it so we can do that or we change our targets. We shouldn't try to fool ourselves. We cannot meet the targets unless we put the resources in to enable us to do that.

I think an important part of the innovation strategy is to be able to say to the world that we regulate efficiently in Canada. We have innovative, efficient regulators. Bring your capital here because you'll be treated in an efficient way.

¿ (0950)

Mr. Andy Savoy: On a third topic, we're the only G-8 country that doesn't have a developmental financing institute. To put it in the larger context, DFI are used for accessing either proposal financing capital or debt or equity capital for international projects.

We in fact partner with other countries--other G-8 countries and other OECD countries--and I think there are only three other OECD countries that don't have DFIs. They facilitate access to bidding on large projects internationally, whether water and sewer projects or large infrastructure projects.

And certainly our engineering and our construction trades are Canada's fortes. We're very well known for them internationally, but without a DFI, it's hard to take our innovations or our competitive advantage in those areas to the international level.

Is this something that has been discussed in the innovation strategy? I realize it may be out of that realm, but I certainly think it's consistent with the look you are taking at innovation, at developing our core competencies and moving outside of our boundaries to the global marketplace. I think a DFI is quite critical to this, so I wonder if it is being addressed or if there have been any discussions around it.

Mr. Allan Rock: It's been raised with me most forcefully by members of engineering firms with an international practice, who lament the lack of such a resource in Canada. We have it under consideration as one of the possible concrete steps we can take in the innovation agenda.

Mr. Andy Savoy: Thank you very much.

Thank you, Mr. Chair.

The Chair: Thank you, Mr. Savoy.

Mr. Brison, welcome back.

Mr. Scott Brison (Kings--Hants, PC): Thank you, Mr. Chair.

The Chair: It's your time.

Mr. Scott Brison: Thank you, Minister, for your appearance here today and your presentation.

I have a question on Technology Partnerships Canada, specifically on some of the criteria for investment. Is there a minimum or maximum amount of investment in a particular tranche of investment? How would the criteria for TPC differ from that of, say, BDC venture capital, which is a public vehicle designed to invest in technology opportunities or venture capital opportunities?

And given the fact that the lion's share of Canadian venture capital funds is labour-sponsored, effectively created with public money through tax advantages, why are we continuing this process of picking winners and losers, as with the TPC, when in fact there is already a lot of public money in Canada's venture capital system right now?

¿ (0955)

Mr. Allan Rock: This question requires me to go back to the purpose of TPC, which fundamentally is to provide patient, long-term investment at the pre-competitive stage to allow development to take place in order to bring a product to market. Venture capital is more at the competitive stage when the idea has been developed, when the pre-competitive work is done. When you're out of the laboratory, you've proven it can work, then you go to venture capital, whether it's a labour fund or BDC.

The answer to your question about BDC is they operate as methods of finance at different points in the spectrum between idea and product.

Mr. Scott Brison: But if you are saying about the partnerships in investment that typically there'd be only about a quarter, three-quarters would be private.

Mr. Allan Rock: It's levered one for four. Four-fifths is private. That's the average over the years.

Mr. Scott Brison: Okay, so the lion's share of the risk is private. Then the question becomes, why does the 25% that the partnership is playing make a difference?

Mr. Allan Rock: Well, it's often the first 25%. Actually it's less than 25%; it's 20%. But you as a person of experience in the business world will know that if you have an idea at the pre-competitive stage and you're looking for investors, if you can say that the Government of Canada, through TPC, with its hard-eyed analysts who know they're going to come under the scrutiny of people in the industry committee, have agreed to invest through that government program, that gives you a very substantial leg up competing for the private dollars in the marketplace.

Mr. Scott Brison: Typically, though, the capital markets look with a jaundiced eye, frankly, with government agency participation in some of the cases. There's a general feeling in the capital markets that the scrutiny and the criteria are looser with the government investment. I don't think it's viewed as positively as you indicate.

Mr. Allan Rock: You'd better tell the Auditor General, because the Auditor General looked twice at this program and found that we do due diligence in a manner that the Auditor General found entirely satisfactory.

Mr. Scott Brison: That's one of the few things she liked about your government.

Mr. Allan Rock: I think it was “he” at that time.

Let me also say that it's one thing for us, as politicians, to spar about whether it's picking winners or corporate welfare and engage in the game--that's fair enough. It's tiresome, but it's necessary. It's part of our livelihood--

Mr. Scott Brison: It's called democracy.

Mr. Allan Rock: No, I mean the games of positioning, the epithets, the labels, and the spin. What would really be useful is if you took the trouble to speak to some of the people who received some of these TPC investments. Talk to them about the effect it had in the marketplace. Talk to them about what it meant.

There's something a lot of members of the House of Commons use right now in their daily work. It's called a BlackBerry. It's wireless communication in a very convenient format. Scott's putting it in his pocket right now. That device exists because of TPC. Speak to Mike Lazaridis about what it did in terms of enabling him to go to the marketplace and get capital financing.

Mr. Scott Brison: I agree with you in terms of the notion that we need a more vigorous capital market in Canada, seeking out these types of opportunities, but there are several ways to achieve that. Most of the people you would speak with would also suggest to you.... You said that without the technology partnership we'd be disadvantaged. Well, we are disadvantaged by a capital tax system and a capital gains tax system that could be changed quite easily. The amount of taxes collected in capital gains in Canada per year as a percentage of the federal budget is actually quite small. It's a critical area of taxation where we could actually be ahead of the U.S., which is where we have to be as opposed to always playing catch-up. I would assert that would probably have a more significant impact than the one-off strategies of direct government investment.

Mr. Allan Rock: I think you've made very constructive contributions to the public debate in that regard. I'm not here to disagree with you. What I will say is there's no reason it has to be either/or. Why can't it be both?

Also, if you look at what the Americans do in terms of TPC--they don't call it TPC, and with the defence establishment they have, they do it in a very different way--if you look at what they invest in public dollars in pre-competitive development of products that literally lead to commercial innovation, they do it massively through the defence establishment. And we're trying to compete with them. We're trying to say that we want the same standard of living. We're trying to say that we'll take them as a benchmark economy. Yet we're going to have quarrels about whether we should put public money into pre-competitive investments after due diligence.

I think we ought to realize we're playing in a league where we have to get on with it and we have to do what governments do in the modern developed world.

À (1000)

Mr. Scott Brison: Do I have time for another question, Mr. Chair?

The Chair: One more.

Mr. Scott Brison: This is part of your responsibility as industry minister. Programs like ACOA and regional economic development strategies feed into that. ACOA's budget in Atlantic Canada every year is around $360 million. Federal corporate taxes paid in Atlantic Canada are about $380 million. If we're to look at the success of the Ireland example, a lot of that was based not just on strategic investment in education and infrastructure but on aggressively reducing corporate taxes to create a more favourable environment.

Wouldn't eliminating federal corporate taxes in Atlantic Canada have a greater impact on economic growth, opportunity, prosperity, and innovation than $360 million seeking out winners, and often picking losers?

Mr. Allan Rock: I disagree that the ACOA money goes to pick winners and--

Mr. Scott Brison: I agree, it probably doesn't a lot of the time.

Mr. Allan Rock: Well, no. I have to tell you that if you look at the financial return on ACOA's investment, you will be impressed that the money is spent wisely and with good return.

I encourage you to look at how that money is being put to work in your own riding. I also ask you to consider whether, if corporate taxes were terminated, corporations would spend that money in the same community investment that ACOA does, for the same purposes and with the same return.

If you look, for example, at the Atlantic Innovation Fund, administered by an independent board, the purpose of that board is very similar to the innovation strategy, which is to enable people to get into business and be competitive by bringing ideas to market. That in the long run is what the economy of Atlantic Canada is going to need.

So I disagree that it's government picking winners and losers. I think it's government investing in people.

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

Mr. McTeague.

Mr. Dan McTeague (Pickering--Ajax--Uxbridge, Lib.): Thank you, Mr. Chair.

Mr. Minister, thank you for being here today, and welcome to the committee.

I know this is not an easy portfolio, but you certainly have experience in other areas within cabinet, and it's one of the reasons we look to you, particularly, as a guide in terms of what the government's deliberations and decisions are with respect to this ever-changing economy.

One aspect of the economy--and it's debatable whether this is good or bad--is the high level of concentration...and certainly the rather interesting phenomenon that we're seeing with respect to the TSE. Even the Business Council on National Issues has changed its name to reflect the foreign ownership aspect in this country. I can think of no better example of where this exists than in the drug industry.

In response to my colleague, Mr. Volpe, and to a lesser extent, Mr. Savoy, you had suggested that perhaps it is up to the committee to make the decision to look into this matter of the notice of compliance.

Minister, I'm interested in the fact that within...not from the health perspective, because I think the public understands that drug care is now the fastest-rising component of our health care system. It is certainly further ahead than the practitioners. The committee, however, has an interest in terms of soliciting your view on the account deficit of nearly $5 billion. It's pretty difficult for us to try to understand any argument about innovation or productivity when Canada's valued health dollars and public dollars are being spent on purchasing assets from other countries in order to maintain a particular standard of health. I think the end, certainly in this case, probably doesn't justify the means.

There is a specific area that is of concern to some members of this committee. It deals with the unique automatic right of injunction, which to my knowledge only exists in Canada and the United States and, as far as our patent laws are concerned--you being a lawyer and having been the Minister of Justice--only exists in the drug industry. I believe the Supreme Court has referred to those as draconian.

I know there is a causal relationship between those extensions, which have the effect of moving patented medicines beyond 20 years.

I have some experience in trying to move legislation, as a backbencher and without the assistance of a minister. It took us five to six years to get the Competition Act eventually in the right direction. If you leave this to the committee, sir, I'm wondering how you would expect to reconcile what I think is a growing concern among politicians, representatives, public care administrators, and the public in general about the raw deal Canadians receive with respect to the current regime of drug patent policy.

À (1005)

Mr. Allan Rock: Mr. Chairman, the member has raised a number of issues--talking about foreign ownership, for example. As you know, one of my responsibilities is to administer the Investment Canada Act, which is all about looking at proposed foreign investments over a certain threshold level to determine if they're of net benefit to Canadians, with the power and authority that the statute provides. I've learned a lot more about that in the last few months than I had known in the past, and I've examined a variety of transactions under that statute.

One of the things I've learned by looking at the material is that levels of foreign ownership tend to ebb and flow, whether it's in the energy sector or in other sectors of the economy. I've learned also that Canadians are investing more and more themselves as foreign investors, purchasing assets abroad. In the free global market, capital comes and capital leaves, and capital seeks opportunities. That's why it's so important for us to be attracted to capital, to attract foreign investment, as well as provide a marketplace in which Canadians can start businesses through innovation, and that indeed is what the innovation strategy is all about.

So, broadly, my answer to the foreign ownership point is that we have to make Canada a place that's attractive for Canadians to start businesses and make them successful, and an attractive place for others to invest to provide the capital that's going to be needed to develop our economy--all within the conditions of the Investment Canada Act, which have “net benefit to Canada” as the bottom line.

The member also mentioned the cost of drugs. One of the things I learned as Minister of Health is that it's difficult to look at these things in isolation. The cost of drugs in relation to what? The cost of drugs in relation to overall treatment? I think you have to take into account that the use of pharmaceuticals sometimes makes surgery or other interventions unnecessary, so you have to look at the net cost in our system.

I think you also have to look at the relative cost of drugs in the world marketplace. Over the last ten years, as a result of the Patented Medicine Prices Review Board, Canada has maintained a highly competitive cost of drugs in relation to other competitor countries. Indeed, it's not for nothing that you see references in the media to American busloads of seniors coming to Canada to purchase their pharmaceuticals. It's not for nothing that you see members of the Senate and Congress holding up charts as they make submissions on the congressional floor about drug costs, drawing attention to the gap between prices in Canada and the United States.

Just last week on C-SPAN, I observed exactly that spectacle as a senator made that point in relation to a variety of pharmaceuticals.

Are we ever going to get agreement between generics and brand names on what the right balance is between patent and competition? Are we ever going to get unanimity on whether the NOC regulations are right or should be adjusted more? I predict not. I think there are powerful forces at work, with deeply vested interests. It's up to us to look at the public interest and make sure the balance is right.

Members of this committee will have differing views as to what that ought to be. As I've already observed, if this committee wishes to look at the regulations under the Patent Act or any other act of Parliament, it's entirely up to this committee to do so.

À (1010)

Mr. Dan McTeague: Minister, the evidence demonstrates that the rising cost of drugs in this country is among the fastest in the world. You cited the example of the United States, and I know there are senators who are trying to remove the notice of compliance with respect to the right of automatic injunction, the equivalent down there.

I also know the Canadian exchange rate, relative to the U.S., is far less, but with the question of reimportation, we may very well see a scenario in the next two to three years where drug prices are in fact higher in Canada than in the United States. We don't have the benefit of any of those maisons-mères, any of those head offices, doing their work in Canada as they do in the United States.

So, Minister, you've gone from a situation in the life of my government, our government, of having some of the lowest drug prices in the world to having some of the highest drug prices in the world.

You cited the example of the BlackBerry a few minutes ago. I know many knock-offs and different patented copies have been made since then, as part of our innovation. If there is really value to drugs that they've been sitting on for 24 or 25 years, is that not a sop to innovation at the expense of the productivity and innovation of our country, sir?

Mr. Allan Rock: I mentioned already my hesitancy to launch into an analysis that is now the responsibility of another minister. So I'll restrain myself from discussing at length the phenomenon of pharmaceutical costs as an element of Canada's overall health care system. That's for another minister now, and perhaps you will care to hear from her.

I will, however, talk about innovation, and I think it's important for the industry minister to focus on an economy that attracts investment, that clears the way for people who want to invest in new ideas and bring them to market. That means getting regulations right, striking the balance.

In terms of the Patent Act, as in any other statute, we try to achieve that balance and maintain it. We periodically re-examine it critically to see whether we have it right, and if the committee wants to do that, that's up to the committee.

The Chair: Thank you, Mr. McTeague.

Ms. Gallant.

Ms. Cheryl Gallant (Renfrew--Nipissing--Pembroke, Canadian Alliance): Thank you.

Mr. Minister, the Office of the Ethics Counsellor falls under your portfolio. Why won't you table all the ethics counsellor's guidelines and conflict of interest investigations?

Mr. Allan Rock: Well, as you know, the ethics counsellor reports to the Prime Minister. The ethics counsellor is structurally a part of Industry Canada, but your inquiry might better be addressed elsewhere.

The other answer I would give is that if the ethics counsellor gives advice to someone, a member of Parliament from an opposition party, a minister of the cabinet, the Prime Minister, or anybody else.... I would have thought that if you want to have people come to the ethics counsellor for advice--and that's what the ethics counsellor is there for--you want to have some degree of confidence in that advice. But as I said at the outset, the ethics counsellor reports to the Prime Minister.

Ms. Cheryl Gallant: Given that he does, I'd be surprised if opposition members were willing to do that.

Why does the Office of the Ethics Counsellor not appear in the estimates, but it appears in the government phone book under your department?

Mr. Allan Rock: I'm sure there's a good answer. I don't know what it is, but we'll get that for you in writing.

Ms. Cheryl Gallant: Do you know how much the Office of the Ethics Counsellor costs the taxpayers each year?

Mr. Allan Rock: I can get that for you.

Ms. Cheryl Gallant: I can't find any reference to cost in any business line. Since he's never found a conflict of interest, I wonder why we bother to pay him.

Mr. Allan Rock: Well, it's easy to be cynical about the ethics counsellor. I know you've asked some questions here and in the House that are, but bear in mind that there was no ethics counsellor before this government created the position in 1994. The ethics counsellor was appointed only after consultation with all parties in the House of Commons, and the ethics counsellor exists for the purpose of giving advice to people, of being a place where you can go for advice when you have a question in your mind about conflict or propriety.

I know there's a debate about who the counsellor should report to and how much of the work should be made public, but it seems to me that the creation of the Office of the Ethics Counsellor with the way he functions is an important part of the evolution in this country toward a very responsive and effective means of ensuring, in the public interest, that proper values are respected in public life.

Ms. Cheryl Gallant: Knowledge-generating crown corporations are sitting on patents, renewing them with taxpayer dollars year after year. How, under your innovation strategy, do you plan to convert the patents into commercial applications, thereby creating the jobs and revenues so we can have future...?

À (1015)

Mr. Allan Rock: I'm afraid you're going to have to give me more of an idea of what you're talking about there. Knowledge-creating crown corporations are sitting on patents, you say?

Ms. Cheryl Gallant: Yes. An example is AECL. They have a treasure trove of patents. They're sitting there locked away, paid for by our money, and we can't convert them into commercial applications. In your innovation strategy, how would you propose that we get these rolling so that Canadians can benefit from the knowledge that's been generated?

Mr. Allan Rock: Well, I'll have to take it up with the Minister of Energy for what patents AECL is sitting on. I'll be frank; I don't know enough about your question to give you a specific response. I'll have to look into it, Ms. Gallant.

Generally, we want new ideas to be brought to market, right?

The Chair: Ms. Gallant, you mean they're sitting on patents and not research, is that right?

Ms. Cheryl Gallant: That's correct. They're not generating revenue, and that's the reason for the question.

But there is a patent we may be more familiar with, the Ballard fuel cell. You mentioned that government's role is to clear the path so that the generation of knowledge can have a commercial benefit. Now we have this situation with Ballard fuel cells. When they attempted to get their commercial applications.... They're now just about at the point where they can have mass production of their hydrogen fuel cells, which will be put into vehicles so we can be a little nicer to the environment by reducing emissions.

But when they attempted to put this forth, the feds zoomed in and now are trying to cash in on royalties for the patents where Ballard themselves were responsible for the research and development. The government isn't happy to be reaping the corporate tax benefits and the personal income tax benefits that will come forth when these fuel cells go into mass production. Why is it that the government wants to double-dip?

Mr. Allan Rock: I'm sorry, I'm not understanding what you're asking me. Maybe you could develop a little more the elements of your question. What was this about the government swooping in?

Ms. Cheryl Gallant: Well, the Ballard fuel cell company has patents and are at the point where they're going to start mass producing them.

Mr. Allan Rock: Is this for commercial automobile manufacture?

Ms. Cheryl Gallant: That's correct.

So now what the government is saying is, “Just a second, those are our patents you used; we want a cut of the action.” Ballard fuel cells is saying “No, these patents were generated from our own research and development”.

Here we have a company that has grown leaps and bounds on its own and has put its money into research and development. But way back in history, through the Department of National Defence, when they were developing fuel cells for submarines, there were patents made in collaboration with the Canadian government. They're saying because they did that decades ago, now they deserve to have a portion of the royalties when the Ballard fuel cells go into mass production.

Mr. Allan Rock: I must say, meaning no disrespect, I don't understand. If you would give me that in writing, I promise to look into it and give you a written response.

I'll take a risk--and it's always a risk to hazard an answer--but it may be that we're looking for a return on our investments through Technology Partnerships Canada, because I know there was a TPC investment in Ballard. As for that, you may want to talk to your colleague, Mr. Rajotte, who is concerned we're not getting our investments back quickly enough. The two of you might get together and decide whether you want us to get returns on the investments or not. When you've sorted it out, put that in your letter too.

Ms. Cheryl Gallant: The U.S. approves patents, trademarks, and intellectual property at a far higher speed, despite the exponentially higher volume of applications. What are you going to do to speed up the process in Canada?

Mr. Allan Rock: I think in patents, as in anything else, if we can do a better job, we should. I talked earlier about drug approvals. I have no doubt my own department and other departments of government can do a better job. If it can be shown that we're falling behind or we're not keeping up or not doing a good enough job, then we should try to do better.

Part of being an innovative economy is having an innovative and efficient regulator. We should never have lack of competence or lack of efficiency in government as a reason why someone can't get to market in a very highly competitive context. I'm concerned about that, and if we're not doing a good enough job there or anywhere else, then we should look at how we can improve it. Sometimes that means more resources, as in the case of drug approvals at Health Canada; sometimes it means doing the job differently by having electronic filings; sometimes it means looking at the regulations to see whether they require too much paperwork or are too onerous.

So if the thrust of your question is that government itself has to do a good job, I agree with you. If there are places where we're falling down, please point them out to me.

À (1020)

Ms. Cheryl Gallant: Thank you.

The Chair: Thank you very much.

Mr. St. Denis.

Mr. Brent St. Denis (Algoma--Manitoulin, Lib.): Thank you, Mr. Chair. I know there are others who wish to ask questions--

The Chair: Yes. You're drawn and then Mr. Bagnell.

Mr. Brent St. Denis: --so I'll limit myself to just one short question.

Thank you, Mr. Minister, for being here.

I was pleased that in your presentation to the committee you asked us to consider the issue of community development as a possible area of study for our committee. I would certainly encourage the chair and all colleagues to consider your request quite seriously. Since I represent a large, rural northern Ontario riding with some 60 communities, you can believe it's a very important matter to me and to the chiefs and mayors and reeves of those communities.

I would like to point out that I have a little disagreement with my friend James Rajotte across the way: I do support the notion of investing in pure research. It's very important, but not at the cost of removing from rural Canada the very important programs that come through FedNor, for example, in northern Ontario--programs delivered through our local CFDCs, which receive money through FedNor and through HRDC.

I take it that, as the consultations move forward, we're looking for ideas that build on what we're doing in the area of community development, not ways to get out of it. With rural depopulation an issue, with a need for immigration to the rural areas--and I'm pleased with the important references to broadband for rural areas in the report--I'm just wondering, Mr. Minister, if you could talk a little bit about your view of opportunity development and could maybe consider the smaller rural context and whether it might be possible that, as this beginning report has its future evolutions and progress reports and a final report, we could look at the unique nature of urban economic development and rural economic development, not as antithetical concepts but as complementary pieces. In fact we need a strong city economy for a strong rural economy; we need a strong rural economy for a strong city economy. They're not antithetical.

I wonder if I could get a few comments from you on that.

Mr. Allan Rock: In the first few days of April, our colleague, Andy Mitchell, the Secretary of State for Rural Development, invited me to Charlottetown for his second annual rural economic development conference. Some 600 people from all over the country were there, and it gave me an opportunity to talk about the innovation strategy in the rural context.

The message was that innovation is everybody's business. Innovation is not just high-tech people in white coats in sophisticated labs in large cities. Innovation is the farmer using technology to determine how to increase yield of the crops in the fields; innovation is the bed and breakfast in the small town using the Internet to advertise; innovation is the small business in the rural community using the Internet for e-commerce to better manage the supply chain to purchase inventory and to market goods. As you say, we're not going to succeed unless we have a strong urban and strong rural economy. Broadband is a large part of this, because unless you get that capacity out there, you won't be able to take up those opportunities.

When I was in Health, I discovered one of the barriers to getting doctors to come into underserved areas is a sense of professional isolation. If you can't have a cluster of doctors on Manitoulin Island, just to take an example, even if you had one physician who was connected through the Internet to continuing medical education, that person could keep abreast of developments in the field, could refer cases to specialists through tele-consultation, digitizie the results of radiological tests, and consult with an expert in Toronto and Montreal. The ability of that physician to communicate with others on the net would help enormously to overcome that sense of isolation and make it more likely we'd attract doctors to those areas.

What I'm trying to say is that innovation is very much relevant to the rural context. It ties into the broadband strategy, and it very much involves allowing rural Canada to reap the benefits of e-commerce. I gave examples in my speech in Charlottetown. I'll e-mail you a copy so that you can have a look at it.

À (1025)

Mr. Brent St. Denis: Thank you.

Mr. Chair, could I share my time with my colleague, Mr. Bagnell?

The Chair: Yes, we're going to him next.

Mr. Larry Bagnell (Yukon, Lib.): Since we only have two minutes left, I just have one question.

Whitehorse has always been under the stranglehold of one airline, a monopoly. I think it costs over $2,000. You could go to Europe four times for that. In a couple of weeks a new airline is starting, Air North, a local airline, which hopefully will make a level playing field.

In the Competition Act amendments and reports that we've recently passed, there are more provisions to help hold the airlines accountable. I hope you get a more competitive playing field in Canada for that, which will be very important for our new airline, and I hope you're fully supportive of those provisions. Do you have any comment?

Mr. Allan Rock: In fact, on April 18, I testified before the Senate committee on Bill C-23, which are the amendments to the Competition Act. I expressed myself fully in support of all of those provisions. I'm delighted that since then the bill has received clause-by-clause reading in the Senate, and it looks like it will be reported out of the Senate very shortly with no significant change.

Mr. Larry Bagnell: Do you have any other comments on the north, which of course is where my riding is? I'm very interested in that, in industrial development.

Mr. Allan Rock: Mr. Chairman, Mr. Bagnell and I have had an opportunity to talk at length about what innovation means to the north. Building on the comments in my response to Mr. St. Denis, I think innovation is particularly relevant to the territories in this country because it's all about connections, it's all about linkages, and it's all about enabling. If someone has a dollar to invest in your riding, then the return is all the more assured if we can make certain that this business has a chance to be competitive with businesses anywhere else in the world, because of the Internet, and make certain that it can market its services, link its suppliers, manage its inventory, and report its results in a way that's modern and efficient.

As I fight for more dollars for broadband earlier, we'll have the north in mind, and I know we'll have your support and the support of this committee in that effort.

Mr. Larry Bagnell: Thank you.

The Chair: Thank you, Mr. Bagnell.

Thank you very much, Minister, for taking the time today. We look forward to the MP kits, the schedule, and all the information you will be unveiling on Thursday on the innovation strategy. Hopefully, we'll find our place, as a committee, as partners in making sure the innovation papers are dealt with as soon as possible.

If there any parting remarks, I'd ask you to make them now.

Mr. Allan Rock: I'd like to thank the committee. I very much look forward to working with you and all members on this shared effort.

Merci.

The Chair: Thank you.

À (1030)

Ms. Cheryl Gallant: I was surprised and somewhat disappointed that this meeting was not televised. Given that the minister gave of his time, and we know how important time is to the minister, I was wondering if there would be any objection on the part of the government to have a standing request that when the minister does appear before us we could have it televised.

The Chair: There are rules of the House. Usually, it's between the House leaders to resolve. Usually, the first one or two ministers in front of committees are televised. If there are more ministers in front of committees, then the House leaders decide.

Ms. Cheryl Gallant: It's my understanding we didn't have this televised because it wasn't requested. I know, in other committees I've worked on, there is an actual motion that goes forth.

The Chair: I'll take it under advisement.

Ms. Cheryl Gallant: Thank you.

The Chair: Thank you.

The meeting is adjourned. See you tomorrow afternoon.