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, March 20, 2001

• 0907

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): I call the meeting to order.

Pursuant to Standing Order 108(2), we are here to consider science and technology policies.

We're very pleased to have with us today Dr. Tom Brzustowski, president of the Natural Sciences and Engineering Research Council of Canada.

We know you have a presentation for us, and it's one we would like to see. After that, hopefully, you'd be willing to entertain questions.

Mr. Thomas A. Brzustowski (President, Natural Sciences and Engineering Research Council of Canada): Thank you, Madam Chair, and thank you for the invitation.

I have asked that one very colourful sheet be distributed to members just by way of introducing what NSERC is and what we do, not in terms of numbers but in terms of the human side of our activity—what our vision is, why we're doing what we do, and how we do it.

My presentation this morning is a work in progress, Madam Chair.

[Translation]

It is ongoing work. A draft has been written. It was only finished yesterday. Translation has started but has not been completed yet.

[English]

As soon as the translation is done on the draft paper, which will be distributed at the end, we will provide it, of course, to the committee in French.

I will be leaving for committee members a hard copy of the final version of the slides that I will build up in animated fashion. I think they will serve as a useful reminder to members of what I've said. If you saw them complete now, without hearing the arguments, you would find them bewildering, so I won't do that initially. I will also provide copies of the narration that goes with the presentation.

With your permission, Madam Chair, I will begin my slide presentation.

• 0910

The attempt here is to try to understand a very complicated system. This is something we have been learning for some time. As I said, this is a work in progress, and we will share with the committee what we've learned. We would welcome comments that would point out where we've made errors or left gaps. If the readers of this material can add these comments, I think we will all be the wiser.

Let me begin, then, with the big picture first. I will look at details of one area of the Canadian economy. In the last two slides—there are eight in total—I will show how the results of basic research are connected to the market in innovation, and how the results of product research, in partnership with industry, are connected to the market.

There's Canada and there's the world. As I go along I will describe for you the colour code I'll be using.

First, I will use blue for the flow of knowledge. This is the flow of new knowledge resulting from research that Canadians do—Canadian universities, Canadian government labs, and Canadian industry. That's 4%, and then 96% of the world's new knowledge comes from research done in the rest of the world.

Right away I can make my first conclusion here, that this 96% is available to anybody who has the ability to understand it. You have to be very good at the 4% and do it in all the key areas in order to understand the 96%.

We also have flows of what is called “tacit” knowledge, the knowledge that people have in their heads and in their hands, which they bring with them. They bring it with them when they immigrate to Canada. They take it with them when they emigrate from Canada. I've drawn the arrows roughly equal. I don't wish to get into a debate on brain drain here, but I'm introducing the colour brown for the flows of people.

Then, it's very important to have foreign direct investment, investment by multinational enterprises who will bring knowledge with them. When a company builds a plant here, and the technology in that plant arrives in Canada, the know-how and the market knowledge come in as well. When Canadian multinationals invest in other countries, that flow is in the other direction.

I haven't shown the knowledge flow that accompanies that. I didn't want to clutter it up. We'll use the colour mauve for investment flows, brown for people flows, and blue for knowledge flows.

With regard to traded goods and services, the products that Canada puts on the world markets, whether they're goods or services, if those products are commodities—that is, they're available from many sources around the world, they're available in like quality, like functionality—then one has to take the price that's set by the world commodity market.

Now, commodities these days aren't just bulk wheat, and as for innovation, the high-tech innovation of 20 years ago, the VCR, is today a commodity product. It can be bought from many sources. The functionality and the quality are the same.

We export lots of commodities. We import some. The traded goods and services that are not commodities are innovations. Innovations are new products that are available from only a small number of sources. The people providing them can set the price at whatever level they need to in order to recover the cost of producing them. We import many more innovations than we export.

So this is the big picture. I'm going to be talking about the relationships from now on in terms of the flows of knowledge, the flows of investment, the flows of people, and the flows of products. I will label the commodities green and innovations red.

• 0915

I'm going to look at the Canadian economy showing the Canadian industry, Canadian market, university research—I want to position university research in this, in science and engineering—and government research. I will show the flows in this way.

Commodities are exported by Canadian industry and they're also imported, in raw materials, by Canadian industry. There are commodities imported directly into the market. There are commodities sold into the Canadian market by our industry.

We also import innovations. Innovations imported into industry tend to be new equipment, new instruments, new processes, but innovations coming into the Canadian market just underlie that we often don't realize that we're dealing with innovations in this economic sense. New fashions are innovations, available only from one source—namely, the original designer. Entertainment products are innovations. New consumer electronics are innovations. All of these things are innovations. They come directly into the market.

We do export. Canadian industry exports some innovations and also provides some directly for the market.

The codified new knowledge is produced from three sources. There is some research in industry, there is government research, and there is university research. By “codified” new knowledge I mean things that you can write down in a book—publications, patents, and other things.

The knowledge from the rest of the world comes to industry directly, to government research, and to university research. The interesting thing about knowledge, of course, is that if there is a supply of new knowledge out there, the fact that you're using it doesn't make it any less available for somebody else. That's one of these strange commodities. But to get at it you need to understand it. If you don't understand it, the book is closed. It's not accessible. So from the other 96% we have these flows.

There's a hugely important kind of knowledge, hugely important for industry, which you don't get from business schools and you don't get from books. This is knowing the market in which you work; knowing what products the competition is producing; knowing what the features of these products are; and knowing where the consumer demand is that's not being met. I call that market intelligence and product information. Canadian industry gets that from world markets and from the Canadian market as well.

Then the investments by MNEs and tacit knowledge will flow in. When General Motors, say, opens a plant here or puts in a new assembly line and they flow out...for example, when JDS Uniphase sets up a plant somewhere outside of the country. I've been told that very recent data would show that the arrow should be thicker for the flow out of this than for the flow in, that Canadian-based multinationals have been investing more in foreign direct investment than we have been able to attract. Not all of my arrows are the right thickness.

With regard to highly qualified people, they obviously flow from university research to industry. They flow from government research to industry in smaller numbers. There is a flow between government research and university research. We have immigration directly into industry. We have immigration into university research. We have emigration from both of these.

Government research sees the same flows. You can see from looking at this diagram why I didn't want to give you the final version of this before developing the arguments. I hope it'll serve as a good reminder, but it would be bewildering to be hit with this first.

There's one more flow of highly qualified people that we shouldn't be proud of. These are people who come in and who are not allowed by various restrictions to practise their professions in this country. If there's brain drain, there's also brain waste, and this is it.

We have a flow of knowledge from government research to industry. We have a flow of knowledge from university research to industry. We'll get into more detail on this later. Quite often the flow of knowledge—and I'm thinking now of both small businesses and IRAP—is accompanied by an investment. The IRAP program of NRC provides both knowledge and funds to small companies, whereas the flow of knowledge from university research to industry is in return for a flow of funds that goes the other way.

• 0920

Now I'm going to look a little bit at the flow of knowledge and investment in the university, industry, and government triangle. There's industry, there's government research, there's the university research. What are some of the flows?

Well, government research provides problem solutions for industry under a contract. For example, when you're driving out to the airport, on the right-hand side as you approach you'll see the white wind tunnel, with NRC on it, where Bombardier tests air foil shapes. They're under contract, and that's where the work is done.

The same thing happens in industry, but sometimes it's under contract and sometimes it's under a grant. So this is university research that provides problem solutions for industry.

There is a flow of discoveries and inventions. Government research, which we've seen a lot of in Ottawa, provides IP, or intellectual property, to industry. The same thing happens from university research. R and D assistance, as I mentioned earlier, of the kind that combines both knowledge and investment, is particularly helpful to small companies. I'm thinking of the IRAP program here. Research support now goes from industry to university, both in dollars and in kind. “In kind” means that the researchers and the university have access to industry equipment and industry personnel.

There is a flow of knowledge among government research and university researchers also, particularly at the level of individual scientists who find that they have complementary interests and complementary equipment. So university people use equipment in government labs and government researchers supervise students in universities where there are common interests.

There's one more hugely important knowledge flow from government research to industry, which I call “standards and certification”. This would be Health Canada approving drugs. This would be NRC developing the national building code. This would be Transportation Canada setting safety standards for automobiles. These types of functions make up a hugely important knowledge flow from government research to industry.

Let's look a little more closely now at the interaction among industry, government labs, and universities. I put university research at the top here because I needed the space.

I'll divide industry into three kinds of firms—firms that do or buy R and D; those that have no R and D at all; and those that are research-based or technology start-ups.

Firms that do or buy R and D produce innovations, and firms with no R and D produce innovations. For example, the whole design industry, people who design clothing and furniture, and the entertainment industry produce innovations without any R and D. We can't ignore the fact that they are innovations in the economic sense, and very important.

They also export commodities, as do some firms that do or buy R and D. Our natural resource industries do R and D but they export commodities. The improvements in the efficiency with which a barrel of crude oil is produced from the oil sands at Syncrude is the result of 30 years of sustained R and D, which has brought the cost down from around $30 a barrel to around $12, I think, at the moment. That's sustained R and D effort but they do export a commodity product.

There is a flow of innovation from firms that do R and D to firms that don't. This could be tools or equipment. Start-ups live and breathe on innovations and they provide them to everybody. Market intelligence and product information is hugely important to all of them. In fact, the start-ups will never get financing unless due diligence shows that there is a niche in the market, that this is a product for which there is a demand, and that it's a product that's better than what exists. So they live and breathe on that.

• 0925

Results of Canadian research go mainly to those who do R and D. Foreign direct investment goes into established firms. It's very seldom that a large foreign company becomes aware of a Canadian start-up until the start-up has produced something that's reached the market. Government R and D assistance goes only to those who do R and D, obviously. Discoveries, inventions, and intellectual property flow from university research to firms that do R and D and to start-ups.

Here there is a very important phenomenon, one that people tend to overlook sometimes even though we have examples around Ottawa of how important this is—that is the flow the other way from established firms that do or buy R and D to the start-ups. The flow will be people. These may be technical people, but very often they're technical managers with management skills and experience. There's the flow of knowledge, which may be intellectual property, or may be unprotected property and know-how, and a flow of money.

We've seen countless examples. Think of how Bell Northern Research had been acting as an anchor for a lot of new companies in this area. That's a very important phenomenon.

So there are the obvious people flows, those from research, and then there are other flows from immigration, emigration, and so on—everything you would expect.

The important thing to notice here is that there are firms that do R and D. There are firms that don't do R and D. There are start-ups. There are connections among them, some of them not obvious, such as the flow from established firms to start-ups and the flow of products. Innovations of many kinds can flow from all of these.

We're getting closer to the main impression I'd like to leave with you, and that is the role of university research in all of this. So we'll take an even closer look at the impact of university research in science and engineering.

We'll start with university research and science and engineering and divide it into two kinds. I really think this is something worth noting. A lot of people get very vague when they talk about research. When you send a high school student to the library to prepare for a paper, is that research? No, it isn't. Research is learning that which nobody yet knows, nobody anywhere.

Basic research is research carried on to make discoveries about nature, about ourselves, about our position in nature. Project research is research done to solve problems, very often from industry but sometimes from government, that can't be solved with the knowledge we have today. So you have to create some knowledge to solve the problem. That's done very differently from basic research. NSERC supports those two categories of research.

The main input to this? Students. Somebody once said that students are to new knowledge what mosquitoes are to malaria, and aren't we glad. They really are the carriers of new knowledge. The knowledge from existing research, existing knowledge, is another major input.

Then there are operating costs of the research. They come in two flavours. One is direct, provided by NSERC, and the other is indirect, provided by the university. I'll stop here and say a word or two about that.

Universities have to provide the cost of being in the research business. They pay for having the capacity to purchase modern instrumentation; for having the accounting capacity to deal with all the regulations that we force on them; and for having the capacity for proper provision of animal care, service labs, computer networks, and libraries.

These are the things that aren't attached to any particular research project that's funded. They're paid for by the universities out of the operating money they get from the provinces and from tuition. The direct costs from NSERC include expendable supplies, the support of technicians, repairing and maintaining equipment, and then actually operating the equipment, logistics, travel, and so on.

• 0930

The funny thing is, in the Canadian system—we're unique in the world, and I'm not happy about this—if you add the indirect costs to the direct costs you don't get the total costs. What's missing in our formula is the time of the principal investigators—the professors. They're not included in the indirect costs and they're not included in the direct costs. They're paid from two sources, most of them from provincial funds that enter university salary budgets and now a few from the Canada research chairs program.

The research infrastructure is paid for by three groups—the provinces, the CFI, and private funds. There are sometimes matching arrangements between CFI and the provinces and private funds.

What is the relationship now with firms that do or buy R and D? Well, they support basic research through their taxes, but they also support project research very directly, in specific areas that are of interest to them. They pay a share of the cost in dollars and in kind, and they define the problems.

The outputs? Highly qualified people, real knowledge workers, people who are educated in basic research know the sources of knowledge around the world. They can assess what's good and what's bad. They understand what's being done. They know who are the people producing it, and they have networked with people of their own generation. They have the ability to generate new knowledge when that's needed. They know how to use it.

But you also have highly skilled people being educated in project research. They can go to work in any sector, but they're particularly valuable to the companies that have been partners in supporting project research. These are students who know the business of those companies.

The codified knowledge, the contribution to the Canadian 4%, comes largely out of basic research but not entirely. Some of it comes out of project research. Some of it flows back to the sponsoring companies in the form of solutions to their problems. These may be reports, these may be patents, or these may be software, but another stream—and this will be the subject of the last two slides—is discoveries or inventions that have the potential to become innovations, the potential to be commercialized as new products on the market.

It's not a large proportion. They enter first stages of commercialization in the universities, and they can go either as a licence to an existing firm or the basis of a start-up. Then the flows of innovation follow from that. It's a very complicated set of relationships, but if we understand these things well, we'll be able to sort out where the bottlenecks are and where the improvements can be made.

The last two slides contain the two points I've been leading up to, the connection between university basic research—no commercial goal at all, no problem being solved, with discovery as the goal—and the market. How does that happen?

Well, public funds provide support for basic research. That produces discoveries. It may produce inventions. Much of the output is codified new knowledge. That's the contribution to the Canadian 4%, but not all the output. There may in fact be some discovery or some inventions that have the potential to become innovations in the market, but that has be recognized by somebody. Someone has to be aware that, yes, there's something there, and somebody has to be able to demonstrate it. If you recognize it, and if you demonstrate it, you can create some intellectual property.

Members might have heard of the Fortier report on the commercialization of university research. It identified a bottleneck in terms of the shortage of people in our universities who have the capacity to recognize that something may have an impact in the market and then demonstrate it to others. We have a shortage of these people, a great shortage.

Once you have intellectual property, it then enters a commercialization process that is fed by a succession of growing private investments. This starts out with love money from the family. It comes up next to angels, then early stage, and finally venture capital and so on. It goes into the market.

Of course, not all products make it into the market, and some will fail in the market, but some might actually become a successful innovation, a product that begins to be sold and make money.

• 0935

What does it do? It creates new value-added economic activity, which produces, through the tax system, a return into the public funds. It provides a return on the private investment and produces benefits to society in terms of the availability of the service or the product, jobs being created, and what have you.

So what we have here is a very interesting thing. You have publicly funded research, whose costs, it turns out, are many times smaller than the private costs of commercialization. There are people who say that to commercialize a typical university invention might cost ten, a hundred, or maybe even a thousand times more than the cost of the research. So the basic research acts, in those rare instances, as a catalyst that sets into motion a lot of private funds that create activity in the economy.

This is a very difficult process, because it's almost pure technology push. Nobody is asking for this stuff. At the bottom there's a guy who says, “I have a great idea”, and there's nobody saying, “I have a great need”—a very different system.

The last slide will show you how university project research, which already involves industry with partners, is connected to the market. When I started doing this, I thought it would be a much simpler process. I've learned that it isn't. In a diagrammatic sense, it's in fact much more complicated.

Remember, project research is undertaken to solve a problem that somebody poses, most often industry, that can't be solved with existing knowledge. If it can be, the company goes out and gets a consultant to do the job. If it can't be, this is where that sets in.

So public funds now provide only partial research support and a partner company provides the rest. It provides it in dollars and it provides it in kind. Problems are defined, and results, discoveries, and inventions produced. A small portion of them are published as papers, reports, and what have you. A portion go back as solutions to those problems. Another portion in fact is discovered to have the potential to become a new product, innovation potential, potential intellectual property. That goes into an internal commercialization process in a company.

You may think this is easy. There's going to be some market pull here, because the company wanted this stuff. It has its own internal processes for taking things to market. And sure enough, some of that happens, but there are also failures to get to market and failures in the market.

In addition, very often the company will simply not try to market a piece of intellectual property at all. It doesn't fit with its strategy. It might be too expensive, or it might be too far from its core line of business, so they create a start-up. Sometimes that happens not at the beginning of the commercialization process but partway through it.

Sometimes a product is developed that is put on the shelf for strategic reasons: “Hey, we can't have this thing competing with our mainline product, which is making so much money. As long as the competition doesn't come up with something similar, we'll just keep this one on the shelf.” That's perfectly good strategy if you're a businessman.

So the start-up enters the commercialization process, as you've seen, and might produce successful innovations in the market. But there's a new touch. I learned about this quite recently. Quite often a company, maybe the same company that had been the partner, will buy this start-up and the mature technology. Why do they do this? They do this to get around their own internal frictions. This is in the area of destructive innovations versus sustaining innovations. A lot of research is being done on that at Harvard Business School.

You can put yourself inside a company and understand how this happens. For instance, the vice-president of sales will say, “We can't develop this. You're going to have my salesmen go out there and say to the clients, to whom we've been saying, `This is the best thing in the world', that it's the second-best thing now because we have the best thing coming right behind it? We can't do that. We're already profitable in this line. We've made our investments. This is what the clients want. Why should we develop it?” So they put it into a spinoff. But once it's a product ready for the market, they can buy it and say, “We've just expanded our product line”. This happens time and time again.

• 0940

Of course, you get the value-added economic activity, benefits to society, return to public funds from taxes, and the return on investment to the private investors.

What I've tried to do with this is share with members, to the extent that we now think we understand it, the role that university research in science and engineering plays in Canada's innovation system. This is a work in progress. In the text I have explicitly written the invitation for people to point out errors in this, to help us fill gaps and get a better understanding. We'll all be the wiser if we do that.

It seemed that so many things were taking place that it might be worth the effort to try to put them in order along some organizing principles. This is what we've done. We'll be ready to hand out the hard copy of all of these diagrams in their final form and the text of the narration I just went through.

Madam Chair, I'll end right here. I'd be very happy to try to answer any questions people might have.

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

We're going to begin with questions from Mr. Rajotte.

Mr. James Rajotte (Edmonton Southwest, Canadian Alliance): Thank you, Madam Chair.

Thank you very much for the presentation. It was very informative.

I want to start off by asking about what you referred to as the brain “waste”. You mentioned that there are people who come to Canada with certain skills but they're unable to practise or use the skills that they come to Canada with. I was wondering if you could just expand on some of the factors they face and why it is they cannot use those skills in Canada.

Mr. Thomas Brzustowski: This happens in a number of professions that are governed by various provincial acts—for instance, the act that governs the engineers in the province, or the accountants or lawyers or doctors. People coming with a professional education and even with experience in practising overseas sometimes have to wait a long time and take many examinations and courses before they are allowed to practice. Others find the process so time-consuming they just don't do it.

The result is that they are doing jobs for which they are, I would say, overqualified rather than using their experience to the full. I think it's a loss to the country.

Mr. James Rajotte: It's mainly at the provincial level, then?

Mr. Thomas Brzustowski: It is at the provincial level, yes, at the associations.

Mr. James Rajotte: Is there anything we can do at the federal level to facilitate that?

Mr. Thomas Brzustowski: I wouldn't be the person to answer that question. I just don't know. I just know that it occurs at the provincial level.

Mr. James Rajotte: You also mentioned the brain gain and the brain drain. What is your latest analysis of how Canada is doing in terms of the number of professional scientists or researchers we're bringing in versus the numbers that are leaving?

Mr. Thomas Brzustowski: I don't have an analysis. I accept what Statistics Canada has said—that is, that the flows are roughly equal and maybe somewhat positive for Canada if you simply look at the number of people and the formal education they bring with them.

• 0945

Against that, though, we have a phenomenon I call the “loss of leaders”. In our universities—that's the group I know best—senior people in whom we've invested for a decade or more pack up and leave, generally for the United States, with quite often a team of people.

Does one leader leaving equal fifty people coming in with formal qualifications? It depends on the individuals. I wouldn't want to put numbers to this. But there is a sense that on a number of occasions people have left mainly because they feel that they will be able to achieve more in other settings, where they will have more time for research, better equipment, better facilities, and, very often, a collection of colleagues. It's joining a critical mass rather than being the big fish in the small pond.

I say the loss of leaders is serious. I think we will succeed in reversing some of that with the Canada chairs program, but it's too early to tell. I'm quite happy to accept the Statistics Canada conclusions on the numbers.

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

Mr. Alcock.

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

Perhaps I could jump in on that earlier question from Mr. Rajotte. One of the issues there is that there are also professional associations that tend to act to keep immigrants with foreign qualifications out of practice here in Canada.

Let me raise two questions here that you and I have talked about before. The first is the policy at NSERC around partnering and the influence of external sources of funding supplementing grants that NSERC gives. It has been a concern that we have raised from time to time over the last three or four years that this may be drawing more research money into communities with larger external pools of money, such as a larger corporate community or a provincial government that is prepared to invest more heavily than other regions of the country.

Has this had an impact on the funding policy at NSERC?

Mr. Thomas Brzustowski: No, it hasn't had an impact on the funding policy. It would have had an impact on the results, and in this way. My very last slide showed that in the area of project research, where, say, a company or perhaps a government or a public institution brings a problem to the university that can't be solved with existing knowledge, they're prepared to pay part of the costs of a project. But a project is defined in terms of deliverables. Something has to be delivered for that. It's additional money for an additional obligation.

These partners provide, on average, about $1.60 to $1.70 for every dollar of support that NSERC provides to support these projects. The projects are peer reviewed for good science and so on, but the fact is, we get the applications from the universities and they already come hand in hand with a partner. So if there's not a partner locally who defines such problems, then they're not likely to be applying for these kinds of funds.

So it doesn't skew the policies but it certainly skews the outcomes.

Mr. Reg Alcock: So there is an impact in the distribution, the final outcome—

Mr. Thomas Brzustowski: There is an impact in the distribution.

Mr. Reg Alcock: —and along with that, then, the strength of the critical mass of research that would be available in the community that didn't have availability of these additional funds.

Mr. Thomas Brzustowski: Well, which comes first? The people who seek to have their problems solved will go where the ability or the capacity exists. They certainly correlate well. So which comes first, the chicken or the egg?

There's no question that doing more project research reinforces the capacity, but I think the partner companies initially look for those who have the competence to help them immediately, not five years down the road.

Mr. Reg Alcock: But if one were to stand back and examine the distribution of research in Canada, would it be fair to say that a greater proportion of it has been drawn into large communities where there are large external resources?

Mr. Thomas Brzustowski: Oh, yes. I think it's quite clear, and there are reasons for that, a number of them.

Mr. Reg Alcock: Okay.

• 0950

I notice that in your mission statement you talk about the Canadian economy and improving quality of life for all Canadians. Does NSERC see it as part of their mission to push back against that trend?

Mr. Thomas Brzustowski: NSERC sees it as part of their mission to help as much good research get done in the country as possible. As you know, last year the senior management of NSERC spent considerable time visiting eleven universities in Atlantic Canada and five in the west in response to, among other things, a conversation you and I had.

This is what we discovered. For a variety of reasons, a number of these institutions were facing what I would call barriers to productivity—not barriers to potential excellence but barriers to productivity. These were such things as old laboratories; the absence of any space designed for research; the absence of research technicians in the university that had been paring its budget under provincial budget cuts; and universities in which only a few faculty members were active in research because the university hadn't had a research mandate before and was starting now.

So there are many reasons for these barriers to productivity—not having the capacity to get the work out in comparison with the other universities.

The Chair: Last question, Mr. Alcock, please.

Mr. Reg Alcock: I'm just starting, Madam Chair.

The Chair: Well, for this round, it's your last question.

Mr. Reg Alcock: Bring me in on the second round, then.

But would that reinforce the position that a lack of resources has caused an inability in universities in smaller communities to participate in the work—

Mr. Thomas Brzustowski: It reinforces that. The reasons for the lack of resources are many and varied, but, yes, that is the case.

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

[Translation]

Mr. Brien, please.

Mr. Pierre Brien (Témiscamingue, BQ): In your presentation, you touched upon this briefly but I am concerned about the difficulty that I see, especially in small universities, with indirect costs. The granting councils' budgets have been raised; chairs are in place; the Canadian foundation has large sums of money but, often, projects are problematic for small universities having to make heartbreaking choices because they are not able to finance indirect costs. Have you also witnessed that problem? Is it more specific to small universities? Does it also exist in large universities?

Mr. Thomas Brzustowski: In my opinion, it is a big problem everywhere. It is a typically Canadian problem. In the United States, the National Science Foundation pays the direct costs as we know them, the indirect costs and the salary costs of teachers doing research. They have an entirely different system, a system more comprehensive than ours.

Mr. Pierre Brien: What would you recommend to the federal government as a possible solution to improve that situation?

Mr. Thomas Brzustowski: We must recognize that there are indirect costs and help universities. We must determine the necessary level but we could start with a percentage. The universities are asking about 40% of direct costs. They are convinced that it is the appropriate level.

Mr. Pierre Brien: Does this percentage seem reasonable to you?

Mr. Thomas Brzustowski: In my opinion, it could be a good percentage, yes.

Mr. Pierre Brien: Besides the indirect costs, if you were to suggest making other corrections or investing somewhere else as a priority, what would it be?

Mr. Thomas Brzustowski: It would be increasing the number of professors now entering the universities. Universities are going through changes. Many professors are retiring and a lot of new professors are coming in. We are facing an incredible growth. In all, 762 new professors have applied in a competition addressed to less then 3,000 people. This represents a 25% growth. The first priority for us is granting research funds for these newcomers in small and large universities.

• 0955

Mr. Pierre Brien: Last year, you also talked about the renewal of faculties. Has the situation changed over the year? You are saying that there is a call for new professors. I gather that there are several young professors, but there were many departures. Are there still several?

Mr. Thomas Brzustowski: The growth is larger than we had anticipated.

Mr. Pierre Brien: It is larger than anticipated. What is the trend for the next few years?

Mr. Thomas Brzustowski: We don't know. We were surprised by the results this year. It would be difficult to predict but I would say that the trend will be toward a sustained growth for the next two or three years.

Mr. Pierre Brien: I have a last question. What are the direct links between the council and, for example, the Canadian Foundation for Innovation? How do you coordinate your actions with the foundation or university chairs? Several of you have financial means. Therefore, how do you coordinate your work to make sure it is as efficient as possible?

Mr. Thomas Brzustowski: The chairs program is managed jointly by the three granting councils. The foundation is independent and must remain so to receive the funds it receives. The researchers themselves present their requests to the foundation and the councils. They are nominated to the chairs by the universities. We are on familiar grounds. Coordination is more formal in the case of chairs than in the case of the foundation.

Mr. Pierre Brien: Does this create operational problems?

Mr. Thomas Brzustowski: No.

Mr. Pierre Brien: Okay. Thank you.

[English]

The Chair: Monsieur Bélanger, please.

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

I'd like to explore the realm of what I call “basic” or “pure” research versus applied research and where we're going as a country in that field. Can you tell me, sir, what would be, in your opinion, the ideal split between pure or basic and applied research?

Mr. Thomas Brzustowski: In our case, we think the split we have is very good. What is the split? About 56% of our budget goes to basic research and about 25% of it goes to project research.

The people who engage in both are the same people. The basic research, though, is the foundation for everything else that follows. If you do the basic research, then you develop the competence and the capacity to create new knowledge to do the project research.

We are not engaged in supporting anybody in what might be called product development. It's not that far applied. It has to be research. Between project research at about 25% of our budget and—

Mr. Mauril Bélanger: Project research, as we define it, is one that comes to you from the private sector. In other words, we don't know how to do things or solve—

Mr. Thomas Brzustowski: We don't have the knowledge to solve this problem, that's right.

Mr. Mauril Bélanger: But that's driven by the private sector.

Mr. Thomas Brzustowski: The problems are defined very often by the private sector. Sometimes they're defined by the public sector where you need raw materials for public policy.

Mr. Mauril Bélanger: You gave me the impression, through your presentation, that the driving impetus, the driving force, is innovation. That seems to be the mantra applied to NSERC. Am I misreading that?

Mr. Thomas Brzustowski: Well, to some extent you are. The narrow economic definition we use for innovation is bringing new goods and services to market.

Mr. Mauril Bélanger: That's right.

Mr. Thomas Brzustowski: Even if you begin with problems from industry, not all of those will result in bringing new goods and services to market when they're solved. You might improve the process, for example. In the case of basic research, it's the discoveries that in the long term produce the biggest changes in the market, the innovations. But basic research is not done with the motivation of innovation. It's an incidental output, but it can be a hugely important incidental output.

• 1000

Mr. Mauril Bélanger: So 56% of your spending goes to basic research.

Mr. Thomas Brzustowski: Yes, and 25% goes to project research, 15% or so goes to individuals receiving scholarships and fellowships, and then we operate at 4% or 5%.

Mr. Mauril Bélanger: I have to agree that basic is the more important one. If we look at the field of genomics, for instance, basic, pure research is in the midst of producing the organic periodic table, which will drive our society for years. That's one field. We lag as a country, and it's only now that we're getting into the field.

We seem to lag in a number of fields that are promising. I asked the minister the other day what we're involved in with regard to nanotechnology. Perhaps you'd like to deal with that. Is NSERC involved in driving our knowledge and research capacity in the field of nanotechnology?

Mr. Thomas Brzustowski: We are about to become involved. We will be creating perhaps the first of what were called NSERC “innovations platforms”. If any group, however funded, with whatever goals, has an interest in long-term university research and the education of people in it, in the area of the overlap of interests, we will offer our services, accelerate the research, and make it happen better.

We will probably be investing quite soon and accelerating research in nanotechnology. We'll not be creating a little nanotechnology group with a boundary—for example, you're in nanotech if you're inside but you're not in nanotech if you're outside—but drawing people who can contribute: our physicists, electrical engineers, chemists, material scientists, life scientists, and so on.

Mr. Mauril Bélanger: It is a multidisciplinary field.

Mr. Thomas Brzustowski: It's totally multidisciplinary.

Mr. Mauril Bélanger: Okay. We agree then.

Is there a need in Canada for equivalence in basic and pure research to the CFI, the Canadian Foundation for Innovation, which is basically innovation-driven, with labs facilitating that type of thing? Is there a need in Canada for a stand-alone foundation that would be dedicated to pure, basic research?

Mr. Thomas Brzustowski: It's interesting; in my opinion, the name of the Canada Foundation for Innovation is not accurate. First and foremost it provides facilities for research. Some of these facilities will in fact be used, in the ways I've described, to promote innovations. Others will be used for basic research.

Mr. Mauril Bélanger: I went on the tour with the minister to announce $750 million in additional funding. One of the presentations involved a new sunscreen. With all due respect, I don't quantify that as pure research.

I'm just wondering if indeed.... You're suggesting that the CFI is directed to pure research.

Mr. Thomas Brzustowski: I'm suggesting that the CFI is directed to supporting research facilities that are absolutely essential for all research, some of which produces innovations, as I've indicated. I think if you had people here from the CFI they would not tell you that every cent they spend can be translated into a new product or service in the market. It just doesn't work that way.

Is there a foundation for basic research? Well, the biggest need for basic research right now, and for project research, is operating funds.

The Chair: Last question, Mr. Bélanger.

Mr. Mauril Bélanger: Is it your view that science and technology—and this is an enormous tag—is more at the service of society as opposed to being at the service of corporate Canada or corporations worldwide, currently?

Mr. Thomas Brzustowski: I'm not quite sure what one means by “being at the service of”. The knowledge that's produced in basic research is available to anybody who understands it. Some of those people will be in corporations, there's no question about that, and some of the ideas discovered in basic research will change our lives hugely.

• 1005

The work done in solid-state physics maybe 50 or 60 years ago has turned into consumer electronics in all its forms today, and that has changed our lives hugely. Is it in the service of corporations? Well, anything we have in consumer electronics is produced by a corporation, so you can put that interpretation on it, but it wasn't done with that as a purpose.

People are very clever. The human being will use knowledge and will try to create something with it that meets a need that's been identified. Whether that need is a need in the market or whether it's a need met in some other way depends on the circumstances. But I can only talk about the way we do things.

Does project research mean that somehow research in the universities is being steered in directions that corporations need? Well, to some extent, yes. If they come with problems that they can't solve and there is good-quality research that we can support that will solve those problems, yes, I think that's very important. Half of our population is in the workforce and we do depend on these things. The commercialization is a way of getting some of those results to market.

I would be much happier if we had, in this country, a source of credible advice, totally independent of any interest, with its own budget, to decide not only what answers to give but also what questions to ask. It could deal with current issues that arise out of science, advising people across all institutions on what is good there, what is dangerous here, what should be attempted, and what shouldn't be attempted.

We don't have this. We don't have this capacity. The expert panels of the Royal Society are very good in what they do, but they depend on somebody to tell them what the question is and to pay for getting the answer. We need a body that can decide, on its own, what the questions are, and that body has to go beyond including scientists. It has to include lay people.

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

Ms. Desjarlais, please.

Mrs. Bev Desjarlais (Churchill, NDP): Thank you.

Even though initially I wasn't thinking along this line of questioning, I think we might be going along the same line here. Scary, isn't it.

In your comments, and certainly in your paper, I was getting the impression that the sole goal of research and engineering and science was to somehow benefit the economy, that ultimately we were looking at it strictly from an economic perspective.

Even though this nice-looking paper does throw in a mention of the high quality of life for Canadians—and everybody attributes prosperity to financial wealth—it talks about competitive research in science and the productive use of new knowledge in all sectors of the economy and society, just as a little tag-on down there. I got the same impression when you were mentioning it.

I can't help but think, does any kind of cooperative research take place without the sole goal being some financial benefit to someone?

Mr. Thomas Brzustowski: Oh, absolutely. Let me take a number of points from your question.

First, what I was presenting was focused on the issue of innovation, defined as getting new goods and services to market.

Mrs. Bev Desjarlais: Can I just highlight that, then, as a point in fact, that innovation, in a narrow economic view—your words—is looked at as bringing new goods to market? Is there any view to bringing less goods to market, or better goods to market?

For example, I never cease to be amazed at how we would take something as simple as a tube of toothpaste.... Nothing gives more practical use and benefit than such a little thing as a tube of toothpaste, and what have we come up with? The toothpaste pump. Someone tell me, where is the practicality of a toothpaste pump for a tube of toothpaste?

It's a simple thing, but to me, it's the epitome of coming up with something for the sake of coming up with something. It is not as practical and not as usable. Anybody, especially with a little kid, who has tried to use the darn toothpaste pump knows that. We just don't seem to be looking at those—

Mr. Thomas Brzustowski: Let me answer that with the bigger picture. A great deal of research is done with no commercial end in mind whatsoever. In fact, I would say all basic research is done with no commercial end in mind whatsoever. Research in all areas of the environment is in that category, research that studies natural hazards and turns them into manageable risks for people, huge areas of research that have absolutely nothing in the way of commercial goals.

• 1010

We have to recognize this, that knowledge, once it's out there, will be used by people to do whatever. We have an economic structure in which many of us are employed by corporations whose aim is to make a profit by producing something consumers will spend their money on.

The thing that drives me personally in the quest to improve the capacity of Canadian university research, to actually commercialize those things they happen to come up with that have commercialization potential, is an abhorrence of publicly funded invention or discovery being made in Canada, ignored here, and being turned into a product we then have to pay to import.

There are huge areas of research—not just in a single discipline, but multidisciplinary research—where we have to learn how to do things better in light of better information about nature. That's a huge motivation for basic research. It's also a strong motivation for some of the project research.

Mrs. Bev Desjarlais: Do you think we, as government, are putting enough dollars into that type of research, as compared to purely market-driven research?

Mr. Thomas Brzustowski: Yes. I think the balance is right, though I think we should be putting much more money into research of all kinds. Again you have to remember there are very strong views within the research community itself that basic research is primary, and without it nothing else happens. There are very strong controlling mechanisms within the community.

Mrs. Bev Desjarlais: Thank you.

The Chair: Ms. Torsney, please.

Ms. Paddy Torsney (Burlington, Lib.): Thank you.

One of the issues you raised was recognizing when things could be commercialized. I wonder what work is being done. Do you have input into different organizations that are trying to work on curricula for undergraduates? If one of the things is that they don't know how to recognize something, maybe they all need to take a marketing course somewhere along the line—not, obviously, a heavy focus, so that they're totally diverted and only thinking about products for commercialization, but enough that they have an awareness of how to determine those things.

Mr. Thomas Brzustowski: You've pushed one of my hot buttons with this question. Let me describe the people who are in short supply, the people whom we need, and what abilities they must have. You'll see they're formidable.

These have to be people working at the university, so they can actually visit the labs, see what work is being done. They have to know the science well enough to be able to talk credibly to the professors and students they meet. They have to be able to recognize why things were built and how they're built.

They have to know the market well enough to see where something might fit—that's where the recognition comes in. They have to know the local investment community to see whether investments can in fact be produced at the right level. These are tiny things that are too small for venture capitalists initially, going on to bigger investments as things get closer to market.

They have to understand intellectual property law. They have to understand how to protect intellectual property, and they have to be clever enough to realize, as business people, that sometimes you increase the value of your own intellectual property by acquiring related intellectual property and bundling it together.

With all of that, they have to be good enough managers that they keep the files moving.

We have some people like that in this country. They're mainly trained on the job in university industrial liaison offices, university research offices.

I keep hoping the business schools that claim they're going to be leading the way in this age will start including courses on intellectual property protection, intellectual property improvement, the structure of the innovation system, and so on. I haven't seen too many of those yet.

Ms. Paddy Torsney: Yes, but what about the science schools taking some marketing courses?

Mr. Thomas Brzustowski: There are programs called “Science and Business” in a number of universities already. Some of the people are the ones who arrive in the universities, but they're also snapped up by industry. There is a brain drain of these highly qualified people that I've described. It's not to the United States—they have many more of them than we have, so many that they specialize in narrow sectors—it's from universities to the Canadian financial industry.

• 1015

Ms. Paddy Torsney: The reason I raised it was that when I was at business school, they found that business graduates couldn't write to save their lives. So everyone in first year had to do an English writing course. They grumbled about it, they hated it, but frankly it was some of the stuff that held you in your actual career better than others. So if you could do something for everybody in first year, or everyone within their three- or four-year science degree.... Some of those are going to go on and stay in universities and some of them are going to go into different sectors. If they end up as researchers, they will at least have some grounding.

You talked also about collaboration between government scientists and university scientists. When we made the toxic substance research initiative announcements, we gathered some of the researchers together, and one of the comments, particularly from the university researcher, was that historically there were lots of interactions, but in the past 10 or 15 years there haven't been that many interactions between them. It was said that particular initiative, the $40 million, was in fact a great chance for them to work collaboratively again, to re-establish those contacts.

I wondered whether this was unique to toxic substances. Have there been problems? Are we addressing those issues and getting them back to working collaboratively? They seemed to think, as researchers, it was a huge charge that advanced the research so much further, and that there really hadn't been enough done in the last few years.

Mr. Thomas Brzustowski: I guess it's a matter of perception. My view is that there's a great deal of collaboration. I know of a lot of government scientists who are adjunct professors in universities, and that gives them access to graduate students whom they can supervise. Many others, because of work on complementary areas, work together, as governments will have one kind of facility in the government labs, the universities might have something else. They give each other access, and they work closely.

I think the state of that collaboration is quite good. For example, the question was asked by Mr. Bélanger on nanoscience. There was a workshop a few weeks ago, in which a number of university scientists from across the country, a number of NRC and other government lab scientists, some provincial people from the Alberta Research Council—the meeting was in Alberta—came together to talk about nanotechnology. They could all see themselves fitting into a collaborative effort.

So I don't see that as much of a problem. Maybe others closer to particular departments will have seen some decline in activity, but from my point of view, it's proceeding very nicely. We encourage it whenever it can happen.

The Chair: Last question, Ms. Torsney.

Ms. Paddy Torsney: Obviously we can't be experts in everything, and we can't fund all the research everyone would like to do, and yet in picking winners, you worry that the criterion could be flavour of the month, or it could be things that are important in the short-term. What is the process? How does NSERC really pick winners and make sure we are investing for things that are absolutely going to be important ten years down the line?

Mr. Thomas Brzustowski: We don't pick winners. We pick areas in which people, if they work hard enough and are smart enough, might become winners.

Ms. Paddy Torsney: No, I meant in terms of research areas.

Mr. Thomas Brzustowski: I know what you mean.

We have, on a four-year cycle, a process we call reallocations, which is a zero-sum game in basic research, where we have 25 disciplines permanently set up. Each of them is evolving in time, but they exist as 25 different groupings. In the process of reallocation everybody loses 10% of their budget, and those who gain more money can gain a lot more than their 10% back. The decisions are made by an arm's-length, independent committee on the basis of the answers to one simple question: Why is it important for Canada that your discipline should get more money out of this exercise? They can answer it in any way they want, provided they do it in plain language and ten pages.

We're actually starting the third of these exercises. In the last one the microelectronics people, communications technology, and molecular biology made very strong cases, and they got additional funding. This isn't very fast transfer of funds. This is, on the average, 10% over four years. It's slow, but it's a hugely important strategic exercise for the discipline.

• 1020

So that's one thing we do. But it has a weakness. Who speaks for the people who are working between disciplines? We're trying to develop some ways of actually identifying areas where disciplines are colliding and new things are happening. There, when enough eminent people say something is important, such as nanoscience, which involves six or seven disciplines, we will accelerate development in that area.

The interesting thing is that with all these processes that are being done differently around the world, people are all coming up with the same ideas and the same answers. You have to be good in nanoscience. You have to be good in plastic electronics—they're now printing electronic circuits on plastic films. You have to be good in optics. You have to be good in certain aspects of biotechnology. Everybody comes up with the same things through different processes.

This isn't surprising. Science is a very international activity, and the scientists are all in touch.

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

Ms. Paddy Torsney: Can I just ask a supplementary on that?

The Chair: No.

Mr. Penson, please.

Mr. Charlie Penson (Peace River, Canadian Alliance): Thank you.

Dr. Brzustowski, when money is allocated to NSERC, is there any distinction made for research that would go into areas where Canada has had some historic strength, such as basic resources? We do have old economy industries such as mining, forestry, and so on.

We know that those industries can be enhanced greatly. The question I would ask does not relate to basic research—though maybe there are a lot of benefits coming out of basic research that will help those industries too. But has anyone taken a look at our old, historic, basic industries to see if we can develop them further through scientific research and thereby provide more jobs and more benefits?

Mr. Thomas Brzustowski: I'm glad you asked that question because if there's anything I forgot to say, it was the fact that the impact of the research cuts across all sectors of the economy.

I don't believe research is strictly for biotechnology and information technology. Research improves all our existing industries, every single one of them. Look at our natural resource industries, which are hugely important in our balance of payments and which will continue to be for quite a while.

Even if we're committed to selling only raw materials, then research on extraction processes can produce some cost advantages. However, I would hope that even in the resource industry, where the product is still a commodity, we would put in a couple of processing steps to add value because we're clever in processes. We're good at that, and we can gain additional advantage by doing that.

I mentioned Syncrude. NSERC has supported a great deal of research jointly with Syncrude, and we've been supporting a chair for many years now at the University of Alberta. The whole object is to improve the processes that happen between the time the crushed sand and rock gets fluidized at the mine site and the time the slurry comes out at the separating plant. That's why we don't have mechanical conveyor belts any more between the north mine at Syncrude and the main plant.

In all sorts of areas, the Networks of Centres of Excellence...I haven't talked about that program. But of course we participate, as the other councils do. The Sustainable Forest Management Network, whose administrative headquarters are in Edmonton, deals with everything from the biotechnology of forest species, the issues of the animals in the forest, the mixed use of forest both for tree harvesting and for tourism, right down to native land claims and the issues relating to those.

I would say that a great deal of the research that's done in basic research has an impact on our resource industry. I think it always will, and I think it should.

Mr. Charlie Penson: I agree with you.

I would like to see a little more research done on projects like the Peace River tar sands, which have a terrific capacity, as well as the tar sands north of Athabasca. Those are deep tar sands that need a different method, not just soil removal, because they're too deep for that. I understand work is ongoing.

• 1025

I'd like to switch gears a bit. Once a product has been discovered, if you like, through university research—and I can understand what you're saying—the ability to take that forward and apply it in the marketplace must be a terribly difficult process. I've heard people say the easy part is inventing it—

Mr. Thomas Brzustowski: Yes, that's true.

Mr. Charlie Penson: —and the difficult part is getting it out there and marketing it. There are products that don't really become used by consumers for 20 or 30 years afterwards because nobody really picks up on the idea.

But once something has been developed, do we have adequate intellectual property law in Canada to protect the people who want to market that, or in your view is there further work that needs to be done there?

Mr. Thomas Brzustowski: When I come to the committee, I want to tell you all I know about the subject. I don't want to go beyond that and start talking about things I don't know.

I do know that if something begins with research, Canadian universities have two very different sets of policies. In some, the intellectual property resides with the inventor, the researcher; in others, with the institution. What happens to it afterwards may be the result of a number of business decisions. It may be that the university will take equity in a spinoff company. It may be that the university will sell the intellectual property.

It's very clear that the investors along the way, particularly the venture capitalists, are very wise to these issues and define exit strategies for themselves to protect their interests. A number of universities are very experienced in this area and actually have portfolios of intellectual property, which they manage. Their returns are not great because by the time the intellectual property has turned into a product that's gone to market after all this private investment, the holdings of the university are very diluted. They have a tiny fraction of something, and this is because that commercialization process, as you said, is a very expensive process.

Mr. Charlie Penson: I was speaking about things a little further along the chain than at the university level, that is, the companies or individuals who want to proceed with something after it's come out of the university. Have you heard from them that there's a problem?

Mr. Thomas Brzustowski: No, I haven't. We have different industries that deal with these things differently. Some industries will not bother to patent something, to go through all that process, because their advantage is in getting to the market four months ahead of the competitor, in just knowing about it and getting it out there first. Some other industries, like the biotech industry and the pharmaceutical industry, must protect their intellectual property because of the long time it takes to get a product to market. Others use trade secrets, for example know-how in a craft shop or how to assemble a better compressor for an aircraft engine. It really does vary across the spectrum, but I haven't heard of problems, no.

Mr. Charlie Penson: Okay.

The Chair: This will be your last question.

Mr. Charlie Penson: Yes, this is the last question.

I was interested when you were talking about the need for some scientific body—you compared it to the Royal Society, I believe—to help the public in deciding what is good research, where we should be going, and where we shouldn't. Would you advise taking that further, to a level where, for example, this body would try to help direct Parliament in choosing where allocations of money should go to support research?

Mr. Thomas Brzustowski: I think that would be difficult. Let me give you an example.

A very lively issue these days is the issue of stem-cell research, which poses any number of ethical questions. Moreover, as a layman in the medical field, I can see a superbly attractive prospect of medicine having significantly new technologies in a decade or two. They'll be able to do a fast analysis of blood and everything else at the patient's bedside. Operations will be inside-out, and by that I mean surgeons won't have to cut through a lot of healthy flesh to get at the sick parts. And people will be self-healing, that is, cells from your own body will regenerate any damaged organs, and so on.

There are great ethical issues involved, and there are issues of risk that are very hard to predict. I would be very comfortable if we did in fact have a group that was able to offer a scientific opinion one could trust because it was untainted by any interests. At the same time the group would take into account the perspective of the citizenry, of lay people, on the issues as to how they affected their lives. If that were offered to the country as a whole and not to some particular sponsor of an expert panel, I think we would be well served as a nation.

• 1030

The Americans have such a thing. Their academy of sciences and their academy of engineering operate the National Research Council, which for them is that advice-producing body. It's independent and endowed by legislation and has the right to set its own agenda. I think it would be awfully good for us to have that capacity.

Mr. Walt Lastewka (St. Catharines, Lib.): There has been talk about the funding of research in Canada being low compared with other countries. Have you noticed a change in that?

Mr. Thomas Brzustowski: Yes, indeed. If one looks at the G-7 countries—I can't say G-8 because I don't know what the situation is in Russia—then Canada stands out in two things: the greatest proportion of university research is funded by industries, about 10% to 11% here; and, secondly, the greatest proportion of industry research is conducted at universities. It's about 5% or 6%. Both are high compared with the other countries.

The reasons for that, I think, are in our history. We're new to this game. We've been taking research seriously for less than half a century. We have missing layers of institutions between research and the market that exist in other countries. I've read recently that in the United States something like 70% of all researchers working in the country work in corporate research labs. They have huge numbers of researchers in universities and government labs as well. That means that the corporate research lab is a huge operation. We have a very small number of those.

The second is the non-profit public research institutions. The Americans have the Battelle Memorial Institute, the Argonne National Laboratory, SRI International, and a number of Department of Energy labs that are trying to become that. The Germans have the Fraunhofer Institute.

We have NRC, which is very good and doing all the right things, but it's about ten times too small for the size of our economy. So we have missing institutions in this country. That's why our universities are so involved with industrial research. But I would say that the amount of industrial research done is not as big as it should be.

Mr. Walt Lastewka: As more and more funds are channelled into research, the concern in the past was, and still is, that we might get into more duplication, less partnerships, and less networking. You and I have had discussions in the past about the importance of partnerships and networks. Is that a fear of yours, or do you think we have a system in place that would prevent duplication and give a return on the dollar?

Mr. Thomas Brzustowski: I think we have a system in place for partnering that is better than—oh, let me be bold—anybody else has. I think our program, Networks of Centres of Excellence, of which we now have 22, is a terrific example of doing what we need to do. We're best at doing what we need to do. We need to assemble researchers from institutions that are spread around the country into a critical mass to work on a difficult problem. We've learned how to do that through the Networks of Centres of Excellence and other partnering arrangements.

An hon. member: They're not in one place.

Mr. Thomas Brzustowski: They don't come to one place. They stay in their own institutions, because our other need is to have that capacity in the regions. By having them stay there and teach students and be a source of advice locally but also be networked virtually to create this intellectual critical mass, we have a very good system for our needs. So I don't foresee a problem in that area. I think we'll only get better.

Mr. Walt Lastewka: You mentioned before, and you talked about it again today, the importance of commercialization transfer, liaison offices at universities, and so forth and that we don't have a pool of talent in that area. I think we've now heard this for four or five years, as far as I'm concerned.

• 1035

I've had the opportunity to visit some universities and see the difference from one university to another with regard to the commercialization and liaison offices. Is this something we should be really concerned about? It was in your chart there about not only taking commercializing out but getting input back into the university.

Mr. Thomas Brzustowski: I think we should be concerned with this. The Fortier report was concerned with it and made some specific recommendations. It remains to be seen what action will take place on that. We have a very small program called intellectual property management, which helps universities network and learn how to do these things. If government chooses to go that way, we will try to quadruple that program as our response to the situation you describe. But I hope the business schools get interested in this, too.

Mr. Walt Lastewka: But we've been saying for a number of years that hopefully that would happen. I'm at the point of saying it's time to get off it and do something, and then if the business schools want to get into it later on, that's fine.

Mr. Thomas Brzustowski: That's why I say between the Fortier report or if government chooses not to act on it, we will do something with our intellectual property management program.

Mr. Walt Lastewka: My last question concerns your strategy. I know in the past you have done reviews of strategy and come out with statements and so forth. You have been quoted as having almost a living strategy ongoing because of change. Would you summarize that for the committee.

Mr. Thomas Brzustowski: Yes, I'd be very happy to. It starts with our name. The strategy follows from the vision, which follows from the name. Our name is very difficult: the Natural Sciences and Engineering Research Council of Canada. In this city most people say the first word is “national”, and then they realize they've made a mistake.

[Translation]

Even in French, Conseil de recherches en sciences naturelles et en génie du Canada is a bit long. It's not a lively name.

[English]

That's our legal name. We're living with it.

We're now starting to call ourselves NSERC, the SmartCanada people. We extend that to all the people we support, including the students and the researchers. We have a statement of what SmartCanada is, which we use as part of the vision. We define it this way: SmartCanada is the best place in the world to live and work because Canadians are skilful at creating and using knowledge to enhance all aspects of their life and work—not just industry, all aspects of their life and work. In that case, then, our strategy is to become as good as we can in trying to promote the creation of knowledge. Just parenthetically, when we say competitive research, we don't mean competitive in the marketplace. We mean as good as any in the world. Our strategy follows from that. We have to invest in people. That's a central thing. We have to help them learn how to create knowledge and to put it to use, whether in the private sector or the public sector or whether to produce a new product or improve the environment. This is the strategy.

We also have one other aspect. We're a federal agency. We can't say a thing about education in our mandate, but we can influence it by becoming partners with those in the provinces who have the responsibility for education, for example, helping teachers become better teachers of science by giving them an experience in a research lab over the summer, that kind of thing. So there's our strategy.

Mr. Walt Lastewka: Thank you, Madam Chair.

The Chair: Mr. Brien, do you have any other questions? Ms. Desjarlais? Mr. Alcock, then.

Mr. Reg Alcock: Can you speak a little bit about the research and policy development that NSERC gets involved in, specifically over the last few years and with reference to the creation of the research chairs program. Was NSERC consulted on the design of that program?

Mr. Thomas Brzustowski: Yes, I personally was a member of a small group that was asked to flesh out the concept. We were presented with the concept, and we were involved in fleshing it out and designing how the program might be implemented. The three councils under the leadership of Marc Renaud actually operate the program and are responsible, together with the CFI and Industry Canada. It's a steering committee of five.

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Mr. Reg Alcock: So the small group involved in the design includes yourself, Mr. Renaud from SSHRC—and who else?

Mr. Thomas Brzustowski: At the time, Henry Friesen from the Canadian Institutes of Health Research, Medical Research Council, was there. There were some university people—the Association of Universities and Colleges of Canada was represented at the table. Some civil servants were involved. I can't remember too many others.

Mr. Reg Alcock: Was CFI there?

Mr. Thomas Brzustowski: Yes, CFI was there.

Mr. Reg Alcock: And that program is currently operated by a steering committee consisting, you said, of the three granting councils, CFI, and the department?

Mr. Thomas Brzustowski: Industry Canada is there as well, yes.

Mr. Reg Alcock: Is it, then, the opinion of that group that excellence only occurs in large, traditionally structured universities?

Mr. Thomas Brzustowski: No, I don't think that's the opinion of the group at all.

Mr. Reg Alcock: Then what was the rationale for allocating chairs, with the five large universities disproportionately represented?

Mr. Thomas Brzustowski: Well, I think we have to remember what the Prime Minister announced as a goal of this program: we should build on strengths and try to reach international levels.

We have an interesting challenge here. In research, we recognize that we need reasonable capacity because it's important in the regions. We also recognize that we have to compete on an international basis. Trying to reconcile the two is sometimes difficult. But we had a history of peer review to tell us where the strengths were, and our goal here was distribution on that basis.

Mr. Reg Alcock: Well, the history of peer review was influenced by financial resources. A few cities influenced the distribution of resources, and this group made a decision to accept that distribution as the basis for allocating those chairs. The chairs were defined as in support of excellence, and yet no competition was allowed. The distribution was predetermined by the people who designed the program.

I'm just trying to understand why you would deliberately put in place a policy that sets up an unattractive situation. My friend Andy Scott from the Maritimes is faced with the reality that if his kids want to get the best education, they've got to move to Toronto. Now it strikes me that as a national organization, you have some additional responsibilities you seem to have forgotten about.

Mr. Thomas Brzustowski: Well, I have a feeling we're going to disagree on that.

Mr. Reg Alcock: I'm certain we are.

Mr. Thomas Brzustowski: Take the University of New Brunswick, for example. It has 17 or 18 Canada chairs. And recently, by peer review, NSERC awarded one of its most important prizes—the Steacie Award—to Bruce Balcom of that university.

The peer review is affected by the quality and the productivity of people. But the quality comes first. That's been the history.

Mr. Reg Alcock: Do you have any concern about the inter-university rating that exists now? Because the chairs are given to the larger universities, that allows them to strip capacity out of the small universities.

Mr. Thomas Brzustowski: Well, I've heard that fear expressed, but I haven't seen much evidence for it yet. The fact that the University of Alberta got somebody from Queen's.... Is there a lot of evidence?

Mr. Reg Alcock: I can give you evidence.

Mr. Thomas Brzustowski: I've seen it both ways.

Mr. Reg Alcock: In fact, when people win large awards, like the recent awards in medical research, within the next month they receive offers from one of the big five, which use the chair money to move that person, that capacity, to their university.

You know, Dr. Brzustowski, my personal opinion is that this was an enormously irresponsible decision on your behalf, and on behalf of all the members of the granting councils. They supported a narrow group of elites with a particular view of research—and frankly, that is not my view of research.

I heard Mr. Bélanger talking about networks and creating linkages among researchers. I see what the new Canadian Institutes of Health Research are doing in trying to link up researchers and build capacity across the country. I do not understand why the traditional councils have taken this very narrow view of what constitutes research excellence.

Mr. Thomas Brzustowski: Well, I have a feeling I'm not going to be able to change your mind. But likewise, you're not going to be able to change mine all that easily. I have the feeling that time will tell, not which of us is right or wrong, but how to build research capacity and excellence across the country.

Take small universities that have never, until maybe the last few years, had any significant interest in doing research, and no graduate students. They need capacity building, which is something different from the chairs. We're trying to use the chairs to attract the best researchers in the world. The smaller universities need investment; they need nurturing.

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Mr. Reg Alcock: Absolutely. But could you not have put the chairs out for competition? If excellence is the guide, why didn't you simply say, here's a pool of 2000 chairs; let's have a competition and let excellence be the determination? But you didn't. You pre-allocated. That's the problem with the program: you made the decision about where excellence lies.

Mr. Thomas Brzustowski: We made the decision because those places had demonstrated excellence.

Mr. Reg Alcock: But that excellence is based on financial criteria, which has skewed the distribution of resources. That's what you said earlier.

The Chair: Thank you, Mr. Alcock.

Ms. Torsney, you had a supplemental question? Quickly.

Ms. Paddy Torsney: Everybody's doing high-tech research—you mentioned that other countries are working on optics and a few other things. But the Americans, let's say, have tons and tons of money and excellent follow-up investment. Canada doesn't have the same access to funding. How then do we make sure we can still be part of the research and keep up with what everyone's doing? Isn't there a possibility we could miss niches because we're focusing on the same areas everybody else is?

Mr. Thomas Brzustowski: Well, that's a real challenge. The question is what our national strategy should be. My opinion is, it shouldn't just be an attempt to catch up.

Ms. Paddy Torsney: Right.

Mr. Thomas Brzustowski: We do need to catch up. The rest of the world is not standing still while we've announced a target to go from 15th in the world to 5th. I think we have to be awfully clever in defining niches we can leapfrog to.

Ms. Paddy Torsney: Right.

Mr. Thomas Brzustowski: I think we have the intellectual horsepower to do that. But we need some resources, and we need the settings in which to make those decisions.

Ms. Paddy Torsney: Okay.

The Chair: Thank you, Ms. Torsney.

Mr. Bélanger.

[Translation]

Mr. Mauril Bélanger: First, I would like to be able to pronounce your name correctly.

Mr. Thomas Brzustowski: Tom.

Mr. Mauril Bélanger: I paid close attention to your answer to my last question and to the comments you made in answer to a question from the opposition. If I read between the lines, I understand that there must be discussions going on right now on the establishment of this national organisation, this academy you talked about. Am I right?

Mr. Thomas Brzustowski: Yes.

Mr. Mauril Bélanger: My second question is this one: would you agree to send us your comments, suggestions or maybe documents that were circulated and that can be made public at this stage on that issue so that we can make a record of it and see if indeed we want to contribute to this discussion?

Mr. Thomas Brzustowski: You are right in thinking that discussions are going on. It is preliminary discussions. There is a project proposal for the lead Secretary of State, Mr. Normand, who supports this effort. I am expecting something very worthwhile for the whole country. This will happen in the next few months but it is very preliminary right now.

Mr. Mauril Bélanger: Can you send us documents as well as your own views on the issue?

Mr. Thomas Brzustowski: My views are similar to those of others: an organisation which will have its own funding sources in order to have the independence necessary to choose the questions and provide the answers.

Mr. Mauril Bélanger: I understand.

Mr. Thomas Brzustowski: It is very important. It could be a foundation or an academy. I don't know.

Mr. Mauril Bélanger: You will be sending us things?

Mr. Thomas Brzustowski: Yes.

Mr. Mauril Bélanger: Thank you.

[English]

The Chair: Thank you very much.

And lastly, Madam Jennings.

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

I want to come back to the issues of the chairs. You've said you don't agree with Mr. Alcock's position that predetermining their allocation has stripped from some universities what little capacity there is. These universities are considered secondary, perhaps because they're newer or because they haven't had time to develop research capacity in certain areas. You say you really haven't seen much evidence that capacity has been stripped as a result of the way in which the chairs were allocated, and you don't think you will change your mind. But do you agree that there is a need to strengthen capacity in what we would call secondary, smaller universities, or in newer universities that have not, for whatever reason—whether they're historically based or whether it's simply because they're newer universities—developed capacity in certain science fields that we have in our five big universities that have been around for going on a second century? Do you think government and possibly the funding councils may need to address that and advise government, or, if you have it within your power, provide them with the means to build that capacity, more than you've been doing to date?

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Mr. Thomas Brzustowski: The answer is, absolutely, yes.

Ms. Marlene Jennings: So what are you doing?

Mr. Thomas Brzustowski: As I mentioned to Mr. Alcock—in fact, as he knew because we took this issue so seriously—five members of NSERC's top management team visited Atlantic Canada at the end of June last year, and two others and I visited Manitoba and Saskatchewan. We actually visited the universities, we visited facilities, we talked to people, and we developed advice as to what they need. What they need is investment in facilities in some cases and the human infrastructure of research in others.

Our opinion was that the regional agency should take this very seriously, because that will help the universities compete more effectively in the national competitions. To their credit, the universities made no case at all. They didn't even try to make the case. In fact, in one or two instances, they said they were determined not to make the case that they should be treated to different standards in the competitions. But they did make the case that they needed some investment to bring their capacity to compete to a higher level. We agree with that. We were quite specific about those sorts of things. Some advice was sent to the regional agencies on that, to WED and ACOA, and we're looking forward to seeing some action.

Ms. Marlene Jennings: When you visited these universities, was it just in the Maritimes and out west? Did you visit any in Quebec, such as the Université du Québec à Montréal?

Mr. Thomas Brzustowski: We visited sixteen universities in Manitoba, Saskatchewan, and the Atlantic provinces.

Ms. Marlene Jennings: I would suggest that you might want to visit the Université du Québec à Montréal. Some of the problems that our smaller universities in the other provinces are dealing with are also being dealt with by the Université du Québec à Montréal, partly because it's a newer university and therefore hasn't necessarily built up strength and capacities in certain of our more traditional science fields.

I've met with the interim recteur, and that was one of the issues that was raised. The fact is that because of that, with the chairs of excellence, one of their top scientists was actually ripped off, because the chair of excellence went to one of the big universities in Quebec, and it then went and cherry-picked. Now, what little capacity there was in that particular department has been completely removed.

Mr. Thomas Brzustowski: I must say we have not paid too much attention to universities in Quebec on that issue, because our impression is that, by and large, the system is well served and well planned there. Very frequently, I hold up the Université du Québec à Chicoutimi as an example of good planning and good management. It's one of the smaller universities, with not much of an allocation of chairs from the program, but by competition, they have won four NSERC industrial research chairs over the years. These are major awards, and they've won them by concentrating their resources very effectively.

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I looked around Quebec and I saw lots of very good examples. So we put our time and effort into visiting the universities where the circumstances were being represented as being very dire at the time.

Ms. Marlene Jennings: Thank you.

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

Dr. Brzustowski, we want to thank you very much for your direction today. It has obviously been a very enlightening conversation today, and we look forward to meeting with you again in the future.

Mr. Thomas Brzustowski: Thank you very much for the invitation, Madam Chair.

The Chair: The meeting is now adjourned.