Good afternoon, ladies and gentlemen. Welcome to meeting 64 of the Standing Committee on Industry, Science and Technology.
Before us we have the Honourable Gary Goodyear, Minister of State for Science and Technology as well as for the Federal Economic Development Agency for Southern Ontario.
Along with him we have, from the Department of Industry, Robert Dunlop, who is the assistant deputy minister for the science and innovation sector. From the Federal Economic Development Agency for Southern Ontario we have Bruce Archibald, the president; Linda Cousineau, chief financial officer, information management and informatics; as well as Clair Gartley, vice-president, business, innovation and community development.
Ladies and gentlemen, before I call on the minister to go ahead with his opening remarks, I should tell you that and have confirmed that they will be with us on May 2 for the first hour, from 3:30 until 4:30. We had already made our schedule and had, as was mentioned, some flexibility, so they will be taking that slot.
Without any further delay, Minister Goodyear, it's good to have you here, and please go ahead with your opening remarks.
Thank you, Chair. I appreciate that welcome.
Good morning, committee members and honourable colleagues. It is indeed a pleasure to be here again with you to answer questions and share information about the science and technology issues as they relate to my portfolio and the main estimates. Given that my portfolio also includes the Federal Economic Development Agency for Southern Ontario, I'm more than happy to speak to you about the overall efforts in that regard as well.
Since 2006, our government has provided more than nine billion new dollars in new resources to support science, technology, and business innovation. This funding has helped to make Canada a world leader in post-secondary education research and to create the knowledge and highly skilled workforce that businesses require. We continue to work in this regard as well to innovate and create even more high-value jobs.
Economic action plan 2013, the latest budget, builds on this foundation, helping to position Canada for stability and long-term economic prosperity, as well as a higher quality of life for Canadians, while again sticking to our promise of keeping taxes low for families and businesses and balancing the budget by 2015.
We are working to strengthen Canada's world-class research talent through such programs as the Vanier Canada graduate scholarships, the Banting post-doctoral fellowships, and the Canada excellence research chairs programs, and many others. The economic action plan further strengthens our advanced research capacity by providing another ongoing $37 million in new annual support for research partnerships with industry through the granting councils.
We are strengthening research infrastructure as well, through the Canada Foundation for Innovation. As you know, the 2013 budget allocates $225 million to support new competitions and cyber infrastructure and to sustain its operations, as well as to deliver programs that enhance collaboration and partnerships between the private and public sectors. Programs such as the centres of excellence for commercialization and research, the business-led networks of centres of excellence, the industrial research and development internships, and the college and community innovation programs all aim to build industry-academic connections that we know will lead to new products and processes in the marketplace.
As well, let me take this opportunity to highlight some of the findings in the recent Council of Canadian Academies report on the state of Canada's science and technology enterprise as it currently exists. The report concluded that Canadian science and technology is healthy and growing in both output and impact, with Canada being the only G-7 country to have achieved an increase above the world average in the number of scientific papers produced between 2005 and 2010.
The report also notes that there has been a net migration of researchers into Canada. This is probably the most profound and irrefutable evidence that our strategy here in Canada is working and that we should continue, so of course budget 2013 focuses on the drivers of growth and job creation, which include innovation, investment, education, skills, and healthy communities. This approach promotes business innovation through improved support for high-growth companies, research collaborations, procurement opportunities, applied research, risk financing, and so on.
Those measures include: $121 million over two years for the National Research Council to help continue its transformation; $20 million over three years for a National Research Council industrial research assistance program pilot project initiative to help small businesses access the research capacity and services at our post-secondary institutions and at not-for-profit research institutions of their choice; $325 million over eight years to Sustainable Development Technology Canada to continue support for the development and the demonstration of new clean technologies that can create efficiencies in businesses and help them with their bottom lines as well as contribute, obviously, to a cleaner environment and more sustainable economic development; $60 million over five years to help high-potential incubators and accelerators; a new entrepreneurship award that celebrates Canadian entrepreneurs; and $18 million over two years to the Canadian Youth Business Foundation to help young entrepreneurs.
Significant investments, obviously, in budget 2013 are also targeted toward human health and genomics, a very exciting basic research area, skills training, manufacturing, the aerospace and space sectors, infrastructure, and I could go on and on.
Given the level of business expenditures on research, science, and development, we want businesses to pursue innovation-based strategies that encourage them to increase their investments in machinery and equipment and help them gain access to highly skilled personnel and be more globally competitive. Our recent action plan 2013 included many new measures to do exactly that.
In addition to the science and tech portfolio, I am honoured to be the Minister of State for FedDev Ontario. This agency has been around a few years and in my view has made incredible efforts within southern Ontario to effectively support growth and long-term prosperity.
As you might know, southern Ontario, the area we work in, has approximately 12 million people, about 36% of the population of Canada. It is the heart of Canada's commercial core and does have incredible potential to create long-term success. Of course, the agency has funded hundreds and hundreds of projects in southern Ontario in this regard, but the agency is not just working with money. We are advocates for the region, conveners, and we are bringing together stakeholders, focusing on clusters, collaborations, and partnerships, building critical mass, again to get that edge on global competitiveness.
Some of the programs we have—and I'll be very brief—the applied research and commercialization initiative, for instance, have facilitated the development of hundreds of partnerships between the post-secondary institutions in southern Ontario and businesses. In fact, 560 businesses have been involved with students who get the added benefit of a real world educational experience.
We have put forward the prosperity initiative to help target investments to advance key economic growth in southern Ontario, including advanced manufacturing, digital media, green construction, and green automotive. I will give you another quick example of what this has done. We've made a significant investment in Western University's Fraunhofer Project Centre and Centre for Commercialization of Advanced Manufacturing Technology.
These centres will create opportunities literally for hundreds of businesses to collaborate with our educational institutions and not-for-profits to support global competitiveness coming out of southern Ontario in sectors, frankly, that are in the aerospace, defence, construction, medical devices, composite light-weight materials—another very exciting area of potential—automotive, and renewable energy sectors.
The facility itself will represent North America's premier hub for the development, validation, and industrial-scale testing of new advanced manufacturing materials and products.
We've also taken it upon ourselves to create a sense of curiosity for the next generation of business leaders with our youth STEM program. The folks involved in that have reached about 1.1 million kids in southern Ontario to get them stirred up about science and mathematics.
In our scientists and engineers in business initiative, we invested up to $7.5 million in this one project, VentureStart. VentureStart is a partnership of 12 research innovation centres throughout southern Ontario of course. It has already delivered entrepreneurship training to 128 highly qualified graduates, as well as provided mentoring support and seed financing for 88 new start-up businesses, and that's so far.
By the end of March 2014, VentureStart tells me they are online to fund 224 start-up businesses. Through other programs like investing in business innovation we're boosting private sector investment. This is an angel venture capital program to help businesses quickly bring their new ideas to market. We've been able to have significant leverage in this regard. I can tell you that the angel network in southern Ontario has grown from about 250 angels to well over 800 as a result of this program.
There are a suite of programs I'm happy to talk about, but mainly they fit under what we call the southern Ontario advantage initiatives. Under that suite of programs, we've invested more than $420 million in funding, resulting in partnerships with more than 5,000 organizations, and over $1.2 billion of additional funds leveraged for these investments—and those are almost exclusively non-governmental sources—as well as over $2 billion in a boost to the GDP.
In closing, Mr. Chair, I am pleased that economic action plan 2013 provides an additional $920 million over five years, which is basically renewing FedDev Ontario. This will start in April 2014 with $200 million of this renewal support to be allocated for the delivery of a new advanced manufacturing fund in Ontario.
The government's renewed commitment to the agency is clearly based on its success in creating jobs and increasing the productivity and competitiveness of southern Ontario.
There is still obviously a great depth of potential in the region, and I look forward to witnessing future successes in our incredible communities, forecasting great growth for them, for the nation, as well as continuing to grow the science and tech sector in Canada.
Mr. Chair, thank you for this time. I look forward to answering any questions the members may have with regard to my portfolio.
Thank you for that question.
With respect to the parts of the science and tech file in Canada that I'm responsible for, I think I speak for some of my other colleagues as well when I say we are very proud of the work that our scientists and our academic community do. These are world-class people.
We absolutely understand that research findings and their benefits must be effectively communicated and shared with Canadians. In fact, our government has put in place foundational pieces that actually call and guide...to support open and transparent communications. In fact, in accordance with the government policy regarding government scientists, I can tell you that they regularly provide media interviews. They publish thousands and thousands of research papers. I'll provide some numbers here. Environment Canada has provided more than 1,300 media interviews. Scientists in that one area have published some 524 articles. There are reports that we are leading the world in some cases on our published articles.
The official communications policy directs federal departments and agencies to properly address media inquiries. Federal scientists, as you know, are non-partisan. They do their work to achieve the results they're after. They're very professional. They do not comment on government policy. This is a role that we are required to leave to ministers who, as people can understand, are primarily responsible for their files.
With respect to your first question about the unprecedented funding, if I may, Mr. Chair, there is no question that this government has provided more funding in its time than any other government has in the history of this country. If I may, I will close that question by quoting a reference from the Canadian Council of Academies, which is an independent body:
There is much for Canadians to be proud of as Canada's international reputation is strong, science and technology research is robust across the country, and globally we are considered to have world-leading research infrastructure and programs.... The Panel's findings are comprehensive and represent one of the most in-depth examinations of Canadian science and technology ever undertaken.
That's from the chair of the panel, Dr. Eliot Phillipson.
Hopefully, that answered your question.
Again, if you do choose and select your statistics and your timelines, you can get any answer you want.
In 2008-09, I believe it was budget 2009, we had 4.9 billion in additional dollars. While I know some people would want us to continue to spend that kind of money, we don't have a carbon tax coming up. That was stimulus funding from a temporary two-year stimulus program, as you recall.
I'm sure you will recall that the government came forward with a fairly aggressive and quick stimulus program. It included billions of dollars for infrastructure, and $2 billion was for infrastructure for science, research capacity, at our universities and colleges.
While we completed some 550 projects, highly successful, the vast majority on time and on budget, there was no need to continue that program, as these were temporary stimulus programs.
With all due respect to my honourable colleague, if you're going to take the year after all of those programs ended, you should see a decline. We made the commitment to temporarily stimulate the economy. We did, and those programs, or most of them, ended.
Through you, Mr. Chair, thank you for the question.
You are absolutely correct. The National Research Council, I might want to point out, is one of our councils. We have, as you know, a number of councils. We have looked at this research council and are working to transform this council into more of an industry-facing organization. This is to better align the National Research Council to an area where Canada needs some support, and that is business research and development. It is based on the recommendations from the Jenkins report, the expert panel report that you may recall.
As you point out, the focus will be to help businesses grow. It will be to help high-growth businesses. It will be to help small businesses that do not generally have research capacity on site. This new approach will allow us to offer to businesses in Canada the enormous resources of this National Research Council with all of the expertise and all of the equipment. In fairness, they've done a lot of this in the past.
We are in the process of transitioning it. We are identifying, obviously, those areas and sectors that show the greatest potential and are already strong in Canada. We want our businesses to work more closely with our colleges and universities. We will be announcing more details, if I can say that, in the months to come. This obviously is a large organization. There are a lot of scientists there. There are international scientists who help us with our work, and we cooperate, as you know, with other countries. The process itself should take a little longer than you'd think, but we are obviously working to get this organization up and running as a research technology organization. All that means is it will be the laboratory, if you will, for business in Canada.
That's a very exciting thing. I can tell you, if I'm allowed, that the research council is a perfect example of how they can work. Recently they've been involved in the world's first ever flight by a civil jet on 100% biofuels. You can imagine the impact of this kind of research if we can move that information out into our private sectors. Something like that can have an enormous benefit for the economies not just in southern Ontario in this case, but all across Canada.
So if we can help Canada's businesses in this regard...because as I mentioned many times, we're number one in a number of areas in Canada. Certainly we're number one in our support of post-secondary institutions with respect to research and development as a percentage of our GDP, but we're nowhere close to number one in what's called BERD, business enterprise expenditure on research and development.
Businesses need to spend money on research, obviously, but they do need help in making sure that research is reproducible and ends up being valid and can be supported by other research. They do need a quality research organization. They need a place to test their products, perhaps get certification on their products, and frankly, get assistance in reaching those global markets that we're working so hard to open up.
Excellent. I will do my best.
Obviously, the agency has done very well in southern Ontario. That is the reason we are renewing it. The other reason, of course, is that we're not out of trouble. The manufacturing industry and other sectors in southern Ontario face everything from an unstable United States, the global market, pressures around the dollar and venture capital as you mentioned. We did a lot of stakeholder consultations in setting up the original programs and they were designed to assist that.
The venture capital market is also something the Jenkins panel recommended the government have a look at. The government as a whole has taken a serious approach to this with money in the budget for venture capital.
We saw a great possibility to increase the angel investor capacity of the southern Ontario market, so we developed a program to do just that. It has been highly successful.
I will give you an example. I have tons of examples, but I will give you just one. The Ice River Springs water company is a family-owned business that produces private-labelled spring water. The company expressed a desire to become more environmentally sustainable in all of its materials and practices, but they were limited by space.
They came to FedDev. They showed us this opportunity not only to help the environment and buy more locally, but to increase jobs, so we ended up helping them. They have now converted an automotive manufacturing plant, which saw some contraction as you know, into the first food-grade recycled resin manufacturing facility in Canada.
They are selling to foreign markets. They have new products. They've created 36 full-time jobs. That's my best example.
My apologies, Mr. Chair.
Yes, certainly. I'll try to summarize this time.
First of all, the agency got started in August 2009, halfway through the fiscal year. We took it upon ourselves to look for partnering opportunities with agencies that had a history of doing very well: the industrial research assistance program, the Ontario Chamber of Commerce, Canadian Manufacturers & Exporters, and the SMART program, just to name a few.
We knew at that time it was imperative to get assistance into these communities around southern Ontario. Very quickly, we looked for partners that had connections and existing relationships, but we also went on the road and did consultations with communities, with economists, and with planners in these little communities around southern Ontario. We collected all this data. That is where we came up with companies and communities saying that they only had one employer and needed to diversify so that they would have three or four employers, or that they needed venture capital and infrastructure, or that they had scientists who didn't know how to run a business but had great ideas.
We developed a series of programs, as I mentioned earlier, that we called the southern Ontario advantage. They were to try to approach these gaps, but I will tell you that the criteria changed, so that it wasn't so much just simply getting money into the community. We continually upped the game to require a longer term economic benefit to the community.
Today, our programs are based on diversification of communities by trying to get to the communities and educate them about these programs being available. We can't fund anything if we don't have an application. That has been a bit of a challenge.
On the venture capital side, we've leveraged some $147 million with 81 high-growth start-up companies, and with 2,400 high-quality jobs created there. The money is repayable. This is a very important thing. We've had folks like Dr. Oetker, which was looking all over North America. It's a German company. We ended up landing that company in southern Ontario, again for a repayable loan, whereas other countries, as you can imagine, are offering some significant grants, but the overall tax base I think has been attracting them because it's so low.
For one example here, I'll go back to the research commercialization initiative. Eighty-five per cent of the people in that program indicated that their projects met or exceeded most of their original objectives. Fifty per cent indicated that as a result of the ARC program, applied research and commercialization, they are expecting sales increases greater than 75%.
Another one is the partnership with Canada in which the Canadian Manufacturers & Exporters are projecting that for the funding we've delivered to them, they've leveraged up to $95 million while assisting 800 southern Ontario manufacturing businesses. Their objective is to increase their productivity and their competitiveness on a global scale. Also, they have created some 5,000 jobs.
I could continue with this. Chango is another one I remember, whose sales increased over 500% as a result of working with students under our FedDev programs. In the next year they're predicting an increase of over 800% on that number.
I think we are looking at the opportunity here to shift the environment, not just to create jobs, but to create high-quality jobs in a new economy. Obviously, this is what other folks think, hence the agreement to renew the project. What we need now, obviously, is that it has to pass; we need to have the budget pass.
When I look at the main estimates, page 134—and of course departmental spending in the federal government is an annual process. That's why we have annual main estimates. That's why we have, Minister, as you indicated, supplementary estimates (A), (B), and (C). That's why our plans for departmental priorities, the plans and priorities, are annual documents.
When I compare the main estimates for 2012-13 with those for 2013-14, I see a net increase of $4 million, or 2%, when you compare the mains to the mains, or apples to apples, so I'm not quite sure why there's confusion on the other side of the table.
In addition, one of the reasons for the net increase in the main estimates, as I understand it, is that FedDev was asked to administer the community infrastructure improvement fund, which increased funding for this year by $25 million.
Again, is it not accurate to say that even though this budget has renewed funding for FedDev over five years of $920 million, any future budget from the government could potentially increase that funding envelope?
Thank you for the question, Mr. Chair.
One interesting thing about this regional agency is that it operates in a very large and diverse economy, in Canadian terms, with a real GDP somewhere in the neighbourhood of $600 billion and a very diverse economic base. One thing is that in consultations with various stakeholders and obviously through guidance and direction, we have tried to make our investments in areas in which we can foster partnerships and try to improve the productivity piece, as well as build communities, and also look for opportunities involving gaps in the landscape of the various players.
I think we've been very successful in helping bring a large consortium together, with ideas on projects that can make a difference in the transformation of the economy in southern Ontario. One example is that there is a fair bit of understanding and expertise in the area of water management, water conservation, purification, a number of those issues.
Early on we had a number of applications from various players to look for pieces of that puzzle. We worked very hard with a number of industries as well as universities to build a much stronger and larger proposal, one that involved several universities and a number of private sector partners and that leveraged a considerable investment and actually made a significant investment in the area of water technology in southern Ontario. This is the model that we think is the way to make a real difference. We have done smaller investments with specific companies, but I think some of the transformational pieces are in these areas.
That's one example. The other area is in communities.
Clearly, a number of communities were seriously impacted as a result of the economic downturn and have worked hard to try to reinvent and think about where they need to go on a going forward basis. We've worked very diligently with a number of them.
Windsor is an example, in which, in a very large area that was largely dependent on auto assembly, the jobs left. How does it recreate itself? Working with the community, the mayor, the local universities, and the local Chamber of Commerce came together with a couple of very credible plans on a going forward basis, and we made some investments in those areas.
Recently we've done some work in the Niagara region, which is similar in those areas.
Then the last area, which the minister referred to, is the area of early stage financing. We heard a lot in the round tables about access to capital having disappeared, so we looked at some opportunities to see what we could do to encourage people to come back into that market, to make more investment in creating Canadian companies. Those things have gone well.
This is community activity built up by the community itself whereby we help bring a large consortium together in areas in which there are known gaps to try to work in those areas. That has really been our emphasis.
Thank you for the question.
As Dr. Archibald mentioned, this is one of the areas we identified early on in the agency that we felt was a place where we could play a role in making a change. Angel capital has declined quite substantially in Ontario. It was difficult for good ideas, good businesses, to find the capital they needed to get going.
It took a number of things. A strong innovation ecosystem was encouraging people to start up businesses and look at commercializing new IP and new technology. That was happening as there were various things at play. Certainly it's something that communities, post-secondary institutions, and the province were very involved in.
To address the capital issue we had a lot of discussions with some of the existing angel networks and some of the key venture capitalists in southern Ontario. We heard from them that if we helped them in matching some of the capital they put in to these companies, that would encourage more activity. We devised a program called investing in business innovation, which was launched a couple of years ago. We now have funded over 80 start-up companies through that program with repayable contributions, repayable loans. Our funding is one-third of the total cost of the project, up to $1 million.
The unique thing about the program, though, is that these start-up businesses have to come to us first with either angel or venture capital, or both types of funding in place. We're not picking them. They're being picked by the investment community as good prospects and then they come to us. Then if everything's in place, we put in our one-third of the funding.
The model has worked, I think, because stakeholders had a lot to do with it and because the timing was good. It was really needed. It's generated a lot of response.
The interesting thing early on was we thought most of the funding would come from angels, private individuals who are working perhaps in a network and investing in these start-ups. As time went on, the venture capital community joined in. About half the funding that's gone into these over 80 start-up companies is from the venture capital community and the other half from angels.
First I'd like to thank the departmental officials for attending today. I know that appearing before a parliamentary committee isn't always the most pleasant experience for you, especially when you get tossed into the political fray every once in a while. Once again, thanks for your professionalism and for being here today.
We know that estimates provide an opportunity for parliamentarians to examine and ask questions about planned government spending for the upcoming fiscal year. We also know there's a direct correlation between government expenditures and revenue. Here a trade-off can be made between raising taxes and increasing deficits to maintain expenditures.
There has been much discussion about one particular revenue-generating aspect of the budget, namely revisions to the general preferential tariff that will increase the cost of hundreds of consumer goods, including iPods, bicycles, baby carriages, coffee makers, scissors, rubber sandals, vinegar, umbrellas, paint brushes, and perfume, just to name a few. These changes, found on page 332 of the Conservatives' economic action plan, will have a major impact on industry, on retailers and consumers, and they certainly merit, in my opinion, examination by the industry committee.
Therefore, Mr. Chair, I would like to move the following motion and then speak to it.
I move that the Standing Committee on Industry, Science, and Technology undertake a study into the increased taxation of hundreds of consumer goods detailed in budget 2013, including the 5% tax increase on iPods and MP3 players, the possibility that TVs and other goods may have been taxed retroactively, and the impact of these tax changes for consumers, retailers, and industry, and that the committee reports its findings back to the House.
May I speak to this now, Mr. Chair?
Regarding Madam Gallant's point of order, the Office of Consumer Affairs falls under industry, and much of the manufacturing sector that falls within this sector also comes under industry.
The study should get to the bottom of the ongoing debate regarding the taxation of iPods and other MP3 players as well as the plethora of other consumer goods that would be subjected to the Conservatives' increase levied on the backs of Canadian consumers and Canadian industry and should as well give the committee information on the reporting and registry of information related to tariff waivers.
My Conservative colleagues opposite will no doubt tell you that a tariff isn't a tax, but that simply isn't true, Mr. Chair. Let me stamp out that argument from the outset. Even the Encyclopædia Britannica defines a tariff as a “tax levied upon goods as they cross national boundaries, usually by the government of the importing country”. The government can call these tariff changes whatever they want, but that doesn't change what they are: a tax increase, and one that will hit the poorest Canadians the hardest.
Mike Moffat, an assistant professor at the University of Western Ontario, summarized the entirety of these tariff changes most succinctly when he said, “These tax increases are also likely to be regressive in nature”.
The inconsistencies of the Conservative plan to increase the cost of hundreds of consumer goods are apparent to analysts and industry leaders from across the spectrum of Canadian business. One such inconsistency involves the Conservatives' flagship policy of reducing tariffs on hockey equipment, yet shockingly, I've discovered that hockey helmets won't be covered by the reduction. Hockey helmets are imported under chapter 65 of the customs tariff schedule, item 6506.10.90.10, for those who are interested, for “protective headgear, athletic” specifically. However, no chapter 65 duties are listed to be changed in budget 2013. This means that protective headgear for sports will continue to be charged at the most favoured—