Mr. Speaker, I am pleased to attempt to begin my speech a third time. I acknowledge my colleague from Red Deer—Mountain View, and I am pleased that he is interested in hearing this speech, especially since he is a member of the Standing Committee on Industry, Science and Technology, which I appreciate. He is always there to stand up for the people of his riding, as is the member for Windsor West, who is present and who I hope will be able to give a speech soon.
We are not debating Bill C-19 right now. We are debating the Investment Canada Act. As I was saying, the member for Calgary Nose Hill, who was co-chairing the industry committee with me at the time, moved this motion so that we could study the Investment Canada Act. In the context of COVID-19, we had very legitimate concerns about the devaluation of Canadian and Quebec businesses, which could be at risk of being acquired by foreigners at bargain basement prices. We had the real and legitimate concern that head offices could be moved out of Quebec or Canada, benefiting foreign investors.
China is obviously one potential aspect, but there were many other issues, such as Air Transat and Air Canada. These airlines were seeing a significant increase in liabilities coupled with a significant decrease in passenger numbers. They were becoming vulnerable, which was why the Standing Committee on Industry, Science and Technology met and invited witnesses so that we could protect these companies.
Based on the report summary, “The Investment Canada Act (ICA) allows the federal government to review foreign investments. The ICA provides two distinct processes: a net benefit review and a national security review.” There are two key words.
For me, the net benefit for Canada must always be demonstrated. We expect some transparency from the government in this regard, particularly from the Minister of Industry, who will be able to place conditions on a sale.
Obviously, I am thinking of the acquisition of Rona by Lowe's, which happened in our own backyard. We never found out whether the federal government had laid down any conditions. It obviously must have, to allow the acquisition of Rona by Lowe's. The problem is that since these conditions were never made public, it was easy for Lowe's to back out of its commitments a few years later. Quebeckers are no longer attached to Rona. We saw brick-and-mortar businesses in cities across Quebec close their doors. The key issue is supply. A company like Rona would buy goods from Quebec and Canadian suppliers. Now that it is owned by an American company, it will favour the suppliers that can offer the lowest possible price. For an American company, that lowest possible price will be in the United States.
I just want to provide some background and say that, in its report, the committee recommended a more cautious, responsive, and transparent approach to regulating foreign investments.
I submitted a supplementary opinion on behalf of the Bloc Québécois. Although the report contained enough to make it positive, relevant and constructive, we believed that it was missing some important information, mainly surrounding the issue of reviews. I would like to read to my colleagues the Bloc Québécois's supplementary opinion, which is simply entitled “Better Protecting Our Companies” because that is what this is all about.
Can we trade in our neo-liberal economy for an economy where we protect our domestic market, for a Quebec economy and a Canadian economy where we can be independent, do business with local suppliers and keep our economy going in an independent manner?
It is important to remember that, in the context of COVID-19, we were dependent on other countries, whether it was for personal protective equipment or any other health-related issues, such as vaccine production. We lost eight months because of that.
I want to remind members of the context in which our study was conducted. I think it is absolutely fundamental. It is more important than ever. We need to come back to the principle of a strong domestic economy where we protect our national interests and where we buy from Quebec and Canada.
Here is the Bloc Québécois's supplementary opinion, which is entitled “Better Protecting Our Companies”.
The industry committee's report is an important and welcome change in terms of foreign investment control. The Bloc Québécois welcomes this shift after a decade of inaction, but we would have liked the committee to go even further.
In our opinion, the report should have suggested that the government bring the review threshold for foreign investments down to a reasonable level so that it can determine which investments are truly beneficial. Hence this supplementary opinion.
The federal government's foreign investment policy these past years can be summarized in two words: deregulation and permissiveness. The policy provides for increased scrutiny when national security is at stake, and ongoing oversight when investors are foreign countries. The fear of China is real.
However, the floodgates are open for all other foreign investments, which are approved automatically and without review. Statutory review mechanisms, which the government readily insists on protecting in every trade agreement that it signs, are essentially rendered ineffective for foreign investments.
In 2013, the Conservatives set the tone by announcing that they would raise the review threshold used by the federal government to determine whether foreign investments are truly beneficial.
From 2015 on, the Liberals have been doubling down on this change. Between 2015 and 2020, the threshold applicable to “private sector trade agreement investments” increased from $369 million to $1.613 billion. The result is striking: the share of reviewed foreign investments fell from 10% in 2009 to 1% in 2019. You read that right: under the current rules, 99% of foreign investments are now approved automatically and without review.
This lack of oversight comes at a bad time. Over the past 30 years, the nature of foreign investment in OECD countries has changed. New investments are down, while investments in the form of mergers and acquisitions of existing companies are up. I would add that this trend has only been exacerbated by the COVID-19 pandemic.
Between 2010 and 2015, only 54% of foreign investments in Canada went toward new entities, while the remaining 46% went toward mergers and acquisitions, where foreign investors took over a number of our companies, either in part or in full.
Canada is doing significantly worse than other industrialized countries in this regard. New entities receive 72% of foreign investment in the U.S. and 78% in France, compared to only 54% in Canada. And the trend continues to this day: from 2018 to 2020, mergers and acquisitions accounted for $90 billion of the $244 billion in foreign investments in Canada.
Simply put, over the past three years, foreign companies have invested $90 billion to take over a number of Canadian companies in part or in full. This $90 billion in takeovers has led to the downfall of head offices and turned them into regional offices with little power.
Quebec has gained significant economic and financial leverage since the Quiet Revolution, enabling it to pursue a policy of economic nationalism—the intensity of which varies from one government to the next—that gives Quebeckers greater control over their economy.
Our economic nationalism has two components. On the one hand, we are open to foreign investment as a driver of growth and development. On the other hand, we invest in Quebec companies to keep them intact and fuel their growth. And we protect our head offices because we know how important they are as decision makers.
Quebec does not, however, want to shut the door to foreign investment. Our economy is and will always be open to the world, and openness toward foreign investment is essential for enabling Quebec to access major trade networks, which is crucial for guaranteeing the prosperity of our relatively small-scale economy.
As Jacques Parizeau wrote in 2001, even before China joined the World Trade Organization, “we do not condemn the rising tide; we build levees to protect ourselves.” Unfortunately, weakening the Investment Canada Act has caused those levees to break.
One striking realisation is that the federal foreign investment legislation was being gutted at a time when Quebec was becoming concerned about foreign takeovers and the collapse of our companies' head offices.
In 2013, the same year that Ottawa announced that it would raise the threshold for reviews under the Investment Canada Act, Quebec went in the opposite direction and established the Task Force on the Protection of Québec Businesses.
The task force was established by a Parti Québécois government, co-chaired by a former Liberal finance minister and composed mostly of businesspeople. It reflected Quebec's consensus for protecting our businesses.
The task force began by noting that Quebec's 578 head offices provide 50,000 jobs that pay twice the average salary in Quebec, in addition to 20,000 jobs for specialized service (accounting, legal, financial and IT) providers. That is huge.
In addition, Quebec companies tend to favour Quebec suppliers, while foreign companies with a foothold here rely more on global supply chains, which has an obvious impact on our SMEs, particularly in rural Quebec. As we have seen during the pandemic, global supply chains are fragile and make us entirely dependent on foreign entities.
Furthermore, head offices are essential for Montreal’s financial sector, which is in turn essential for SMEs across Quebec, since it gives them the financial tools needed to spur their development. Quebec’s financial sector is responsible for 150,000 jobs and generates $20 billion, or 6.3%, of its GDP. A large part, close to 100,000, of these jobs are in Montreal, which ranks 13th among the world’s financial centres according to the Global Financial Centres Index.
Lastly, companies tend to concentrate their strategic planning, scientific research and technological development where their head office is. In other words, a subsidiary economy is a less innovative one.
The task force’s recommendations were mainly addressed to the Quebec government: make more equity investments in companies, facilitate the distribution of employee shares and better equip boards of directors against hostile takeovers.
However, the power to legally regulate foreign takeovers to ensure that they are beneficial for the economy and society is in Ottawa’s hands. And at a time when Quebec was concerned about foreign takeovers of its key economic assets, the federal government chose to relinquish its power to keep foreign investments in check.
Quebec and Canada are two contrasting economies.
While Quebec upholds economic nationalism, Canada focuses on deregulation. That is because our economies are different.
Quebec’s economic nationalism encourages Quebec companies to grow. However, Canada’s economy is largely based on major foreign companies’ subsidiaries. Whether in the automobile industry, with Ford Canada, GM Canada and so on, or in the oil industry, with Shell Canada and Imperial Oil, Canada has had a subsidiary economy for a long time.
As for Canada’s large companies, they operate in industries that are protected against foreign takeovers by federal law, such as finance, rail and telecommunications. Canada, unlike Quebec, cares very little about protecting head offices because it does not believe that doing so is in its national interest. Nevertheless, Canada’s stance is informed by policy difference, not contempt for Quebec’s interests.
It is a welcome albeit incomplete shift.
A new wave of major investments from companies linked to the Chinese government has been a game changer. Canada is starting to realize that it needs to better control foreign investments and make sure that they are in fact beneficial before green-lighting them.
The Bloc Québécois is pleased that this issue has finally surfaced in the context of a study and in the report of the Standing Committee on Industry, Science and Technology.
The report suggests that the government should tighten restrictions on investments from foreign governments and investments that could impact national security; better protect strategic sectors of the economy; better protect intellectual property to ensure that China cannot access our technology; and increase the transparency of the government’s net benefit review process. The Bloc Québécois fully supports all of these proposals.
However, the committee did not take the next step needed to protect our economy, businesses and head offices, namely, lowering the review threshold. Hence this supplementary opinion, in which the Bloc Québécois speaks on behalf of a broad consensus of Quebeckers.
Even if the committee did not adopt our proposal, we hope that it will provide the government with some food for thought. After all, the pandemic has shown us that global supply chains are fragile and that it is unwise to be completely dependent on foreign decision-makers. All the more reason to protect our companies here at home.
I will add a few more points to this presentation of our supplementary opinion, beginning with the importance of ensuring that we can protect our intellectual property. I would like to highlight a few recommendations. One of our proposals in the report reads as follows:
That the Government of Canada protect strategic sectors, including, but not limited to: health, the pharmaceutical industry, agri-food, manufacturing, natural resources, and intangibles related to innovation, intellectual property, data and expertise.
I believe the report forgot to mention the aerospace sector, because I am positive we voted for it.
When the committee discussed it, it was important, and I want to recognize the interventions of Jim Balsillie, whom I just had to name in the House. We know him well for his leadership in the Canadian and Quebec economies. He has appeared numerous times as a witness before the committee, most notably on the importance of being able to protect innovations, intellectual property, data and expertise. That is absolutely essential in a knowledge-based economy.
One of the Bloc Québécois's recommendations is that the Minister of Innovation, Science and Industry justify their decision whether or not a transaction is to Canada's net advantage. We want more transparency, an explanation of the factors leading to this decision and that the minister make public the conditions imposed for the acquisition by foreign investors to ensure that there is follow-up. When the information remains secret, a company can easily ignore the conditions because it is not accountable to the people. The foundation of a democracy is accountability to the people.
For me, the debates we had at the Standing Committee on Industry, Science and Technology about the recommendations to be made centred around the recommendation that the Government of Canada lower the review threshold to 2015 levels, or $300 million in 2000 dollars. Unfortunately, this is not what happened.
I recognize that when the Conservatives amended the Investment Canada Act they were trying to protect Quebec and Canadian businesses from Chinese investments. At the request of the Conservatives, the Liberals sought to make no changes to the Investment Canada Act. It seems that that thinking has not changed much since 2000.
The recommendation that I made concerning the threshold of $300 million in 2000 dollars was not accepted. This threshold would be revised every year, which is surprising. However this provision recognizes that the mechanism, which I wanted to strengthen, already exists. The threshold will be adjusted annually using formulas based on nominal GDP set out in the act and calculated in accordance with the principles set out in sections 3.1, 3.3 and 3.5 of the regulations.
Another part of our argument focused on thresholds, but other parties did not want to protect our businesses unless there was a national security risk. The goal is to protect our economy by displaying strong economic nationalism that enables us to make choices for our economy without opening ourselves up to takeovers by foreign investors.