[Recorded by Electronic Apparatus]
Wednesday, May 1, 1996
.1618 
[English]
The Chairman: I'd like to call this meeting to order.
We shall resume consideration of our order of reference dated Thursday, March 7, 1996, relating to the main estimates for the fiscal year ending March 31, 1997.
Is there unanimous consent that I call votes 1, 5, L10, L15 and 20 under Industry?
Some hon. members: Agreed.
The Chairman: Is there also unanimous consent that the committee, pursuant to Standing Order 81(7), proceed to consider portfolio overview and outlook for Industry Canada?
Some hon. members: Agreed.
The Chairman: I'd like to welcome the Minister of Industry to the committee.
Because of votes today, we have until approximately 5:15 p.m. and then the committee will have to adjourn for the vote. The committee can consider at that time whether it needs more time with the minister because of the brevity of the situation.
Mr. Minister, without further ado, please introduce your witnesses and any statement you wish to read.
Hon. John Manley (Minister of Industry): Thank you very much, Mr. Chairman.
Let me begin by saying to you that I have with me Dr. Gerrard, who is here today in his capacity as Secretary of State for Science, Research and Development, together with Kevin Lynch, who is the Deputy Minister of Industry. He may respond to any detailed questions that may arise out of the estimates.
.1620
I do have a statement, but in view of the slightly truncated version of this committee hearing we have in the face of the vote schedule, with the committee's indulgence I might ask the clerk to perhaps circulate a copy afterwards, and we'll take it as read so that we can go directly to questions rather than using up the committee's question time on a statement.
The Chairman: Fine.
Statement by the Hon. John Manley (Minister of Industry): Mr. Chairman, I'm pleased to meet with the committee today to speak to the 1996-97 main estimates and outlook for Industry Canada. I have also tabled with the committee an overview document on the industry portfolio, which now comprises 13 departments and agencies.
I want to take this opportunity to thank committee members for your valuable contributions in advancing the heavy legislative agenda pursued by the industry portfolio over the last year. As you know, the industry portfolio plays a major role in the government's strategy to put in place the elements necessary for sustainable economic growth and job creation. The indicators show the government's efforts are working. We have made great strides to reduce the deficit. We have cut spending as a proportion of the GDP down to 1949 levels. The economy has created some 600,000 jobs over the last two and a half years. That is more than the number of jobs created by the economies of France, Germany and Italy combined. Our exports are booming and the current account deficit reached a 10-year low in the fourth quarter of 1995, falling to an annualized $5.1 billion. But we recognize there is more work to be done.
Last year, in its annual review of Canada, the OECD described Canada as having an ``innovation gap'': Canadian firms, particularly SMEs, are slower to apply existing technology and to adopt new technologies than their competitors in the global market. The OECD report also noted that Canada's R and D expenditure as a share of GDP is among the lowest of OECD countries.
In a knowledge-based economy, where innovation drives productivity, jobs, and growth, these findings are troubling. Canada has the highest quality of life in the world, but Canadians continue to feel insecure about their own livelihoods and the economic future of their children. They know that Canada must move quickly to re-engineer and retool the economy to ride the crest of the wave of change.
In 1996-97, the industry portfolio will continue to implement policies and programs to advance the government's economic agenda and help close the innovation gap.
The government's primary role is to help create an environment where the private sector can create jobs and growth. But we also recognize that the government must play an important role in sharing the risks of technology development, creating partnerships and supplying information to help firms meet the challenges of the global economy.
We have consistently pursued a course of using technology, knowledge and entrepreneurship to close the innovation gap. Our course was first outlined in the red book and developed in the 1994 and 1996 speeches from the throne. It was detailed in the plan for Building a More Innovative Economy, also known as the orange book, which was released in 1994 as part of the jobs and growth agenda.
We have also responded to the challenge of deficit reduction and will continue to respond to the program review process most recently reiterated in the 1996 budget. As the committee knows, in addition to its ``stay the course'' message on deficit reduction, the 1996 budget emphasized strategic interventions to create jobs and growth. It promoted technology, international trade, and job opportunities for youth. Mr. Chairman, the industry portfolio will participate in each of these strategic interventions.
This is the third year in which we have met to discuss the estimates, and I am pleased that year by year I have been able to report on the progress and success we have had in implementing the government's economic objectives.
You may recall that in 1994 I said that my priorities were concentrated on four areas: small business, the information highway, internal trade, and science and technology. I can confidently say that we have moved forward and made substantial progress in all of these areas over the last two years. But I also know that there is still more that can be done.
When I met with you last year, I explained how Industry Canada had refocused its efforts along three mutually reinforcing lines of business: micro-economic policy; marketplace rules and services; and industry sector development. These lines of business have provided Industry Canada with a set of tools with which we can tackle the task of creating an environment to promote jobs and growth. They have enabled us to shift our emphasis from grants and contributions to information and advice.
The process of relying less on capital investment and more on providing the information that businesses require was a central theme of the 1995 budget. This approach to helping business is increasingly being applied in the three regional agencies whose Secretaries of State now report to me.
Businesses across Canada, even in some of the more remote areas, have enormous new opportunities with the emergence of the knowledge economy. In the age of the information highway, geographic location is no longer the major determinant for business success it once was. What does determine success, however, is the ability of firms to apply new information and new innovations to their own business strategy. And this is where Industry Canada and the portfolio partners can help businesses take advantage of the emerging opportunities of the knowledge economy.
I would like to mention briefly some of my priorities for this fiscal year.
Consistent with the principles of the new federal science and technology strategy, the Industry portfolio will focus its annual $2 billion S and T investment to build a more innovative, competitive economy through the systematic application of science and technology. We will continue to promote and support partnerships within the Canadian system of innovation to stimulate jobs and growth. Our recent efforts include the implementation of the technology partnerships Canada program to promote technology development and commercialization in the aerospace and defence sectors, in environmental technologies and in strategic enabling technologies such as biotechnology.
The information highway is a fundamental element in the government's jobs and growth agenda and will help us achieve many of our economic, social and cultural objectives. Very soon we will put in place an information highway action plan that builds on the work we have already done to promote competition, innovation and access for all Canadians. As you know, we have already taken some steps to expand access. In the 1996 budget we accelerated both the Community Access and SchoolNet programs to help rural communities, schools and libraries connect to the Internet.
We recognize that small and medium-sized businesses continue to be the primary engine of job creation in Canada. We will continue to develop and deliver services to address the special needs of the small business community, including access to capital and information. To do this, we plan to develop a long-term small business agenda.
Strategis, the largest business information web site in Canada, was recently launched to provide businesses with information on everything from market opportunities to advanced technologies and new manufacturing processes.
In the year ahead, we will continue to expand and develop partnership approaches within the Industry portfolio to optimize the core capabilities and diverse strengths of the member departments and agencies. With the addition of the regional development agencies in January 1996, the Industry portfolio now has a mandate that covers much of the government's jobs and growth agenda, and a combined budget of more than $4 billion and 10,000 employees.
The portfolio brings together the people, the key resources and the instruments to promote innovation, deliver strategic services and information to business and maintain a modern marketplace. We have begun the process of creating synergies from the complementary capabilities of the portfolio partners, notably in the portfolio's S and T action plan. This work will continue in other areas such as small business, trade and investment and service delivery.
On a final note, I would like to highlight the common theme that runs through our initiatives: they bring government and business together, to work in partnership to close the innovation gap. I am confident that as a government we can continue to create the environment necessary for economic success. And Industry Canada and its portfolio partners are well positioned to help create that environment.
I welcome the committee's questions.
[Translation]
The Chair: Mr. Leblanc, are you ready to ask some questions? Or would you prefer to make a speech?
Mr. Manley: That may be what he prefers, but it will be granted to him only if he insists.
Mr. Leblanc (Longueuil): I do not insist, but that will enable me to make the speech in place of the Prime Minister. That will give me a little more time.
Mr. Manley: This is not unusual.
Mr. Leblanc: Since we do not have a lot of time at our disposal, I will raise immediately a problem that exists at present in a Quebec industry. I know that this concerns particularly the Minister of Natural Resources. It involves the Canadian Centre for Magnetic Fusion in Varennes.
I have read the government program concerning industry, science and technology, and I agree with this approach in principle. Where I have some questions is with regard to the Canadian Centre for Magnetic Fusion, located in Varennes, which is a clear reflection of the policy of the Minister and the government concerning science and technology.
This centre, where research is conducted, is a perfect example of concerted action by universities, research centres, private businesses and government. Moreover, of the 100 specialized scientific and technical employees working in this company, 50 are on loan from private business. Thanks to the presence of these people, whenever new results are achieved in research, they are used to increase productivity or develop new products.
It seems to me that this way of operating is fully consistent with the direction of the new policy as stated by the Minister. This leads me to wonder why the minister, Ms McLellan, decided to stop subsidizing this company. The subsidy was 7.5 million dollars. This decision seems very surprising to us.
Is the Minister's budget so inadequate? It seems to me that the department could easily continue to fund this corporation, which would be fully consistent with its policies. The Canadian Centre for Magnetic Fusion does excellent work and an enormous amount of money has been invested in it. This corporation has already spent 70 million dollars on infrastructure, 50 percent of which originated with the federal government. It has just invested a further 11 million dollars in new equipment.
The fact that the government is withdrawing totally from the funding of this centre leads us to wonder whether it wouldn't have been appropriate for the Minister of Industry to continue to support this exemplary corporation.
Mr. Manley: I will first make a brief reply, Mr. Chairman, and the Secretary of State, Jon Gerrard, can no doubt add something with regard to his own responsibilities in the field of science, research and development.
.1625
The decision was taken in the context of the program review necessitated by the government's decision to achieve its objective of reducing the deficit to 3 percent of GDP. In such a context, there are always some decisions that are fairly hard to make.
We have had to make some as well in Industry Canada, for the councils connected with Industry Canada, such as the National Research Council and the Natural Sciences and Engineering Research Council. These are not necessarily happy decisions, but they are necessary decisions.
Since we announced a year in advance our intention to terminate the support we were giving to this project, the Quebec government and Hydro-Québec will have time to determine whether this project is really a priority and whether they can reinforce their support to the project with respect to research in the nuclear field. This research would be more general than research alone in the fusion sector.
On our side, we would have to review the options that are set out in the strategy referred to by Mr. Leblanc. This will not be easy, in fact. It is easier to discuss a policy in the nuclear field and scientific projects put forward by Industry Canada than to introduce those projects into the budget. To decide to continue the research in the nuclear field, it will be necessary to determine in what other sectors we are going to reduce expenditures in order to pay the costs of valid, but extremely costly, research.
[English]
The Chairman: Mr. Gerrard, would you like to add a few words?
Hon. Jon Gerrard (Secretary of State (Science, Research and Development)): This is to further emphasize that this decision is consistent with what we have set up in terms of governance mechanisms for science and technology, which is to re-emphasize the important role of research and development in supporting mandates of ministries, and to make sure that the individual ministries, in this case Natural Resources Canada, can make the decisions and set the priorities. That in fact has happened in this case.
There continues to be support for basic research by the federal government through Industry Canada and through NSERC, and for commercialization areas through the technology partnerships program. It is true that these are highly competitive and any applications have to be in that context so that we are continuing to broadly support research as well as to ensure that departments have the capabilities to carry out their mandates successfully.
[Translation]
Mr. Leblanc: Mr. Chairman, sincerely, and without trying to assign any blame whatever, I will note that this company, as I mentioned earlier, currently borrows 50 percent of its specialized researchers and technicians from private business. Last year, this company manufactured and sold products at over 100 million dollars. Almost all of this production was exported. It is indeed a profitable and cost-effective undertaking, at this time.
You are still imagining that nuclear fusion can yield results only in the long term. On the contrary, this company has decided to function in such a way that each discovery made in the course of its research is immediately applied. That is why private businesses are making a 50 percent contribution to the staff.
.1630
Honestly, I don't have the impression that the Minister or the department seriously examined the situation before making this decision. In my opinion, it should be given more serious attention and we should realize that this is probably one of the few firms in Canada that is cost-effective at this very moment, since as it advances it implements the--
There is something else that I do not understand. It was decided to increase by several million dollars the grants to a company in Vancouver that makes much the same thing and that is called TRIUMF. The subsidies went from 19.3 million dollars to 34.3 million dollars this year. This company, TRIUMF, does work that is excellent but clearly inferior, from the standpoint of efficiency and cost-effectiveness, to that of the Canadian Centre for Magnetic Fusion.
You increased by several million dollars the subsidies to TRIUMF and you reduced those to the Canadian Centre for Magnetic Fusion to zero. That is really hard to accept and to understand. That is why I am asking the Minister to review this matter and ensure that he is making a decision that is fair and equitable for everyone.
[English]
The Chairman: Thank you very much, Mr. Leblanc. Mr. Schmidt.
Mr. Schmidt (Okanagan Centre): Thank you, Mr. Chairman.
The Chairman: If he wants to respond...I'm not sure there was a question.
A voice: That's a good question.
Mr. Manley: I'm not sure there was a question.
There were a few misstatements that perhaps deserve some clarification, one of which is not that the industry department didn't look seriously at this. That is not a misstatement. because this doesn't pertain to the industry department.
We are here for the estimates on the industry department. I recommend to Mr. Leblanc, if he wants to pursue the details of the decision with respect to this particular cut, that he really ought to ask the minister responsible.
Secondly, although he demonstrated a great deal of interest in the area of nuclear research, he disappointed me when he confused the work being done at TRIUMF with the work being done at Varennes. They're totally different. I'm glad he thinks TRIUMF does good work. I can assure him his party's critic for research and development sent me a note after we announced the TRIUMF decision congratulating us for it. So I was very pleased to hear the Bloc support for that, because indeed it is very basic research.
So we're talking about quite different kettles of fish here between what AECL, the Quebec government and Varennes treat as a commercial potential for an area of research versus the performance of very fundamental research through the TRIUMF facility in B.C. - which, by the way, supports the work of quite a few researchers from universities located in the province of Quebec.
I'm not sure, Dr. Gerrard, whether you want to elucidate on that.
Mr. Gerrard: I think we have clearly provided major support to science in Quebec in a variety of mechanisms, including major support for the Canadian Space Agency, in the last year for the Institute for Magnesium Technology, the National Optics Institute, and so on.
I am pleased to hear your comments about commercial potential. If indeed it is commercially viable, then I hope it will continue on that basis with a re-engineered form of support. We are proceeding and we're trying to make sure we have a balanced and forward-thinking portfolio of science and technology across the country, significant elements of which clearly are in Quebec.
The Chairman: Thank you very much.
Mr. Schmidt.
Mr. Schmidt: Thank you, Mr. Chairman.
First of all, I'd like to commend whoever put this book together. I think it's one of the nicest, shortest, most concise briefing books I've seen in a long time. It's really good, and I thank you for that.
I'd like to get into three distinct areas. One of these has to do with Telesat Canada. In particular, could you perhaps tell us just exactly what is or was or will be the process, whatever happens to be happening here, in terms of allocating the geostatic spaces that exist for Canada. It is my understanding that Telesat Canada had access to all of those. That may be wrong. It may be other people who get them. So it's really the process of allocating those geostatic spaces I'd like to have some clarification on.
.1635
Mr. Manley: Thank you, Mr. Schmidt. They have to make the briefing books short, but they gave me one that looks a little bit longer than yours.
Mr. Schmidt: That's why I have a question, you see.
Mr. Manley: Let me say first of all that this is a good question. It's an important question. There are a lot of misconceptions out there and I welcome the opportunity to add some clarification.
These slots were secured by Canada by allocation by the International Telecommunications Union. We've had them available to us for occupation since June 1983, for almost 13 years. On a number of occasions, most recently in January 1995, by Gazette notice in the normal way, we have made known to the industry - and frequently in other fora - that these slots were available along with other potential spectrum allocations and that we were open to proposals to hear about them.
In all that time, the only expression of interest we received was the one we received earlier this year from Telesat. Essentially their proposal was one that saw them pursuing a business relationship with U.S.-based partners that would improve the economies with respect to the usage of a slot if both that and the requisite regulatory approvals could be obtained. That meant quite a lot of hurdles.
As you can imagine, for them to pursue the idea of acquiring and using the two slots they asked for, which are not all of the slots that are allocated to Canada but which are certainly the best slots, is not a minor expense. It costs roughly $400 million for a satellite to be launched. It's a major business proposition and would require quite a bit of work on the part of the company.
For that reason and in the absence of any other potential Canadian users of the satellite slots, we provided to Telesat a letter that gave them in principle the comfort that they would obtain the slots subject to satisfying us on a number of accounts. The key ones were that they would have to satisfy us that Canadian requirements would be fully met from their use of the slot and that we would be expecting a fair value, a payment, for the use of the slots. Both of those required that they negotiate with us further.
As you may know, a recent allocation of a satellite slot in the U.S. was done by an auction process and generated quite a substantial payment for the slot. I don't mind saying my view is that if indeed this slot was going to be used in part for delivery of services to the U.S., the recent auction of a U.S. slot certainly gave us a bit of a benchmark as to the value that might be attributed to such a slot.
As recently as this morning I heard on the radio that we gave those slots away for nothing. Number one, we haven't in fact finally allocated the slots. Number two, we haven't agreed on a price. But we have tried to put Telesat into a position where they could potentially seek out business partners that might lead to their acquiring not only the slots but also the regulatory approval that would be required from the CRTC to use them on the Canadian side for direct broadcast services, as well as the FCC and for that matter the ITU internationally, in order to put the whole transaction together.
So I would say it's very much a transaction that has yet to gel in terms of its business components. We've merely provided the basis upon which a Canadian company could proceed to potentially put together a viable business transaction.
.1640
Mr. Schmidt: I thank the minister for the answer, and indeed you have thrown some light on the subject.
I'd like to explore further, then, this payment from Telesat to the Government of Canada. Is it anticipated it would be on some kind of a rate or ratio basis of business done or transacted through the satellite? How will this actually happen? Will it be a demand of a lump-sum payment or will it be a continuing type?
Mr. Manley: In the past we have not sought lump-sum payments for spectrum in Canada, although you may know that with the request for proposals for local multipoint communications systems, LMCS, we've indicated a subsequent allocation could be by way of auction. In the budget implementation bill that is before the House, the required enabling provisions are there for us to potentially auction spectrum in the future.
Our view in the past has been that in any event we would want to ensure that we did not create simply value in the licence. We prefer to encourage Canadian firms to build the investment in technology and markets that will make them viable rather than simply to make an up-front payment for the licence for the spectrum without having made the investment.
That was my view as well on PCS, which we licensed before Christmas and which was auctioned in the U.S. The dynamics of the Canadian market - a small market where we're very concerned that we provide service as readily as possible across a very wide geography - require that firms be enabled to make the investment in the technology rather than in the up-front cost of a licence. So we would seek to draw the fees out of the usage of the spectrum over the time it's in use.
There would be a variety of ways in which we could do that. Frankly, that's one of the things that would need to be negotiated in the case of DBS, which is a new usage. But we'd certainly look at the breadth of coverage, the potential users and so on in determining what would be fair market value for the use of the public good, which is the spectrum.
Mr. Schmidt: I'm wondering, Mr. Chairman, if the minister could respond.... These are very direction-setting types of questions and directions that I think the minister can take.
If an auction is done today, it is based on current market and anticipated market value. It seems to me that if it were done on the basis of business transacted, the anticipation of revenue might be less by actual experience. But the way it looks to me, it will be well in excess of what's anticipated today.
If I remember, the minister himself said the uses of PCS aren't even known today - the many different applications that could come. I think the same thing applies to the geostatic satellites. So indeed we could generate revenue that is well in excess of what an auction process might generate. On the other hand, the auction process has the value of determining a benchmark and we now have a bit of a benchmark.
So I really would like to encourage the minister to get with the business aspect of this. I know it's difficult and I certainly don't want to minimize that. But is something happening with the industry and also with the other interested persons, such as the innovators in particular, as to how we might best get a return for the dollars spent? Canada has a vested interest. That space, the geostatic space, those spectra that are there for PCS and LMCS, virtually belong to the people of Canada.
Mr. Manley: They do belong to the people of Canada. That is why I make a strong point of the fact that we intend to get fair value for them. But I have another point of view on this as well. They are also there to enable Canadians to have access to the best, newest services as quickly as possible.
In other words, I have some broader industry policy concerns in this rather than those that might be shared uniquely perhaps by the Minister of Finance, who may be a little more interested in the revenue potential for the government. I want to see us get new services developed and out there really quickly. If I suck all of the early-stage profitability out of a venture, then that's money that's not going to go into investment, into new services for Canadians, and it becomes part of the cost burden for the users.
.1645
A very important part of the telecommunications potential for the country is the fact that it enables all of our other sectors to be more competitive in the world. So getting that service to the users at a reasonable cost becomes a fundamental part of making our overall economy, whether we're talking about natural resources or manufacturing or other parts of the export sector, as competitive as they can be.
So I have all of those factors in mind in trying to arrive at the best way to price the use of the spectrum so that Canadians benefit in a variety of ways.
The Chairman: Thank you, Mr. Schmidt.
Mr. Schmidt: Okay. Can I have another question later?
The Chairman: Yes - or I hope you will. Bargain with your associate there.
Mr. Shepherd.
Mr. Shepherd (Durham): Thank you very much.
I've been noticing a tremendous increase in bankruptcies, and bankruptcies come under your purview. I have a number of questions. I guess a general one would be, is there something with our bankruptcy laws? Are they too lax? Why are bankruptcies increasing during a period of economic recovery?
Mr. Manley: I'm not sure I can answer that, Mr. Shepherd. As you know, proposed changes to the Bankruptcy Act are before Parliament now, and I hope they will soon be into this committee. If Mr. Bodnar does his work, we'll get them soon.
I think what you're seeing is a decline in bankruptcies in the corporate sector and an increase in bankruptcies in the personal sector. I think what that means is that as we're still - very slowly, frankly - coming out of the past recession, you've seen in the corporate sector the clean-up occur. The firms that just didn't make it have already filed.
In the personal sector, we still suffer from disturbingly high rates of unemployment. A lot of individuals are still having difficulty making ends meet. The statistics are reflecting a high level of personal bankruptcies. The best solution for that, of course, is to see more folks finding employment.
Mr. Shepherd: It states in the department's summaries here that there's an effort to make the costs of bankruptcy in your department a cost recovery. How are you going to do that?
Mr. Manley: Obviously, the Bankruptcy Act is one of those pieces of framework legislation that exists to try to make the overall commercial marketplace operate more smoothly. Bankruptcy is basically a way to take care of the orderly disposition of the assets of a debtor whom both he and the bankruptcy courts have concluded is incapable of managing his affairs, through to a state of solvency.
Of course, that means there are assets to distribute. Since it is a marketplace framework law, it's appropriate that those assets in part be used to defray the costs of the administration. You want as much as possible to maintain order in the disposition of assets, and this is the way we do it.
Mr. Shepherd: So that would be a raising of the fees for filing and the administration process, and therefore -
Mr. Manley: That's how we would generate the revenue in order to defray the costs, yes.
Mr. Shepherd: How is that program working? Are we actually reducing the department's cost of servicing the bankruptcy community?
Mr. Manley: We will have to provide those stats to you later, Mr. Shepherd.
Mr. Shepherd: That's fine.
The Chairman: Mr. Murray, do you want to take your five minutes?
Mr. Murray (Lanark - Carleton): Sure. I'll be very brief.
Minister, last fall, I believe, the Information Highway Advisory Council reported with about 300 recommendations. I just want to ask you how you're making out in the implementation of any of those. Has it been helpful, and where do you see that leading?
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Mr. Manley: First of all, I think the council provided us with a number of pieces of work over the course of their deliberations. Their final report is really a seminal piece of work on the information highway in Canada. Members of the President's Advisory Council in the U.S. have told me they admire our work and have used it as a reference point, as have academic sources across the country.
So they have produced a major piece of work, really, with, as you say, 300 recommendations. Quite a number of those are already either implemented or are in the process of being implemented.
We have prepared a response to the recommendations of the Information Highway Advisory Council, which I expect to make public in the very near future on behalf of myself and I guess about seven ministers whose departments in various ways are impacted by the recommendations of IHAC. So our thorough report is coming soon.
We've also asked the advisory council to stay with us for another year and to hold about three more sessions to review and monitor the implementation of many of their recommendations. The first session of that council will be later this week, here in Ottawa.
So not only was their work valuable, but we also intend to keep them at it at the same outrageous rate of compensation they were receiving before - nothing.
Mr. Murray: Thank you.
Dr. Gerrard, we've talked for years about the need for science culture in this country. I know the government has a number of programs to encourage science, particularly in schools. I was wondering if you'd like to comment on whether or not you feel we're making any progress in terms of having that science culture in Canada.
Mr. Gerrard: Let me make two points. One, in terms of the ability to use the information highway to promote a science culture, we're making very rapid progress. We have more than a third of the schools in Canada hooked up to the information highway, to the Internet, with computers, and we're working very hard and fast to try to connect up the rest within the next year and a half to two years.
We are continuing with the national/regional science fairs - there's one coming up in North Bay - as a way of encouraging people. I think through innovative programs, like the digital collections program, operating in conjunction with SchoolNet, to encourage Canadians and to provide some seed funding for Canadians from coast to coast to get involved in digitalizing Canadian heritage materials and making that available electronically through the school connections programs, getting involved in recent graduates getting out and helping the many businesses get involved in appreciating the importance of science and technology.... If we're going to move business into the information age, clearly this is something we need to do as well. So right from school up through business we're working very hard in terms of promoting a science culture.
Mr. Murray: Thank you.
The Chairman: Thank you. Pierre Brien.
[Translation]
Mr. Brien (Témiscamingue): In your brief, Mr. Minister, you refer to the fact that the OECD points out that our investments on research and development, as a proportion of GDP, are among the lowest in its member countries. You end by saying that your role is more to create appropriate conditions for economic development than it is to intervene directly through financing.
In this sense, one of the sectors in which Canada does well, particularly in Quebec and Ontario, again in the area of research and development, is the pharmaceutical industry. You previously made an undertaking not to amend the Patent Act before 1997. Does that undertaking still hold?
Mr. Manley: Yes. I replied in the House to several questions on this matter, some time ago. It was in 1994. Bill C-91 provides for a review. We promised to respect our commitments to our international partners in NAFTA as well as in the agreement that developed out of the Uruguay Round.
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I would also like to explain that we must still take into consideration the investments, the research and development performance and the price of drugs in Canada, to ensure, when performing this review, that the undertakings made by the pharmaceutical companies have been kept.
Mr. Brien: I would like to know something else. You said that you would not be making any amendments, as the Act provides, prior to 1997. Are you also undertaking not to do so indirectly, such as through the link regulations, prior to 1997? Meddling with the link regulations would be altering the meaning and spirit of Law C-91. So, can you tell us whether you reject the idea of making any amendments, even in the link regulations, before reviewing the Act?
Mr. Manley: I am going to answer you in English because the explanation is already sufficiently complicated in English without my trying to provide a translation.
[English]
The NOC link regulations, pursuant to section 55.2 of the act, are an important component of ensuring the balance between brand-name and generic companies, which is struck by the act itself. As you know, the act provides for 20-year protection from the date of filing.
The issue becomes how you ensure, on both sides of the equation, that legitimate patent holders enjoy the full term of their legal protection as set out in the Patent Act. On the other side, how do you ensure that those who would benefit from access to products no longer patent-protected have the right to do so as soon as the patent expires? That's what the regulations seek to do.
So, yes, they are an intrinsic part of the legislation, but they are subject to constant monitoring to ensure that they are striking that appropriate balance - in other words, that they don't go too far and inhibit the access to products with respect to which the patents have expired and on the other hand to ensure that they are not permitting access to products prior to the expiry of patent. So it's an essential balancing act.
I would say to you we're carefully monitoring the impact the regulations have and the litigation being pursued, and quite a lot of litigation is being pursued with respect to them.
[Translation]
Mr. Brien: Mr. Minister, in less than a year there will be a review of the Act with, I imagine, all the debates that normally surround the review of an Act. Are you, at this point, in a position to tell us there will be no amendments to the link regulations before the review of the Act? That is what I want to know.
From what you are telling us, it would be possible to amend the link regulations between now and the review of the Act. Do you contemplate doing so before the review of the Act?
Mr. Manley: Certainly, if it is necessary to re-establish a balance.
[English]
The Chairman: With the indulgence of the committee, given that we have to vote soon, three members have identified themselves as wanting to speak - Mr. Ianno, Mr. Mayfield and Mr. Solomon - and Messrs. Leblanc and Schmidt have indicated they want to speak encore. So if the people who have those five minutes could get to the point of their questions, we could then try to get everybody in again as we went around, if you don't mind.
Tony Ianno.
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Mr. Ianno (Trinity - Spadina): Thank you very much.
First of all, Mr. Manley, I'd like to compliment you in terms of what the department and you and Mr. Gerrard are doing in terms of a lot of the innovative plans, from strategists to many others. I think it's in the right direction, especially for small and medium-sized businesses. I'd just like to start off with that.
I'd like to bring up a couple of issues with you - I've done this twice before, and I will continue. One is cost recovery re the science portfolio, so that in effect there is an opportunity down the line, even though we fund a lot of basic research, that royalty can be gotten back so that it can be reused for the science field, at least something on a self-sustaining basis.
I know when we are funding basic research we don't see it immediately, but I think there is the odd time when something does come back. I'd like to see the federal government get some of that back, to stay within the fund so that it can then be recycled out. I'd like to know what you have to say on that.
Before I do, though, I'd like to put my second point before I get cut off.
Mr. Manley: That strategy still works, does it?
Some hon. members: Oh, oh!
The Chairman: I'd really like to see everybody get a chance to speak before they have to go up to vote. Is this your major question?
Mr. Ianno: No, I have the major one coming. I would have finished it by now, Mr. Chairman.
On the small business numbers, more access to capital for small business, as you know, we are continuing the pressure to try to achieve that ultimate goal. I know you've been supportive. I would like a lot more support, but I'm pleased with the amount you are giving.
I go back to the Business Development Bank and the deposit-taking opportunities, especially with the businesses they deal with, not to compete with the banks but so that in effect they have more moneys available to them so they can also recycle that money and put it back out. I know we've done some good things with the increase of the ability to raise the funds in the private market, but I'm hoping that some day soon it may become a possibility, and I'm hoping you, as minister, will see that.
Mr. Manley: I'll try to be really rapid here.
First of all, with respect to R and D, not so much on the basic side but certainly with the technology partnership program, the new program we introduced subsequent to the budget, we anticipate not only repayment but also an upside for the government on the repayments. We also have structured that program so that repayments are cycled back into the program. We all have a stake in it as a partnership. That's the title, and that's what it's designed to do.
Repayments are certainly conditional. They reflect sales of products developed out of the R and D being performed. But the government would enjoy the potential of an upside on it.
Just quickly on the bank - and John may want to add something to this - as you know, last year when we brought forward the amendments to the FBDB, as it was then known, I indicated that perhaps some day, but not yet.... I very much think we've made a lot of progress since last summer, when the bank name and mandate changed, changing the mentality of that institution, providing it with more outreach. In the budget we provided it with an increase in its capital of $50 million, which it can of course leverage.
In any organization of that size it takes time to implement a change of mandate. That is my priority at the present time. I think we are achieving some of our objectives. To convert it into a deposit-taking organization, and to therefore ensure that it's capable of fulfilling the fiduciary responsibility it would have to its depositors, would require an enormous change. Not only would it require us to set up the necessary technological and other infrastructure in order to do that, but it would require us also to train an employment force that would have quite different skills and expertise than that which we now have.
I'm not saying we would never do that, but I would say we want to secure the performance of our current mandate before we take on something that different and that significant in its fiduciary role.
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The Chairman: Mr. Mayfield.
Mr. Mayfield (Cariboo - Chilcotin): It's a pleasure to be here with you, Mr. Manley. I'll try to keep these as short snappers, perhaps.
I'd like to ask about the tourism section of the estimates. The estimates point out a number of initiatives. One of them is the idea of the Canadian Tourism Commission attracting partners who will increase their partner funding to $50 million, which is to be matched by the federal government. I'm wondering who the industry department has in mind as these partners.
Mr. Manley: In fact, we have achieved quite a lot of partnerships, both with large national firms primarily - the airlines, CP Hotels, Delta Hotels - as well as with some of the provincial governments. They've been the major contributors to the partnership funding.
On a project basis, Mr. Mayfield, they don't turn their money over to the CTC, they embark on joint projects. For example, if they wish to penetrate the German market, a plan is developed that would see joint leverage of an advertising or other campaign to that market. That's the nature of the partnering that's going on.
The last time I was advised on this, I think we had reached about $30 million in additional contributions for the year ended March 31, so the potential for roughly doubling our money is quite good.
Mr. Mayfield: The report also mentions that it's intended to increase international tourist revenues up to about $9.2 billion. I'm wondering how this project can or will be measured. Is this a real number that people keep track of?
Mr. Manley: Statistics Canada generates that number, so it is in the nature of a survey number that StatsCan is capable of producing as opposed to.... It's not an audited number or an accounting number, it's a survey based on information that they've developed over their experience.
Mr. Mayfield: So there are no performance indicators set up by which they're measured.
Mr. Manley: I'm not sure what you mean by that. StatsCan has means by which a lot of factors in the economy are measured. The tourism account is one of those factors. The import-export numbers and so on are, likewise, part of that. So in terms of what our tourism account balance is, that raw number is one that they stand behind.
In terms of the actual industry itself, part of what the CTC is trying to do is promote the development of benchmarking and performance indicators in the industry. The quality of service and that kind of thing are part of what the subcommittees in the CTC are working toward doing. They become important factors in attracting tourists from certain markets particularly.
Mr. Mayfield: I guess the reason I was looking for this is that it also mentions that a performance and evaluations committee of the board has been established to measure the services benefits and results. I was expecting to be able to ask you what they have found out so far.
The Chairman: Mr. Lynch has a very short intervention, if you don't mind.
Mr. Kevin G. Lynch (Deputy Minister, Department of Industry): The way they're going at it is to target certain markets and target what they'd like as an increase in the gross tourist inflows from those markets. That's how they're setting up the marketing program; they're benchmarking that against what they'd like to see come in. It's too early to tell, but they will check at the end of each year to see whether or not they're achieving their target increases for the increased marketing campaigns in each of those target markets that the board selects.
Mr. Mayfield: Who makes up this committee?
The Chairman: I'm sorry, Mr. Mayfield. I know it's very short, but I have to move toMr. Solomon.
Mr. Solomon (Regina - Lumsden): Mr. Minister, I have three questions, each dealing with a complex issue, so maybe I'll just give you the three questions quickly. They pertain to your portfolios and your commitment to small business, to consumer affairs, as well as to the issues of the Competition Bureau.
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I want to raise the first one with respect to Hollinger Inc. As you recall, Hollinger recently purchased all the daily newspapers in Saskatchewan and subsequently fired 25% of their employees two days after taking possession. There have been some suggestions that not only is this a merger question, a monopolistic question, it is also one of predatory pricing with respect to the Yorkton Enterprise, which was purchased by Hollinger, who threatened the municipal newspapers.
As of yesterday, I understand, they've purchased another six dailies in Atlantic Canada from Thomson Newspapers. The question in relation to the Hollinger Inc. newspaper takeover is a question of concentration of ownership in the media. At what point, Minister, would you instruct the Competition Bureau on its policy, or at what point would the government take action through some other process to look into something like this being a problem with respect to competition, with respect to the public's right to know and with respect to corporate responsibility and the employees?
I have a second question....
The Chairman: Mr. Soloman, in response to your request and Mr. Bodnar's request, this committee is bringing in representatives from the Competition Bureau on Tuesday. I think the committee responded very quickly to your request already and I think perhaps the committee would like to hear from that bureau rather than do it the other way round. The minister may want to respond, but I think the committee would be quite happy to hear from the witnesses as arranged by the minister's office as quickly as you asked for them to be.
Mr. Soloman: Yes, it was just a question of at what point the government would take some action, not whether the Bureau of Competition Policy...what they would do, just whether or not.... It's a question of what his thoughts are with respect to the concentration of ownership of media.
Mr. Manley: First, I'm not sure the issue of media concentration itself lies within my purview. As for the actions of the Competition Bureau...of course they do report to me. They have reviewed the Hollinger acquisitions in Saskatoon from the point of view of the merger provisions and have come to the conclusion that the newspapers that were acquired do not compete with each other in their markets.
But that deals with the business of newspapers as opposed to any kind of editorial content or opinion. You may want to pursue that with the bureau when their representatives are here, but with respect to the Thomson acquisition - which was only announced yesterday of course - the bureau would review that and seek to draw conclusions based on whether or not the transaction is likely to result in undue lessening of competition.
Predatory pricing is a tough allegation to prove but it is an offence under the Competition Act. It requires evidence. Allegations are investigated by the director and if substantiated will be pursued by him. In all of these cases the director acts independently of the minister, save to report his findings.
Although the minister has directive powers in certain cases, I believe they've only been exercised once in the history of the act. It's an extraordinary item to issue a direction to the bureau to investigate, and I've taken the view that as an independent enforcement agency the director should investigate as he sees fit, as has been the case with some of the other issues that you and I have debated over the last two years.
The Chairman: Mr. Soloman, you might just want to say for the record what the topics are before I switch to Mr. Leblanc. We are at the full five minutes.
Mr. Soloman: I have one more question, if I may. It's very brief.
The Chairman: Well, you're not going to get an answer. I explained it. It's five minutes for each and the five minutes are up. The regular member has been sitting here - the lead critic for the opposition party - for a while, so I think he has a right to have one last crack at it.
[Translation]
Mr. Leblanc: Concerning the present 25 to 30 percent increase in petroleum, the Americans have decided to investigate the collusion that may exist between the companies. Does the Minister intend to conduct an investigation in Canada, since there has been a 25 percent increase during the last month in the price of gasoline at the pump?
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Mr. Manley: Here again, Mr. Chairman, I think the question should be put to Mr. Addy when he comes to meet with you next week. This will be the point of view of an independent agent. I think Mr. Solomon will want to ask the same question.
For my part, I noted in the House that the fact that prices are high, that they sometimes go up without any real explanation is of concern to us too. But I will say that it is necessary, under the Competition Act, to demonstrate that there is collusion between the firms. Now, making such proof is quite a challenge. I hope that the process undertaken in the United States will disclose some information that will can help Mr. Addy here in Canada.
You know that some very lengthy studies were made here in Canada on the price of gas and fuel oil, more than ten years ago now. It has always been hard to obtain proof.
As the federal Minister responsible for consumers, I prefer to satisfy myself that the facts are known to consumers and that they can make decisions that help vendors who are prepared to be the first ones to reduce prices.
Mr. Leblanc: Mr. Chairman, the Minister is telling us it is hard to prove it. However, to get to prove it, it seems to me you have to investigate.
I am asking him whether he is going to conduct an investigation. If he does not investigate, it is certain that he will never be able to get the proof and he will never know whether there is collusion among the firms.
What I am asking him, basically, is whether he intends to investigate. That is my question. If there is no investigation, he will never find out, that is certain.
[English]
Mr. Manley: Mr. Chairman, perhaps I didn't express myself clearly enough. The director of competition is an independent law-enforcement official. I no more instruct him in the ordinary case as to how to conduct an investigation than the Solicitor General would instruct the RCMP to investigate allegations of offences. That's the nature of the independence of law enforcement from the political level. It's firmly embedded in our law. And I'm sure that Mr. Leblanc himself supports such independence of law enforcement.
It would be entirely appropriate for him to put questions to Mr. Addy on whether he feels there is sufficient reason to follow the example in the United States that has been mentioned. But I certainly do not intend to exercise the very unusual step of directing that an investigation occur. As I said earlier, this has only been done once. It is not something that I would do except in a very unusual circumstance.
The Chairman: Mr. Schmidt, we're governed by the bell. There are about ten minutes to go before the vote, so if you want to you can ask a couple of questions. I just remind everybody that we have a vote.
Mr. Schmidt: I understand. Thanks, Mr. Chairman.
Is there any further development in the Competition Bureau? I'd like to step back just a little bit as to the process that someone might want to get started in an investigation. It's not the minister who charges it, but some person in the community or in Canada somewhere who feels they have been wronged somehow, or who feels that some group is using their power in an abusive kind of way. How does that get started if, as I read here, the tribunal's mandate is in fact strictly adjudicative, with no inquiry or investigative powers? In the case that an application is to eventually be given to the tribunal, how does that get started before it gets to the person - that's Mr. Addy - who takes it to the tribunal?
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Mr. Manley: Well, Mr. Schmidt, there is in fact a provision in the Competition Act that enables six citizens of Canada to request that the director investigate a situation, and that's a common occurrence open to all citizens of Canada. Mr. Addy then performs the investigation as he sees fit and determines what to do with the evidence, if any, that he has gathered. He decides whether or not it merits being taken before the tribunal or, in some cases, before the courts.
Mr. Schmidt: In the case of, say, an individual who owns a company, who feels that company is being somehow put out of business because of....
Mr. Manley: It's a victim of predatory pricing or whatever.
Mr. Schmidt: Right, whatever.
Mr. Manley: He should complain.
Mr. Schmidt: In that case, would he still have six people?
Mr. Manley: No, he should make his complaint directly to the bureau, the same as he would complain to the police if his store was robbed.
Mr. Schmidt: Okay, so that is the situation, and then the director institutes the investigation that he thinks ought to happen in order for it to either go or not go to the tribunal.
Mr. Manley: That's correct. As with a police investigation, the director has to decide how to allocate his resources. Obviously, the resources allocated by the police to a $200 theft are less than those allocated in a murder charge. The same kind of process of how important a case may be has to be considered by Mr. Addy. Again, I'm sure it's something he will be prepared to explain.
Mr. Schmidt: Is there any part of this process that would somehow mitigate against any influence on the director or someone like a senior bureaucrat or you, as a minister, to intervene in that process so that the director does not continue the investigation, or delay the investigation, or change the investigation in different directions?
Mr. Manley: I would consider it to be quite improper for that to occur.
Mr. Schmidt: I'm sure it would be improper. The point is...what process would there be to make sure it doesn't happen?
Mr. Manley: Well, the director himself is charged with these responsibilities. I would suspect that if, in the case of Mr. Addy, he were to feel that he was being pressured improperly to not perform his duties under the act, he would likely resign.
Mr. Schmidt: I think that would be the appropriate response, indeed.
Thank you, Mr. Chairman.
The Chairman: Thank you.
I have a very quick motion to read, given what the minister did in putting aside his statements so that we could get right to questions. I'll read it, and I hope I can have everyone's agreement: ``It is agreed that the statement of the Hon. John Manley be printed in the evidence as read.''
Motion agreed to
The Chairman: The committee is adjourned until Tuesday, May 7, 1996, at 3:30 p.m., when we shall have the Competition Bureau before us.