Proceedings of the Standing Senate Committee on
Foreign Affairs and International Trade
Issue No. 11 - Evidence - Meeting of October 19, 2016
OTTAWA, Wednesday, October 19, 2016
The Standing Senate Committee on Foreign Affairs and International Trade met this day at 4:18 p.m. to study foreign relations and international trade generally (topic: Bilateral, regional and multilateral trade agreements: Prospects for Canada).
Senator A. Raynell Andreychuk (Chair) in the chair.
The Chair: Honourable senators, the Standing Senate Committee on Foreign Affairs and International Trade is meeting this afternoon. The committee is authorized to examine such issues as may arise from time to time relating to foreign relations and international trade generally. Under this mandate, the committee will continue to hear witnesses today on the topic of bilateral, regional and multilateral trade agreements, prospects for Canada.
To date, the committee has had many meetings on this topic, heard from academics, experts, government officials and stakeholders, and I'm very pleased that we continue our study today. We have, by way of video conference, from New Hampshire, Dr. Emily Blanchard, Associate Professor of Business Administration at Tuck School of Business, Dartmouth College, author of Leveraging Supply Chains in Canadian Trade Policy, published by the Institute for Research on Public Policy.
And here with us — not his first appearance, always very agreeable to coming before us — is Mr. Paul Davidson, President of Universities Canada. I know for Mr. Davidson — I'm not sure for Dr. Blanchard — that you were scheduled to be on previous meetings, but we had difficulties with the Senate sittings, et cetera, and we were in a position to have to cancel you before. We appreciate your kindness in coming back and appearing before us.
I'm going to take it in the order I introduced you. As we will perhaps look at them should they come before us, we are very interested in trade policies generally, CETA and TPP. We're not specifically looking at them. We're looking at trade policies. We want to be in the best position to analyze them when they come.
Welcome to the committee. Dr. Blanchard, please proceed.
Emily J. Blanchard, Associate Professor of Business Administration, as an individual: Thank you very much for inviting me to speak with you today. I'd like to talk to you about my research broadly on global supply chains and trade policy, particularly how it relates to Canada and Canada's trade agreements.
I'd like to take a few minutes at the beginning to talk about my research and what I've learned and that many other academics have been focusing on in recent years.
We begin with a simple observation that national economic borders increasingly are divorced from geographic boundaries. What this means is that Canada's economic interests extend well beyond its physical borders to include mining interests that span the globe, global supply chains that Canadian producers provide with important goods, services, upstream inputs and are often embodied in Canada's own imports as those products come back home.
At the same time, there are substantial foreign investments and foreign supply chain interests in Canada's economy. What this means is that foreign interests, overseas interests often have a stake in the local economy in Canada.
What all of this means for research and policy is that a more sophisticated and new understanding of the linkages between firms and markets and countries' policies are in order. For research that means being able to model trade and economic activity differently, and we need to come up with new measures, things like value-added trade flows instead of gross trade flows.
For policies, this underscores the importance of first understanding and recognizing, then ideally internalizing these new and sometimes difficult linkages across markets.
If I'm to summarize research lessons so far and summarizing a little bit the paper that I wrote for the IRPP last year, there are two main lessons for how foreign direct investment and global supply chains influence potentially trade policy today.
The first is simply that countries have new and stronger reasons to lower tariffs and non-tariff barriers, to improve market access for imports from around the world. This can be because of foreign direct investment. Canadian mining interest does better when it has clear and duty-free market access to Canadian consumers and Canadian upstream firms.
It's also because of supply chains. A company like Magna International will do better when it can sell its own auto parts to Mexico, which often is then embedded in Mexican car and light truck production and come back to Canada in the form of finished products.
It's also because of classic input/output linkages and demand complementarities. We know from research that successful firms, particularly successful exporters, do better when they can access foreign importers from around the world. They need strong local suppliers, but they may also need suppliers located abroad. Strong economic activity at home increasingly requires access to foreign producers.
At the same time, foreign direct investment and global supply chains may introduce new vulnerabilities —
The Chair: Excuse me. I'll have to stop. I'm being told that the French translation is not coming through; is that correct? Apparently, there's a background sound which we were hearing, but I could still hear your voice over it. I don't know whether it's the connection. There's no background noise, Dr. Blanchard, in your meeting room?
Ms. Blanchard: Not at all. It's very quiet here.
The Chair: It seems that the technician has done something to improve it. If you can start and we'll see whether the interpretation can continue now. But please alert me if it's not.
Please go ahead, Ms. Blanchard.
Ms. Blanchard: Thank you.
At the same time, there are new vulnerabilities that are introduced by foreign investment and global supply chains. There are opportunities for opportunistic behaviour around the world through policy-makers and potentially through firm behaviours. So there may be new policy prescriptions or protections in order. These, of course, are highly controversial and could include measures like the investor state dispute settlement and other mechanisms around regulation or border policy. I'm happy to talk about those more during questioning.
What this means, more broadly, is that there are new reasons for countries to liberalize their trade barriers and there may also be new policies to be included in trade agreements. Not surprisingly, to suggest that regional trade agreements may be increasingly important in a world with global supply chains and foreign investment. I would argue, and many academics have, that the recent proliferation of regional and preferential trade deals may reflect latent demand for these kinds of deeper liberalizations and stronger behind-the-border protections. These aren't without costs and caveats, but they certainly seem to be top of the agenda for many trade negotiators around the world.
There's a reinforcing cycle here. Global supply chains may lead to deeper regional agreements which lead to deeper global supply chain or foreign investment linkages. So one fear is that this mechanism that's so strong for some countries and regions, integrating areas like NAFTA, Canada, the U.S. and Mexico, could leave other regions or countries out of an otherwise virtuous cycle of increasing trade, economic and political integration.
With this greater regional integration with preferential deals, it's important to remain aware of symmetries that may be growing stronger in the international trading system, and it may be increasingly important for Canada and other leading economies to take a strong seat at the multilateral negotiating table, including at the World Trade Organization.
With that, thank you, and I look forward to your questions.
The Chair: Thank you. I'm going to turn to Mr. Davidson for his presentation, and then I'll take questions.
Paul Davidson, President, Universities Canada: Thank you, madam chair. It is very good to be back before this committee. I believe it's my fifth time over recent years. It's been a couple of years since I've been with you. Some of this will be familiar terrain, but we're living in a changed context. It's the anniversary of the federal election and the new government is consulting on a broad range of subjects, including this one.
In the global context, we've seen progress on CETA on TPP, and we've also seen the impact of Brexit and the political environment in the United States. Taken together, this provides an exceptional opportunity for Canada to acquire top talent from around the world and to collaborate on global research challenges. This changed context adds urgency to remarks that I've made previously about the important role that universities can play in developing successful relationships beyond our borders.
[Translation]
As you said, my name is Paul Davidson, and I am the President and Executive Director of Universities Canada. Our association is the voice of 97 universities that work together to build an inclusive, prosperous and innovative Canada.
[English]
Canada's international trade success is bolstered by people-to-people connections between our talented students, faculty and researchers, and their global partners.
These partnerships are leading to the emergence of new global discoveries and dramatic innovation. They also foster a global entrepreneurial culture which leads to new ways of doing business and pursuing new markets for Canadian innovation.
I was struck last week when Dominic Barton, the chair of the Advisory Council on Economic Growth, spoke to the Public Policy Forum, when he laid out the challenges facing the global marketplace and then proceeded to talk about Canada's competitive strengths. He led with the quality of Canada's tertiary education system, ahead of any of our assets, and Canada's assets are many.
Today, I'd like to provide a greater glimpse of how, through these partnerships, Canada's universities are leaders in building globally engaged learning environments, researching collaboratively across borders and launching innovations in the global marketplace, all enabling factors in driving successful international trade relations.
Since I have been before this committee, we have conducted the most comprehensive survey of internationalization of Canadian universities and the results are impressive. We've left a copy with the clerk. Virtually all of Canada's universities have placed internationalization as a strategic priority and are pursuing geographic priorities, including China, India and Mexico.
In previous appearances before this committee I've talked about the important value of international students, Chinese students and from other countries, and that continues. But the degree of research collaboration is growing at an accelerated rate. Out of our most recent survey, we found that 80 per cent of Canada's universities have identified China as a partner of importance for research collaboration.
I mention this because right now over 40 per cent of all of the research done in Canada is done on Canada's university campuses and with university partners. Whatever we do, we have to make sure we create an environment that can be global in its outlook and global in its ambition. Canada is punching above its weight. Close to 50 per cent of publications from Canada have co-authors from other countries. That's double the world average. Our researchers are among the world's most cited, punching above their weight.
The other development we like to draw attention to is the quality of our research infrastructure, where global partners want to come and work in Canada. Finding the trade policy, the trade agreements and the trade programs that support this is terribly important.
Again, one of the recent developments since I was before you is the development of the European Union's Horizon 2020 program, which is an 80 billion euro multi-year initiative. They have identified Canada as a partner of choice, but we don't actually have a mechanism to plug into that incredible international opportunity and we're looking for that in the months ahead.
Let me turn back to the question of the mobility of students. We've done a good job of attracting students to Canada. We have one of the most enviable education systems in the world. The number of international students has tripled since 2000. And in terms of the economic impact, I remember when Stockwell Day was minister and his department conducted an economic impact study that showed the contribution to Canada by international students valued at $8 billion per year. Ed Fast updated that study to over $10 billion per year, and soon we expect Minister Freeland will be updating that economic impact study. I won't steal her thunder, but I wouldn't be mentioning it if it wasn't continuing to grow. All of those students have an impact for Canada.
Let's turn the tables. Something that hasn't changed over the last 30 years is the percentage of students that have a global experience. One would think that a trade-dependent country like ours would want our students to be out pursuing experiences beyond our borders as part of their undergraduate experience, but annually only 3 per cent of Canadian students will have an international experience. We have to do better on that. Again, we're working with the private sector; we're working with the government and other stakeholders to improve those numbers.
The third element around the question of student mobility is around immigration policy. This is not an expensive item to fix but it is critically important that we have the immigration policies and practices to be best in class and to continue to attract students in a very competitive environment.
I want to leave lots of time for questions so I'll conclude my remarks shortly, but I want to focus on a handful of recommendations in relation to your work today.
First, we need to maintain international education as a priority trade sector. I encourage the committee to look at the resource levels made available by the Government of Canada to promote higher education as a priority trade sector. Some have commented that the Government of the United Kingdom spends more in New Delhi to attract students than Canada spends globally. We have to do better. At the same time, we have to make sure that the immigration policies are in place that are best in class and best in time. And we have to find new mechanisms to get students abroad.
Next week we're pleased to host my counterpart from Australia, Belinda Robinson, to talk about Australia's New Colombo Plan, which is an ambitious plan that links student mobility, research collaboration and Australia's national interests to penetrate the Asian market more thoroughly.
Finally, universities are an under-leveraged asset in building Canada's brand and we believe we have opportunities in this new climate post-Brexit, given the situation in the United States, to seize the moment.
Thanks for the opportunity to be with you.
The Chair: Thank you, Mr. Davidson, and thank you for understanding that senators like to ask questions. I'm going to start off with one question to Dr. Blanchard.
Because of the new supply chains, et cetera, we've heard some evidence that the way that countries gather statistics on trade are outdated and outmoded. You've added a bit of that. Can you elaborate?
The way that Canada, for example, if you're familiar with Canada, or another country, gathers trade statistics was really from inputs into Canada and exports/imports, and very simple data on which we still rely. Do you think we need to get different models of collecting data? What country is doing a better job than others on that, if you know?
Ms. Blanchard: That's a great question. This is critically important for every country in the world, and I would argue Canada as a particularly open country in the world, with a very high trade-to-GDP ratio internationally, ranks among the very top. It's increasingly and even more important.
The key concept to go after is differentiating gross trade flows from value-added trade flows. This is the simple idea that if you take a product, say an automobile that's produced in Canada, how much of the value of that automobile is made up from Canadian local suppliers, workers, capital innovation, and then how much of the final selling price of that automobile actually consists of imported parts?
Our current approaches for understanding trade flows focus on gross and not value added. When you look at bilateral trade around the world, if you look at Canada's trading partners around the world, you'll see that China looks like a really big exporter to Canada, which of course it is, but it looks a lot larger in gross trade flows than in value-added terms. That's because China and other emerging economies — Mexico is another one like these — have a final assembly and they get extra credit for the gross value of the good, where their value added is actually pretty small.
First and foremost, I think differentiating gross and value added is very important. Doing this is not easy. You have to be able to figure out how much of a product comes ultimately up the supply chain from different places around the world. To do that we need input/output matrices that look at individual products and say when I make a given product, again, an automobile or an iPhone or a laptop, what are all of the different sources of the inputs for that? Where are they local? Where are they from overseas?
If I look for countries that do that well, I think Canada is among the top, but I think all countries need to do a much better job. This certainly includes my home country, the United States. The World Trade Organization is involved in efforts to get this exactly right, and non-profit groups at research institutions are working on coming up with better measures.
The Chair: Thank you.
Senator Poirier: Thank you for being here. My question is for Mr. Davidson. During the study the committee heard that Canadian universities do not have access to as much money as their United States competitors. Can you explain to us why our universities are not receiving as many funds? How much funding is made by the private sector?
Mr. Davidson: Thank you very much for the question. In part the answer reflects the different nature of the higher education system in the United States, which has a very large number of private universities that are privately endowed. Therefore the comparisons are quite challenging. When people ask Canadian universities why they don't do X, Y and Z and why not initiate these new programs or new priorities, the challenge for Canadian universities is the sources of funds are operating funds and tuition. Most provinces have now capped tuition as a source of revenue for universities and most provinces have been struggling to maintain operating flows to universities. There's not the additional source of private endowments that a number of U.S. universities have and the U.S. privates have.
Senator Poirier: Can you tell us how much funding you received from the public sector? Have you ever done a per capita comparison with the United States competitors?
Mr. Davidson: Yes. Again, trying to find the precise comparisons is a challenge. In a number of cases, tuition at Canada's universities now accounts for a major percentage of the operating funds of the university, and the operation grants comprise less and less.
But in terms of the comparisons with the United States, when you compare with American public universities, Canada's universities are doing pretty well.
Senator Poirier: So, your return for investment of the funds of the Canadian economy —
Mr. Davidson: Absolutely outstanding, and there are a number of ways of providing detail on that. One of the most interesting pieces of work done in the last little while, and certainly since I was before this committee, was from the University of Ottawa on the economic outcomes for students who had graduated in 2008.
They took every graduate from 14 institutions in 2008 and tracked that to their personal income tax files. They have preserved anonymity and done things properly, but it shows a large and growing income premium for students who pursue a post-secondary education. That's real value to students and families, and to the economy in general. Universities as a sector represent about $35 billion in GDP.
Senator Poirier: I have one last question, on a different angle.
Do trade agreements create opportunities, either directly or indirectly, for Canadian universities? And if so, what opportunities do they create, and how?
Mr. Davidson: I think the opportunities are about the orientation for Canada's young people. As I was saying in my remarks, we need to get young people to be global citizens. We need to have experiences for them beyond our borders. We need to have an orientation that says, "The world is out there, and our students are amongst the best in the world,'' and they need to get out there and pursue those opportunities.
The other opportunity that exists is around research collaboration. As I said, the European Union has committed 80 billion euros to research. They have not limited it to their own countries. They have identified target countries, and Canada is a priority country, but when it comes time to find the matching funds and the resources to participate, we just don't have the mechanism. So, we need a mechanism to be able to fully play on the international stage. Frankly, we are leaving millions of dollars on the table with our international counterparts because we don't have the kind of mechanism to match research opportunities that present themselves globally.
Senator Poirier: Would your biggest challenge be the funding on this part?
Mr. Davidson: In terms of pursuing international research collaboration and in developing a culture of student mobility, funding will go a long way.
Senator Ataullahjan: Student mobility is a discussion we've been having for a couple of years. We were recently in Argentina and we heard the same, that we do have international students coming, but somehow we can't get Canadian students to travel overseas. What can we do? Why are we failing that way? Why is the message not getting across to Canadian students?
Mr. Davidson: Here are some of the things we're doing: First of all, within our own work as universities, we're working to make credit recognition and transfer easier. There is a very exciting project involving six Canadian universities and six Chinese universities wherein the Government of China is paying the full cost of tuition and accommodation and a living stipend for Canadian students to study in China. They study in English, but they live in Chinese settings. That is fully funded by the Government of China. They're ramping that up. I think it would be appropriate for Canada to match that investment. So credit recognition is the first thing.
The second is creating a culture where we value it and signal it to young people. I think students are amongst the most mobile and nimble people, and they read market signals, so having civic leaders such as yourselves, as well as business leaders and others, underscore the importance of international mobility is critically important. We have been pleased to work with the Business Council of Canada and the Chamber of Commerce to create that signalling effect for young people.
And finally, cost. Young people see cost as a significant barrier, and universities are doing what they can to reduce those barriers. I'll give one really exciting example at Western University in London, Ontario, where every student that received an offer of admission this past spring received, in Western's purple-and-white colours, a boarding pass that says, "This boarding pass entitles you to $1,000, in your third year, to go anywhere in the world if you keep your marks up.''
That's a terrific incentive for young people. From the very first time they think about coming to university, they're thinking about going abroad and getting experience.
We have the tools, and we can take it to scale. The other thing that we've been developing in the last couple of years has been in partnership with the Rideau Hall Foundation and with Community Foundations of Canada to create the Queen Elizabeth II scholarship program, which will see 5,000 Canadians study abroad over the next several years, and a number of students from Commonwealth countries come to pursue studies in Canada.
This is a very new and innovative platform that is scalable, should resources permit, to see a much larger number of students pursue the world. XX
Senator Ataullahjan: The other issue I hear about quite often when people come and talk to me when I'm out at community events is that of students having difficulty in getting visas to come to Canadian universities. What's the answer to that? I think if we look at the numbers we know there are certain countries from which you have more students coming. Should the embassies be looking at making that process easier for those students, and maybe having someone in the embassy or consulate specifically to deal with student visas?
Mr. Davidson: I guess the first answer is that we work very effectively with the immigration department to identify bottlenecks and try to expedite the processes.
This is a very competitive market, so the visa processing times from the U.K., Australia and the U.S. are things we watch quite closely. All the marketing and branding in the world isn't going to help if the student has to wait too long for their visa. Now, we have to make sure we have integrity and security in the process, but these are fixable problems and it's a resource question. We have been advocating that immigration Canada receive increased resources to expedite student visa processing.
We are also pleased that Minister McCallum, as recently as June, has been talking about getting rid of dumb rules that get in the way of attracting talent. And that's for students, but it's also for the top researchers coming to Canada to make sure that when we land a world-leading researcher and innovator, they can come into Canada quickly and settle with their families.
The other point I would make about visa processing times is that it is a service in a globally competitive economy, so if we have high service levels we'll get more students and more of our share. Just to put it in some context, I don't mean to sound like a broken record, but when I was here in front of in committee speaking about India, I drew attention to the fact that there are a quarter of a million Indian students each year who would be Stanford- or MIT-eligible looking for a place to study in the world. Canada can be that place, and in the post-Brexit world and with the situation to the south of us, we have a moment to attract that talent if we have best-in-class and best-in-time processing.
Senator Cordy: Senators have already touched on the questions I was going to ask, but when it comes to recruiting, I have heard about an embassy in Asia, and they said that Australians go to Asia for recruitment, and they have people on-site helping students immediately with immigration and student visas to get over.
Whereas often, from Canada, at that time — it was a few years ago — Canadian students were still waiting in late August to see whether or not they had visas and said they can't wait any longer, and were going somewhere else. So, I think if Minister McCallum is open to getting rid of what he calls dumb rules, that would be helpful.
One of the things I'm wondering about and that you touched on earlier with Senator Poirier was the bringing of ideas in innovations. Canadians are very good at doing research and Canadian universities are doing a great job. We have a number of universities that are centres of excellence and I think a lot has happened in terms of research.
But they often have challenges in bringing their ideas to commercialization, and they end up going to the United States so that their product becomes commercial.
You spoke earlier about the dollar value that the United States often has. The universities, particularly, often have access to more money than the Canadian universities have. Is there anything other than increasing finances that we could be doing in Canada to help take the ideas that have been discovered or found here in Canada and allow them to be commercialized within Canada, rather than shipping them off to another country to be done?
Mr. Davidson: That's another great question. I'll preface my answer by referring to Australia again, and my counterpart will be arriving next week to meet with a number of officials in Ottawa to talk about the lessons learned from Australia, both on the inbound but also in getting young Australians into Asia at scale.
They have a very far-sighted initiative to dramatically increase the number of Mandarin-speaking Australian students for example and making sure they have those early experiences.
To your question about innovation, Canada's universities conduct the bulk of research in this country. There have been challenges and criticisms made about the degree of innovation or commercialization which takes place. I think the record is better than some would suggest. We have to do a better job of talking about those innovations. Let me give an example of a couple that have really worked well and that are being replicated across the country.
The Digital Media Zone at Ryerson University brings undergraduate students, venture capitalists, intellectual property lawyers and faculty together to help young people build new businesses. It has created close to 3,000 jobs in Toronto and 25 or 30 new businesses. That's not where it stops. They have partnered with Simon Fraser University and they have created a similar place there. They have developed a similar digital media zone in Tel Aviv and Johannesburg. I was present when the joint venture with the Mumbai stock exchange was opened. The digital media zone in Mumbai sees a flow of students, faculty, venture capital and lawyers moving through these markets, sharing ideas and experiences and taking brilliant ideas and commercializing them. It is something to see. These are ideas moving at the speed of business. It's very interesting that it's in such close partnership with the private sector around the world.
Senator Cordy: Those are very good stories. I'm glad you were here today to share them.
Senator Eaton: I would like to ask you more about the silly immigration laws. My understanding is that with Bill C- 24, with the economic stream, someone who is a brilliant researcher would be fast-tracked to Canada if they had a job. My concern is the student backlog.
Are there specific things we could do which should be in an immigration policy or legislation?
Mr. Davidson: Sometimes it's legislation, sometimes it's policy and sometimes it's simply a matter of resources and programming.
Senator Eaton: Which do you think it is?
Mr. Davidson: It's a combination of those. On the programming and resourcing side, the department has done really good work in becoming digitally savvy and being able to move work around the world to process in real-time in multiple time zones. That's having an impact on processing times.
In terms of policy, it is about an orientation and being open to the world and valuing these students for what they bring both economically, socially and culturally to Canada.
Sometimes it's very practical like what happens at the border point in terms of people being turned away.
Senator Eaton: I'm not as proficient as you are. This is something we could help correct, but I need specifics. I want to come from Mumbai. I'm accepted at Western University. My next job is to get a visa to come to Canada. Is that where the difficulty starts? What do I have to prove? Do I have to prove that I have financial support? What else?
Mr. Davidson: There are a range of tests including financial support, health, security and the rest. They can be done. The question is how we can do them more quickly? That's a processing question.
Senator Eaton: So that's resources.
Mr. Davidson: That's resources, absolutely.
Senator Eaton: In terms of legislation, are there legislative barriers that stop somebody from coming in as a student?
Mr. Davidson: At the student level, one of the areas we're hopeful we'll see change shortly is a greater value being placed on the international students' time in Canada when they pursue citizenship, because these are students that have taken the risk to come to Canada, invested in Canada, studied in Canada, have a Canadian credential, sometimes have Canadian experience beyond the campus, and when they do seek to become citizens, we want to make sure we can integrate them quickly and well into communities, particularly in Atlantic Canada. That's an area where a greater assignment of points to the value of time spent at Canadian university would be important, not only for the international students already here, but as part of our marketing to prospective students. When you come to Canada, the doors are open and opportunities await.
Senator Eaton: Now in Bill C-6 they want to lower from four to six years to three to five. If I really wanted to become a Canadian citizen and I come to Canada to study, I don't see that is an impediment. However, I see what you're saying. You want the time counted. If I go to university for four years, you want that to be counted.
Mr. Davidson: Yes, to be valued.
The Chair: Dr. Blanchard, this publication is extremely helpful. In our previous study, we have been looking a lot at the global value chains. That's a complex area. Your examples were all about trade in goods. How do we value the kind of services which now are integrated very differently? Did your research touch that area?
Ms. Blanchard: There is the principle and the practice on measurement here. You're absolutely right; services are tougher to measure by far. For most economies, including Canada, the U.S., and most developed countries, services are by far the lion's share of GDP and employment. So when there are no good measures of services and the service components of products — and again I say products in a broad sense, not just physical goods but also service, exports and service production — then we're missing a lot of beans which need to be counted.
So in principle, services are very important. These input-output tables and linkages are key to understanding global supply chains. It becomes a more difficult order of magnitude to know what the service component of a particular export is. What is the service component of making a physical product like an iPhone or a laptop or a computer? It could also be what the service component of legal services is? One of Canada's major and truly important exports is education. How do you measure that service export of Canadian education being provided to global citizens from around the world?
These are very difficult things to measure. I don't have practical advice on exactly how to do this. We must get deep into the weeds of national statistical agencies, and I would ask those experts to weigh in.
If I were you, I would call some of them and ask them to come and tell you what they need more funding for. What are the kinds of forms they would like firms to fill out? What are their service needs and their service exports, because I do think that is of critical importance.
The Chair: One of the difficulties in the pushback that I see in this entire field, it's easier to get those hard numbers that we've been getting, but there's a lot of politics in talking about doing trade overseas or protectionism.
Do you think that that stems from the fact that we're a trading nation, but we're not doing a good job of pointing out the value? That comes down to how we gain statistics, et cetera.
Ms. Blanchard: That's a very complicated question. Where is the political pushback coming from against open borders, CETA and the TPP?
I can speak more to the American situation because I'm here and listening to this. Canada seems to be well ahead of us in a lot of ways. We're seeing a very vehement anti-globalization, highly protectionist shift here in the U.S.
It is in part a question of needing better data, including on things that are difficult to measure, like services. It's very easy to point out to political candidates and to our populace that while the U.S. does run a current account or trade deficit in goods, we run an enormous current account surplus in service. We're a very good service exporter.
But I don't think it's entirely about statistics and sharing this broader definition of what it means to be a producing nation or successful economy. I think a lot of it is because the push-back against globalization stems from who is sharing in the gains from trade. That's not just a question of what the statistics are.
This is much less acute in Canada than it is in the United States, but we have an awful lot of people in our country who are not benefiting and the statistics would only bear that out, that haven't been benefiting from some increased trade from some trading partners over the last 15 years. That's where a lot of the politics is coming from here.
Senator Ngo: Mr. Davidson, we know that one third of international students are from China. Once they graduate from one of Canada's post-secondary institutions, are these students able to apply the skills learned in Canada to their life in China?
If they prefer to stay in Canada, are these students able to compete with Canadian graduates and domestic workforce, after completing the post-graduations here?
Mr. Davidson: One of the really encouraging developments around the world over the life of the last government was the emphasis that Canadian missions abroad placed on developing alumni networks of students who had studied in Canada; and to see the quality of the students, to see the calibre of jobs that they have, and their passion for Canada is a tremendous resource for Canada.
The fact that the mission in Hong Kong has developed a Canadian alumni network, or the mission in Beijing has developed a Canadian alumni network in that case of Chinese students, demonstrates the quality of experience they have when they return to China. Frankly, the linkages they build between Canada and China is very impressive.
In terms of the capabilities of international students that choose to stay, they acquire Canadian skills and credentials. They also bring family, resources and new opportunities for Canadians. Given that we're an aging society and country, this is an opportunity for us to attract some of the best and brightest young people in the world to Canada.
If I can leave an Atlantic Canadian image with you, we'd like Canada universities to be the Pier 21 of the 21st century.
Senator Ngo: Are they able to compete with Canadian graduates from the domestic workforce?
Mr. Davidson: Yes, absolutely they can.
The Chair: We've had two very different presentations today, but both extremely helpful to finish off our trade analysis. We've heard a lot about supply chains and global supply chains. It's a growing, more difficult area. Dr. Blanchard, your analysis and research is extremely helpful for our report. I hope that some of your comments today will be seen by you in a positive light in our report.
Mr. Davidson, as usual, you're a great advocate for students and education in Canada, and today was no exception in your presentation.
I assure you we will continue to study the trade areas, and I'm afraid we may be asking both of our witnesses to come back on more specific agreements as we work toward the possibility of those pieces of legislation making it to this committee.
Honourable senators, we are now going to continue receiving testimony on the topic of bilateral, regional and multilateral trade agreements, prospects for Canada.
In September of this year, Deloitte published a report entitled, The future belongs to the bold Canada needs more courage.
Representatives of Deloitte are here before us. Your report was extremely timely in our study of trade, and before we concluded our study, the steering committee thought it was extremely important to have you before us to make your input.
Under our general topic, we have been studying the concepts of trade, including bilaterally, regionally and multilaterally, with the view of understanding the agreements to this point, the environment we're in, the business community, anything that helps us understand the issue of trade with Canada. So your report is timely.
Before the committee today is Mr. Michel Brazeau, Consulting National Public Sector Leader. That's quite a title. We also have Mr. Duncan Sinclair, Vice Chair Deloitte Canada, Consulting. Both of you, I understand, will share the presentation. Who shall start?
Duncan Sinclair, Vice Chair Deloitte Canada, Consulting, Deloitte: Thanks to all the members of the committee for the opportunity to come and talk to you about our latest piece of leadership.
To premise the report, let me begin by saying that the last six years Deloitte, as the largest professional services firm in the country, has been studying various issues of the Canadian economy and we have pugged out reports which we have hoped would help to engage more dialogue and conversation between Canadian businesses, governments and academia about how we can move the Canadian economy forward. We've looked at issues related to productivity, preparedness for technology-driven disruption, and throughout all of our studies, we have encouraged Canadians to take on the challenges needed in those environments to help move our economy forward. In each instance, we do believe that while there are many bright lights of excellence within Canada, there are many opportunities for many other parts of Canadian business and organizations to move themselves forward.
Throughout all those years of study, there was one element that we believed we were missing, some sort of central core theme behind all of our work that we needed to continue to look for, and that's what motivated this most recent study that we did on the topic of courage in business.
I'd like to preface this by saying there are many great examples of courage amongst Canadians. There are many courageous people who serve us not only in the public sector but also in our military, police and many parts of our day- to-day society. This report is talking about how we, as Canadians, engage and think about the leadership of the organizations and enterprises within our country and our thoughts on ways that we can do that better.
In terms of the format and the actual outline of our study and the way we approached and studied it, Michel, would you like to make comments on that?
Michel Brazeau, Consulting National Public Sector Leader, Deloitte: At a high level, I'll jump into the results because I think it's the meat of the outcome.
We did a survey of 1,200 different enterprises — and I use the term "enterprises'' because it was a combination of public sector and private sector and, in the private sector, publicly traded and privately held organizations, and the survey was to try to search out what are those courageous organizations.
What found that only 11 per cent of the organizations that responded actually met the criteria that we had set out for courage. It's not a pass/fail. It's not 11 per cent pass. It's 11 per cent met all of the criteria we had for truly courageous organizations. Thirty per cent were at the cusp of meeting that definition, but they weren't necessarily meeting all the criteria across the five different factors that we had established in terms of meeting the criteria.
There were some interesting factors or interesting results. Why do we care about courageous organizations? Of the organizations that were courageous, 69 per cent saw revenue go up versus 46 per cent for the organizations that were, for lack of a better term, fearful, which I think is what we use in our report. Seventeen per cent saw head count increase, which is an indicator of growth, versus 4 per cent against the target population that was fearful; 67 per cent demonstrated increased investment in R&D versus 23 per cent for the other segment, the fearful segment; and 49 per cent of the organizations introduced significantly new products and services in the marketplace in the previous five years versus 26 per cent.
So courage, to us, is an indication of a factor that definitely is something to look at and say: How do I take that 30 per cent that doesn't meet the criteria that we've defined, but they're close, so there's a lot of potential? There's a lot of data that we didn't dig into in terms of the different segmentations among private sector, public sector, privately held and publicly traded. In general, organizations that were privately held organizations tended to do better in terms of the courage factor. Public sector institutions did not fare so well. And NGOs actually fared extremely well. Some of the data, to be honest, will lead us down a path of additional studies in terms of how we take this forward, because it's led us to ask more questions than we have answers to.
Mr. Sinclair: When we think about the conversation that we want leaders of organizations and enterprises to have within their own organization with one another across this country, we do talk about the five different dimensions of what we believe organizations can do to be more courageous in their behaviour.
We framed them around the construct of doing what's right, and what we mean by that is having the courage to say: What is it that I need to do to drive my business or organization forward for the long term, recognizing that there may be some short-term challenges in doing so, but ultimately what is going to allow for the sort of greatest long-term success of this enterprise? We believe it's important to take calculated risks. We're not suggesting that people should be outrageous, by any means. We think people need to think about the risks in front of them and have good rigorous analysis behind their decisions. But to be courageous is to recognize that despite that uncertainty and trepidation, when you're looking to do what's right for the long term, then you have the courage and action to do so. That requires a need to be provocative and to challenge the fundamental status quo of who you are, what it is that your organization is best at, what it is that your enterprise can do that is the best in the world and in class and to focus your energy and resources on being able to do that.
There were two other enablers of those behaviours that we found through the course of our research that we included in our report. One of them was, from a leadership point of view, we believe this does start with yourself. It is an issue of how leaders in the organization create a culture that believes that there is an opportunity for the organization to go forward and a certain boldness that people are prepared to reward. There is a need to what we refer to as "uniting to include,'' to break away from the groupthink of a narrow group of people involved, to open up the opportunities across your organization for people to share ideas, bring new perspectives and challenge the ways in which the organization is operating in order to find a longer term and more successful path.
Again, Madam Chair, we appreciate the opportunity of being here today and to give you an outline of our report. We're more than pleased to take your questions.
The Chair: Perhaps just for the clarification of senators, you were looking at entities within Canada.
Mr. Sinclair: Yes, we were.
The Chair: And you were doing it because of the fact that they need to change internally, and that means internally to Canada, or to be more prepared to see advantages overseas.
Mr. Sinclair: Certainly, in the work that we've done over the last six years, in a number of the research reports we've done, we believe very much in the importance of Canadian business taking an international perspective. We believe that the results of our research over that period of time have shown that industries that have engaged globally, faced global competition in the domestic market and competed against organizations around the world have built much stronger and more vibrant businesses over time because of that. It's caused them to be more innovative, invest more in R&D and look at best practices of what they can do with their people. We certainly believe that courageous organizations that are Canadian-based are those that would go out and challenge and do the best in all markets, be they within Canada or be they abroad.
The Chair: In that vein, the focus, you said, included non-governmental, some public sector and others. Something that we've heard from other testimony is that larger companies are looking more globally and understand their competition better. But it's been difficult for small and medium companies to stop whatever they're doing because they start out small and get a little bigger and a little bigger. They have more difficulty understanding that they need to take stock, change, and that the reward may come a little later, if I can put it in simplistic terms, than that. We've been looking at what governments have been doing as levers for small- and medium-sized enterprises. Did you touch on that in any way?
Mr. Sinclair: Certainly, across the 1,200 leaders that were part of our analysis, they represented organizations in small and medium enterprise and in the larger company segment. As Michel has said, we don't, in this report, differentiate between some of those sectors in the overall results that we have produced. We have done other reports, which we've presented to government in the past, that have spoken more to those issues, the most recent one being one called Blueprint for Growth that we presented back in the summer. I would agree with you that finding ways to help small and medium-sized enterprise, which represent such a large part of our economy, to understand the many mechanisms and opportunities that already exist within that ecosystem, by way of opportunities with organizations like EDC and others, is certainly helpful to them in seeing the opportunity for a much more vibrant market beyond our own borders.
Mr. Brazeau: Part of why we did this study around courage was that, in a lot of our studies, we refer always to the risk aversion of our Canadian culture. We actually have an index where we say that Canada ranks 47.4; the U.S. ranks 57.7. How do I differentiate or explain the delta, the difference between this risk aversion, that we have as Canadians? In part, what we're trying to get with this study is that, instead of talking about risk aversion, let's talk about it in terms of courage. It's not necessarily, "Why do we have so many small and medium organizations?'' When we did our previous studies, some of what we found was that it was difficult to encourage folks to export. Yet, the data showed very strongly that exporting companies had higher productivity. They had higher growth. They had lower risk. They had a lower rate of exit if they were post-IPO. The data is out there in terms of trying to motivate the small and medium enterprises to become the larger organizations. Part of this study is to find that missing element of what is driving this risk aversion. Can we define it differently than just saying we're risk-averse? That was part of the conversation to try to drive this definition of courage. And, in defining, how do we shift that level of courage?
Senator Poirier: You mentioned in your presentation, if I understood right, that 11 per cent had met all of the criteria that you had put in place. Can you explain to me how you determined which characteristics make a business courageous?
Mr. Sinclair: We did do a fair amount of primary and secondary research around the topic of courage in business as we began to study and look at the issues that we saw in the previous five years of our research. Based on that, we came up with this composite of five sets of behaviours that we believed were supportable in terms of our definition of courage. We felt that, while there were different studies in the past that explored different elements of it, this sort of integration of these behaviours could then be demonstrated by the results of our surveys as strong and vibrant and successful businesses. These were the things that we saw them doing, and we believed that the nature of these behaviours was what we saw as a line to the kinds of behaviours that were described in past research on what courage was in business. That's how we came to our definition.
Senator Poirier: Was that 11 per cent a surprise for you? Were you expecting something different?
Mr. Sinclair: There are different ways of thinking about what that 11 per cent says. You could look at from one perspective and say that, in sort of a normal distribution, you have people at the very top, people at the bottom and people in the middle. How do you move them? Insofar as there's a relatively smaller number at the top, I think that's sort of some inevitability of looking at a set of data. Certainly, from our perspective, we tend to focus more on the next 30 per cent that we saw, as Michel said, as being very much on the cusp of doing some of these very well, and we believe that, by some continued focus and effort in some areas that might be missing, whether it was in the level of risk taking, in the capacity to be more disruptive of their own business model in their industry, there would be a lot of opportunity for improvement in the way the business actually performed and behaved over time, based on the performance of that 11 per cent that we saw. So we tend to think more about it in that context.
Mr. Brazeau: I think the bigger surprise was probably the number of organizations that said they were courageous because part of how the survey was done was "Are you courageous,'' before you then take the participants through the questions, and 44 per cent of the folks who participated deemed themselves to be courageous, while only 11 per cent actually met the criteria. For us, that's an interesting data point because it speaks to the perception of organizations and what they deem to be courageous versus the criteria and the benchmark that we establish. The benchmark, if you want, or the definition of courageous, is really so that we are, in fact, competitive at that global level. When you're looking at the different criteria, it's not how I'm doing against the person across the street from me, but it's defining what we need to be courageous across the five themes to be competitive on a global basis.
Senator Poirier: How are we comparing with other countries?
Mr. Sinclair: This particular study we did was focused on Canadian business. This is what we wanted to look at, so we have not gone yet. Michel made the point that there will be ongoing, continuing research to try to benchmark this criteria against other countries. This is sort of our first report that was really focused on how we as Canadians are behaving.
Senator Ataullahjan: In your report, you say that corporate Canada is a terrible place, full of risk-averse leaders. This is not the first time we're hearing about it because, ever since we started this study looking at trade, we keep hearing the word "risk-averse'' for Canadian companies. As to all of the trade agreements that we are signing, is anyone taking advantage of those new international opportunities? Is there a role for the federal government to encourage these companies to be more courageous?
Mr. Brazeau: The answer is yes, there's a role for all three parties. Again, three concepts: One, there are a lot of programs in place. We were doing a presentation to another government organization, and we were talking about disruption of technology that disrupts the marketplace. We were talking about robotics and robotics being available now. The entry point to actually own robotics in your business is quite low. For $20,000, I can buy a robotics capability to my manufacturing that I couldn't buy before. I equated it to, in 2000, you could buy a plasma for $20,000. For the cost to the early adopters of home high-fidelity technology, you could buy a robot for your organization, but why are enterprises not buying robotics? Why, if there are these programs available, are we not adopting that technology? Why are we not adopting these opportunities? What we're trying to get to is to the behaviour that's stopping us from doing this.
There is a role for public sector, for government institutions. There is a role for academia, and there is a role for the private sector. All three drive the culture we have in our country. All three drive a culture of risk aversion. So I always say that there are two ways to look at the public sector and look at government institutions. One is: What are the policies that we can set that drive the behaviours of others that we're looking for? The other one is: What are the behaviours of our governments that can drive the cultural change that we're looking for in our marketplace?
Part of our study says that the change in courage starts with you. The message there was very clear because it's with all of us. So it's all three segments. Part of it is that, if we have a public sector, if we have governments that are quite courageous, less risk-averse in a managed, thoughtful way, and if we set that tempo, then are we shifting the culture in the marketplace? If we have academia that takes a different approach to risk management, does that drive the cultural shift that we need to have in our marketplace?
In all the programs in the world, what we're finding is, I think, that there are changes we can make to the programs to drive investments. If you look at some of our previous reports, we talk to the availability of capital in our marketplace, and there are different things we could do, but this one is a little bit about cultural change, so it's leadership by example.
We're saying, "It starts with you.'' We repeat that in every one of our presentations, because everybody is looking for someone else. What can we do to make other people courageous? Part of our message is, we own it. When we deliver the messages, we say Deloitte owns it and that's why we're doing this study. We are on the path to where we need to be, which is why we're doing some of these things.
Mr. Sinclair: We are very clear in all of our public conversation. We assess ourselves into the evolving category. We acknowledge that we as a business have more to do as well, and that is why we say we view this as trying to have a conversation with other leaders of organizations and enterprises in our country about how all of us, collectively, do this better. We're certainly a part of it.
Senator Cordy: I have just a few points for clarification. Did you deal with businesses and organizations?
Mr. Sinclair: Yes.
Senator Cordy: You spoke about the private sector and NGO's doing relatively well, but government did not do so well. What did you look at in government?
Mr. Sinclair: Again, this whole study was based on looking at leaders of different organizations and enterprises in the country. It was based on interviews and analysis for 1,200 people, and of that 1,200 people, some were senior officials in government, others were leaders of privately owned businesses, some were leaders of publicly-held companies and some were leading not-for-profit organizations.
There was a mix within the 1,200. While we didn't do a lot of, as Michel said, breakdown by industry subtexts or regional comparators as this first piece of analysis, there was some high-level data that we did extract about the relative level of courage of leaders in privately owned business versus publicly listed companies. As Michel observed, there was a difference that we would find there.
We would also find that of all of the different categories of leaders we looked at, the greatest amount of courage was found by people in not-for-profit organizations. Again, we find that interesting in the sense that there may be something about people who have a calling to work in that space also have a calling to be, perhaps, more courageous and accomplished in the long-term purpose of what that NPO is.
Senator Cordy: How large were the organizations? Were they small or medium, or did they run the gamut?
Mr. Sinclair: Across the 1,200 people, that represented businesses of scale to businesses that were relatively young, emerging businesses and were on a very fast growth path. That was all part of the data set that we had to look at.
Mr. Brazeau: Coast to coast, large to small.
Senator Cordy: I'm still not quite sure about what you said about governments having not done so well. Were those government businesses, government organizations or government agencies? Could you give me some specifics?
Mr. Brazeau: Actually, the organizations that were surveyed are blind from a data standpoint, and we went through a third party. I think we're talking about public sector institutions. So again, it was a range of public sectors institutions.
As I like to say, what's the public sector? It's not privately held or privately owned, and it's not publicly traded. So, the rest is public sector organizations.
Senator Cordy: I'm gathering the point of this is to make businesses become more courageous and find the balance between risk-averse, risk management and being willing to take risks to improve your product and to make new product. How do you message that? Because if I was told I had to be more courageous, I would think they were telling me not to manage my risk as much as I would like to in my business.
Mr. Sinclair: The way that we're trying to take this information out is to engage with people. As Michel has observed, we're engaging with people in the private sector, in publicly accountable organizations, we want to have conversations with other senior leaders, and we're trying to sit down and talk about the results of our work. We're trying to bring charity to the message we have, and to your point, we're not asking people to be outrageous. We're saying that in the way you think about, assess and evaluate choices and opportunities for your organization that you think about the long-term opportunity in front of you versus the short-term risks you take, and to think about how you can truly operate at the best of what your organization can be. Think about what disruptions are coming at you and how you, as a leader, can bring other leaders in your organization or your industry together to think about ways to be on the winning side of what disruption will be, as opposed to suffering under the consequence of it.
That's the nature of the conversations, again, as Michel has said, across the country and with leaders of different organizations that we're trying to have.
Senator Cordy: Will you have a follow-up in two or three or five years to say whether your messaging has worked, and if this project has been successful?
Mr. Sinclair: I think when you think about where we're positioning ourselves in this conversation, our country, as we all know, is turning 150 on July 1, 2017. We have a broader research program that we call Canada at 175, and what we're trying to do now is talk about where we believe our country will go over the next 25 years. What will that country look like at that time, and what are the choices that we have to make as leaders within the country, whether it's in businesses or other organizations and enterprises, in order to create the kind of future that we want to see for the generation coming behind us?
In order to do that, most certainly, in this and other work that we've got coming along, we'll continue to try to advance that conversation and talk about what things we believe, as leaders in Canada, we need, collectively, to do to create that better future.
Mr. Brazeau: I think it is important. It is not just private sector, it is public sector as well, because courage manifests itself in different ways.
We were in province X having a conversation about disruption and the speaker before us had a conversation about how it was very important for their innovation centre to be better than province Y's. We said, "That's the wrong conversation,'' because if we're going to be successful in Canada 175, it's not province X's innovation centre being better than province Y's. It's the Canadian innovation centres being better than the Israeli, Chinese and global innovation centres. We're not having the right conversations.
To us that's partly courage, because we're focused on competing against each other versus forcing the right conversation, which is how to compete against the global marketplace. At times we're making suboptimal decisions in terms of how to invest because we want to please a lot of people. It's the Canadian way, versus courage saying I'm going to maybe place fewer bets, and larger. So it's the question of courage manifesting itself. That's why we talk about managing risks differently. One strategy for managing risk is just to give a little bit to everybody and you make everybody happy. No one is upset.
The other says, "I'm going to do a portfolio approach but I'm going to invest and strategically decide that there are some places I'm not going to play,'' either geographically or by industry segment. There is a whole bunch of different ways to slice up our country, but that is a form of courage in terms of just thinking differently, strategically, about where we want to take our country in terms of how we work with the private sector and academia.
Senator Ngo: I would like to follow up on the questions from my colleague. Why are these Canadian businesses more reluctant to take risks than businesses in other countries? Do you think this lack of courage holds Canada business back from expanding internationally? What are the implications for Canada's international trade performance?
Mr. Brazeau: It's funny, Duncan and I were having this conversation this afternoon, about what defines success in Canada versus what defines success in the U.S. We both have spent a lot of time in the U.S., and it's a story about — it's not meant to be factual — but what the Canadian dream is. "I own a house, a cottage, I have two cars and I paid for my kid's university. I'm in heaven.'' What is the American dream?
I own a 300-foot yacht, I own homes in four countries and I have a global company. It's just our scale of what we aspire to — and these are generalizations — are different and they permeate our culture. We see it in some of the programs we have put forward. We are very focused on small and medium enterprises, but a lot of our small and medium enterprises are looking to grow to the size that some can buy it so you can be comfortable with your house, your cottage, your two cars and your university versus I'm going to create a global organization.
The programs we have are there to support small and medium enterprises, which are very valuable, but do we want to encourage massive global enterprises in Canada? Do our programs and policies support that vision, or do we stop when a company gets to a certain size?
There are a whole lot of messages we send. Some of it is cultural and some is through our policies that make that why are we less risk averse or why are we less likely to export? What is it that makes the American program more aggressive? We focus a lot on the U.S., but there are a lot of other countries that have done very creative things.
I like focusing on Israel, where in academia, government and private enterprise at times when you're in a setting you don't know who you're talking to because they're morphed together in some of the strategies they have in terms of building their private sector. It's hard to recognize a public sector, private sector or academic in the room because of some of the initiatives they've done together.
There is no shame in driving growth in our marketplace. There's no shame for the public service to have a massive role. There's a book written called The Entrepreneurial State. If you haven't read it, it's on my top five recommendations. It's by a professor out of the U.K., and she talks to the history of some of the states that have called themselves private sector, there is no role for public sector, and when you read the stories of some of their great successes and go back to where the investments were made and by whom and who played what role, it's quite an interesting read.
Senator Eaton: Your last little bit is fascinating.
Listening to Mr. Davidson earlier about Canadian universities and how they don't have the resources and they don't do this and they don't do that, it made me think of all the American universities and how much money they raise privately to do a lot of the things they do, and never once did it cross his lips to perhaps mention some of the bigger Canadian universities.
Did you just finish a $2-billion fundraising? Maybe they should raise some money if this is important to them. It's interesting. Has Canadian business relied too much on government to do things for them?
I look at our cultural institutions, too, which the larger ones are very much supported by the government in many cases and don't often have the knowledge or the background to go out and raise money for the things they want to do; only the larger ones have and only because they're desperate.
Should we do some more tax incentives? Should government step back? What has crippled us over a number of years?
Mr. Sinclair: You raise a number of very interesting points in your question. I'll try to parse a few of them out and between my colleague and I we hopefully can speak to that.
I think there are some really great examples in Canadian post-secondary institutions of people who are trying to look at the issues you just talked about. I look at the example of the Lazaridis Institute at Wilfrid Laurier University that's spending a lot of time looking at the question of how a start-up business that has created product market fit and has now actually got a small, vibrant business scale itself within Canada.
Senator Eaton: Mr. Lazaridis put in his own money, which he made.
Mr. Sinclair: Well, he did, and I also believe the Government of Ontario partnered with him as well on that.
Senator Eaton: It was a private initiative.
Mr. Sinclair: I would certainly acknowledge that but I would say to Michel's point about when you're in Israel and you see how people come together, I think it is a notion of people coming together to try to create something collaboratively in that ecosystem that is important.
I would also say that it's important for people to look at even before post-secondary, what is the nature of the education that our young people have, and I look at the example of my stepson who lives in British Columbia and is in a high school program where there is a lot of experiential education that's going on that focuses on helping him to think about entrepreneurship from the time he has been in grade 9 and going forward.
When I think about the kind of university experience he's going to expect to have, it's very different from the one I expected to have when I went through a wonderful school system where I sat in a class at a desk and for 12 years someone at the chalkboard provided me with information, and I learned it and I absorbed it and I wrote exams. Then I went to a university and sat in a room with 500 people, I did the same and then I went into corporate life.
I look today at young people who are in very different learning environments, who have very different opportunities to not only think about ideas and to have time and resources around them to try to build projects and trade companies and think about ways of contributing in different ways from what I did at their age.
All these things are powerful and have impact. On Michel's point about how we see the education system and the public sector more broadly and business, they have to work together. It isn't up to business to wait for someone to help them. For people who are entrepreneurial and want to go out and do things, there are ways. And again to Michel's point, we need to ask ourselves whether there are incentives that we create that have consequences that are unintended.
And on the earlier point about the idea that we have wonderful tax incentives for young companies and small companies to grow, if you continue with a high growth rate why wouldn't we continue to give incentives to be here and build a much larger and more vibrant company rather than say at a relatively small size "now it's up to you.'' As Canadians, these are some of the difficult questions we need to ask ourselves.
Mr. Brazeau: I think part of the challenge is we as a people are risk averse therefore our political system is risk averse. There's no benefit for folks taking risk. It really becomes a supply chain of risk aversion.
The previous speaker was talking to supply chain. It kind of builds on itself. Whereas we look at some other countries that are prepared to make more strategic bets. It's not necessarily more money, less money, it's "what do I do with the money?'' There is one organization my friend is working for trying to help them in Canada called iBIONICS, and they were funded initially by Australia. The Australian government pumped in $50 million to create this interesting nanotechnology iBIONICS, which is interesting. They've come to Canada because we have photonic side, the wireless side, and they are a solution they're trying to pilot in Canada to actually give back eyesight. When he walked me through it I thought it was fascinating. It was a microchip in the eye. For those of us who are my age and used to watch The Six Million Dollar Man and The Bionic Woman it's like this is no longer movie.
This is a classic case. They've come to Canada because we have something and now they're asking us to help them. The Australian government has said they will continue to help and we're working through the Canadian system. The Australian government invested in a Canadian entity before Canada did. Why? Because there are a lot of programs they can apply for, but it's about lining up and being one of the people who is applying for limited funds and then we're going to give you a slice of something because it's very difficult for the programs to say they're going to place a bet. If we in Canada, with this joint technology, were to create a new business, which is we are going to bring sight. That's fantastic. But it's the question you asked: What's the role of government? And some other countries are saying they want to play a more active role.
Senator Eaton: You both have spent a lot of time in the U.S. Do they have a huge role in business or not?
Mr. Brazeau: If you read The Entrepreneurial State, I believe it starts by explaining the great success of Apple. Everybody says Apple is an innovator, it's a creator and they have changed the way we think of technology. If you break down the iPhone, you have the screen. The research that was done to create the technology of the screen was paid for by government.
The chips were paid by government. The casings were paid by government, most of it through military and academia for purposes of either military or advancements of specialty programs, as they say. But it's quite interesting because the U.S. prides itself on, the private sector is the private sector.
Senator Eaton: So Steve Jobs took those various bits in a garage and put them together.
Mr. Brazeau: Yes. There are different roles in the supply chain of success. Governments play different roles in different states, and they play it in different ways; some creative ways, some more blatant ways, but it's quite an interesting journey to see all the different countries and the actual role of the state in the success of the private sector.
The Chair: Thank you for responding to us and coming. I had hoped by having you here you might have given us some answers about why we're risk-averse. I think I have more questions now than I had before.
You have successfully tied it together, that there's something about our culture and how we view non-governmental, not-for-profit, or whatever you want to call it, business and government. It's really a question of the role of all of those for us to be successful as a society and competitive in the new world structures.
What we're left with is that each one of those sectors has come to this point differently, I know the not-for-profit very much. It was risk because it was cause-oriented. They could experiment, but slowly they were drawn into accountability and safety. The standards had to be the same as governmental. At one point you said if the charities are doing this as volunteers, it's okay if they fail once in a while. Then we said no, if they are providing a service they have to meet a certain standard.
Business was the same way: They could go off and do things.
You have given us a lot of thought about our culture and what the balancing act is between all of the varying players in Canada. I'm not sure we're closer to an answer, but we certainly have more questions now. We look forward to your next report and hopefully some of these insights will be helpful in trying to increase the areas that we are now studying in the trade policies. We may rephrase some of what we were thinking. We appreciate being part of the dialogue with you. It's extremely helpful.
Thank you, gentlemen, for coming before us.
(The committee adjourned.)