THE STANDING SENATE COMMITTEE ON NATIONAL FINANCE
EVIDENCE
OTTAWA, Tuesday, October 21, 2025
The Standing Senate Committee on National Finance met with videoconference this day at 9:03 a.m. [ET] to examine and report on matters related to federal estimates generally and other financial matters.
Senator Claude Carignan (Chair) in the chair.
[Translation]
The Chair: Honourable senators, to support the smooth operation of committee proceedings, the following guidelines must be observed by all participants to help prevent audio feedback. Please consult the cards placed on the committee tables for guidelines to prevent audio feedback incidents. Keep earpieces away from all microphones at all times. Microphones must not be touched. Activation and deactivation will be managed by the console operator. Avoid handling your earpieces while the microphone is active. Earpieces should either remain on the ear or be placed on the designated sticker at each seat. Thank you all for your cooperation.
I wish to welcome all senators as well as the viewers across the country who are watching us on sencanada.ca.
My name is Claude Carignan, senator from Quebec, and chair of the Senate Committee on National Finance.
Senator Hébert: Martine Hébert from the region of Victoria, Quebec.
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Senator MacAdam: Jane MacAdam, Prince Edward Island.
Senator Ross: Krista Ross, New Brunswick.
Senator Kingston: Joan Kingston, New Brunswick.
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Senator Miville-Dechêne: Julie Miville-Dechêne from Quebec.
Senator Dalphond: Pierre Dalphond, from the De Lorimier senatorial division, Quebec.
Senator Gignac: Clément Gignac from Quebec.
Senator Forest: Éric Forest from the Gulf division, Quebec.
The Chair: Thank you, honourable senators.
Today, we are holding our first in a series of meetings on a general financial and economic update on the state of the country. For our first panel, we are pleased to welcome with us today, by video conference, Olaf Weber, Professor and CIBC Chair in Sustainable Finance, York University. Welcome, professor. We had another witness, but he could not join us due to health problems.
Thank you for accepting our invitation, professor. I will ask you to make your opening remarks. The time allotted is usually five minutes, but given that you are the only one, if you take a bit longer than five minutes, we won’t hold you to it. You have the floor.
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Olaf Weber, Professor, CIBC Chair in Sustainable Finance, York University, as an individual: Thank you and good morning. Be assured I will keep this to five minutes.
Honourable senators, thank you for the opportunity to provide a witness statement on Canada’s national financial and economic update, ahead of the anticipated federal budget release in November.
I hold the CIBC Chair in Sustainable Finance and serve as a professor at the Schulich School of Business, York University, where I also direct the Centre of Excellence in Responsible Business, or COERB. In addition, I am an adjunct professor at the School of Environment, Enterprise and Development, or SEED, at the University of Waterloo, and a Fellow of the Institute for Sustainable Finance.
My research and teaching focus on the intersection between the financial sector and sustainable development, specifically the relationships between sustainability performance, financial performance and economic resilience. I study the role of financial institutions in advancing sustainability; the effectiveness of voluntary and regulatory frameworks; the development of social banking and impact investing; the materiality of sustainability-related risks and opportunities; and the use of artificial intelligence to assess environmental, social and governance risks and opportunities.
Consequently, today I would like to focus my remarks on sustainable finance and Canada’s transition to a low-carbon economy related to the budget.
I will now talk about the climate and economic context. Canada faces dual pressures: the growing risk of climate-related economic disruption and the rising global momentum for climate-aligned finance and regulation. On one hand, tariffs and trade risks threaten Canadian exports to the United States; on the other hand, tightening sustainability and disclosure regulations in the European Union and other jurisdictions are setting new international benchmarks. These developments underscore the urgency for fiscal measures that stabilize the economy while accelerating climate transition investments.
Despite Canada’s commitments, progress in reducing greenhouse gas, or GHG, emissions remains limited. According to the International Energy Agency, or IEA, Canada is among the top 15 GHG emitters per capita worldwide. While emissions in sectors such as industry, transport and agriculture have declined, the oil and gas sector continues to emit at high levels, with only marginal reductions achieved to date.
We must also recognize that climate change and economic growth are deeply interconnected. A recent study by colleagues Bilal and Känzig at Stanford and Northwestern University found that each additional degree of global warming reduces long-term world GDP by more than 20%, with the social cost of carbon exceeding US$1,500 per ton.
For Canada specifically, the Canadian Climate Institute reports that damages from the impacts of climate change in Canada are already here, and they’re adding up. By 2025, climate impacts will be slowing Canada’s economic growth by $25 billion annually, equivalent to 50% of projected GDP growth. All households will experience income loss, with low-income households being the most affected.
Climate change is a job killer. Job losses could double by mid‑century and reach 2.9 million by 2100. Every dollar spent on adaptation measures saves $13 to $15 in direct and indirect benefits. Limiting further warming pays off even more: Proactive adaptation can halve climate costs and, when combined with global mitigation, can cut them by three quarters.
At the same time, global investment in clean energy reached $1.7 trillion in 2023, highlighting significant opportunities for Canada to capture value through innovation, infrastructure and sustainable finance leadership.
So what are the policy and financial recommendations based on these facts? These findings make one point clear: There is no trade-off between economic prosperity and climate action. The two are mutually reinforcing. Delaying action will undermine long-term competitiveness, household income and fiscal stability. However, sustainable and climate finance remain underdeveloped in Canada. Public funding for mitigation and adaptation measures remains limited, and private sector engagement, though growing, requires stronger incentives and coordination.
To address this gap, future budgets should align fiscal stimulus with Canada’s national climate transition plan, ensuring all public investments contribute to a low-carbon and resilient economy; leverage-blended finance mechanisms that combine public and private capital to de-risk sustainable investments, attract institutional investors and reduce the burden on public finances; and prioritize investments in critical transition infrastructure, including low-carbon public transportation, clean electricity generation and transmission, energy-efficient and affordable housing, EV supply chains and critical minerals and valuation and protection of natural assets that contribute to climate mitigation and adaptation.
Future budgets should also expand sovereign and sovereign‑linked green bond markets, enabling governments to finance transition projects efficiently and attract private co‑investment.
In summary, Canada’s fiscal and economic strategy must be explicitly aligned with its climate transition objectives. The evidence is unequivocal: Climate resilience and economic growth are not contradictory but mutually dependent. By embedding sustainable finance principles in fiscal policy and leveraging private capital through blended finance, Canada can position itself as a global leader in the low-carbon economy, driving prosperity, innovation and long-term stability for all Canadians.
Thank you, honourable senators, for your attention and your commitment to advancing policies that secure Canada’s economic and environmental future.
[Translation]
The Chair: Thank you, professor. We will start our question period with Senator Forest.
Senator Forest: Thank you. In the current situation with our neighbours to the south, we talk more and more about diversifying our economy and exports. I think that is a very important way forward. At the same time, some administrations are putting carbon border adjustment mechanisms in place. I am thinking of the carbon border adjustment mechanism from the European Union to the United Kingdom, which should begin its full implementation in 2026-27. To what degree could the implementation of carbon border adjustment mechanisms in the European Union and the United Kingdom affect the competitiveness of Canadian exporters in these markets?
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Mr. Weber: Exactly. Yes, they could. The big problem is, as you said, that we have the two borders. On the one hand, there is kind of less focus on climate. On the other hand, in the EU, there is a stronger focus on climate. As a consequence, we definitely need diversification of exports, and we also need to create a strategy of how to deal with both.
I talked to people at Export Development Canada as well, who are directly affected by that. Canada needs to develop a way to enable us, on the one hand, to continue exporting to the U.S. and, on the other hand, to continue exporting to the EU. This is the issue that we have to address.
Diversity in our economic activities, as has started in mining, battery production and other sectors, might help with that. We definitely need strategies to lower the carbon content of the exports because this won’t hurt U.S. exports either. The way to go is to focus on figuring out how to address the carbon content of our exports.
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Senator Forest: Thank you. In this matter, it seems that all our administrations and governments are considerably less willing to have a sustainable economy. As we can see, sustainable economy policies are getting much weaker. I believe that this objective is fundamental for the planet’s future. In your opinion, how should we address it in the short or medium term?
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Mr. Weber: We need to focus on the fact that climate change and economic growth or economic development are not contradictory. This is something that is still often on the minds of people. We need to see that if we invest in climate mitigation and climate change adaptation — in renewable energy and other technologies — it will benefit the economy as well.
That’s what we should focus on first: figuring out the economic activities, industries and sectors that could do both and then creating growth and addressing climate change.
[Translation]
Senator Forest: How could other countries’ implementation of carbon border adjustments, particularly Europe and the United Kingdom, affect the production investment decisions of Canadian exporters and business owners?
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Mr. Weber: I don’t know whether it influences the decision, but the consequence is to deal with the regulations. We have to understand what they mean. This is complex and complicated. Even in the EU, they changed the regulations and made them less complex because many companies in the EU had issues following them as well.
The first step is to understand the consequences of these regulations. The next step is to try to address them. In general, if we have implemented climate policy, including carbon pricing for production, it should be okay. The exporters should be able to deal with it.
The first thing, from my perspective, is to understand the legal perspective and the regulations to be able to follow them.
Senator Ross: Good morning, and thank you for being with us today. My question is related to the Major Projects Office, or MPO. Can you give us a little information from your perspective on the projects that were approved in the first tranche of projects?
There was the LNG Phase 2 for Kitimat, the Darlington nuclear project, the Port of Montreal, a copper mine in Saskatchewan and the Red Chris Mine in northwestern B.C.
The idea of the MPO, of course, is to advance major projects and streamline or fast-track federal regulations and approval. Can you give us your perspective on the projects that were selected and the impact? Also, what would be an ideal project in the November announcements?
Mr. Weber: Thank you for that question. It is tricky but, of course, very important.
I think some of these projects really fall into this category where we can address both climate change and economic growth, though, of course, a mining project at first has impacts. What we see is a need for further electrification for electric vehicles, so we need to have mining projects. I think this is an excellent opportunity for Canada. I think these projects make sense from a climate perspective as well.
We need to improve infrastructure, and I can talk about what I would like to see there.
For LNG, or liquefied natural gas, I don’t know. We see reports that say that the use of LNG and the increase of LNG will be very short-term. Many reports say it will peak internationally in five years. For me, then, there is this question: Does it make sense to invest in such a big project, delivering LNG to the rest of the world? I would be really careful with that, not only from a climate perspective — though, of course, it’s criticized for the emissions — but for long-term economic sustainability. I’m not sure. I have seen reports from institutions in Canada saying that it’s too short-term, and, of course, it’s a big investment. From my perspective, we have to be careful with that.
I like some of the projects. They’re great. I’m based in Toronto, you are in Ottawa and then there is Montreal. For me, the obvious infrastructure investment would be the fast train connection. If you look at the number of flights per day between our cities — and to Montreal as well — and what we could do with a fast train connection, I think this would have great economic impacts in terms of jobs when building the tracks, as well as in the future, when we have the train running and need the services. That is something that I would like to see.
What I would also like to see is more renewables. You also mentioned Darlington. I don’t want to get into the risks and opportunities of nuclear, but it’s a way to address the emission problem and electricity. From that point of view, it makes sense, but I would like to see more in renewables. If you look at other countries and what they are doing with wind and solar, I think Canada can do much more, and we have the infrastructure. We also have the space to have more wind and solar.
Also, we’ve already started supporting battery production, which is used for electric vehicles. That’s one use. The other use is renewable energy because we need storage for that. If you have already started investing in battery production, I think more investment in renewable energy makes sense.
Senator Ross: I’d be interested in your perspective on some of the ideas coming out of New Brunswick, which is the province I’m from. There is talk of projects in the ports, a tungsten mine, SMRs — or small modular reactors — LNG and pipelines. Give me a sense of what you see for New Brunswick.
Mr. Weber: Again, thinking about the connection to climate change and whether it’s in line or not, what is still important is keeping the guidelines for environmental and social assessment, not just doing things because we need to do them quickly. Of course, we have to do things faster, but we have to keep the practices in place to perform due diligence. Some of the projects, yes, if it’s export related and so on. Electricity infrastructure is a big topic as well. It makes sense.
For all of these projects, I would just keep in mind the connection to climate change. Is it in line with the transition strategy?
Senator Ross: Thank you very much.
Senator Hébert: Thank you, Mr. Weber. You talked about electrification and the battery industry. We know that the Quebec government has invested in the battery sector, and we saw that due to the conditions of the markets and much lower demand than what was expected, the sector encountered difficulties. Some experts are saying that Canada, in terms of electrification of transportation, should open to the Chinese market and try to attract some investment or production here — with quotas, with caution and according to our relationship with our neighbour.
I’m not saying this is my opinion. I just want to know what your perspective is on that.
Mr. Weber: It’s an excellent question. If we want to support battery production, I think what we really need is to create a market. It doesn’t make any sense if we support the production and subsidize them and, in the end, we don’t have a market. I think that’s a big problem with renewable energy in Canada. We had that with solar panels as well.
We need to increase the demand for electric vehicles. One way is to offer cheaper electric vehicles. That’s usually the big issue. The prices are coming down, but they’re still higher than with conventional vehicles. The other factor is range, but I think that issue is slowly disappearing because the range of the automobiles is constantly increasing.
Yes, having imports from China would be a way to decrease the price. Of course, it’s a tricky decision. I understand, but I would support it. I would say we should try to have a better supply of electric vehicles for a good price. If we can’t do it here with the products that we already have, we need to support others. Of course, as you said, the ideal way would be the production of these cars in Canada instead of just delivering them.
Overall, I would say the number of jobs in the automobile industry in Canada is relatively low. It’s discussed quite often, but there aren’t that many. If we allowed more imports, how many jobs will really disappear from the automobile industry, and how many will we get in addition to that? If we have production from a Chinese company here, we will need people to produce the cars. We need the sales, the support and the service, and we need the batteries that might be used in the future.
I think the strategy to offer electric vehicles for a lower price is useful, and importing from China might help.
Senator Hébert: You talked about fiscal policy. Some governments are contemplating replacing the fuel tax by a kilometric tax. I would like to know your views on this, please.
Mr. Weber: In general, of course it makes sense; we want to avoid transport and driving. On the other hand, we have to think about what opportunities we have. Currently, building infrastructure is such that you must drive to your job. It’s not as if you live where you work, unfortunately. There are some new approaches to doing that.
If we introduce such a tax, we just penalize those who must use a car or other ways to get to work. It’s a tricky issue.
Yes, if we offer opportunities to reduce kilometres, it will make sense if we use the income to improve the situation. If we are just placing a burden on people without offering them an alternative, I don’t think we should do that.
It’s the same with transport. If we need transport and don’t have an alternative, then the question is whether a kilometric tax makes sense in this regard. If we can offer alternatives with respect to a shorter distance, then it might make sense.
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Senator Hébert: Thank you.
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Senator Miville-Dechêne: Mr. Weber, you said that economic growth and climate resilience can go hand in hand and that no choice has to be made. In more concrete terms, how can the federal spending programs — and I’m obviously thinking of housing — leverage social finance mechanisms like social bonds or impact investing?
Mr. Weber: That is a great question. What mainly happens currently is that we have a public fund that invests, and if the fund runs out of money, investments are gone. We see that with the growth fund, not that the money is gone, but we have this fund, it goes into companies and helps them, which is great. Of course, that makes sense. The problem is that it’s not enough — we all know that — and it’s just finished when the funds run out.
An alternative could be to set up this type of funding, these programs, in a way where money can only be spent if we get other investors on board. For example, let’s say the fund for housing will be used if we have other mortgage lenders that will participate, for instance, or other investors that participate in the project.
We see this in other countries. Germany has KfW, the public bank, similar to Crown companies. They have these budgets; however, you cannot access them directly. You have to go to your financial service providers, to your bank or whatever it is. Institutional finance can be involved as well. Combining the advantages of low-interest or low-cost money from public funding with a hopefully attractive private investment creates an attractive total package, on the one hand.
On the other hand, we can leverage the public funding and continue the project even if the public funding runs out. The experience is that often the private funders stay in these types of projects because they have already started and learned how to invest in such projects.
My proposal would be if we have these kinds of public funding — from Crown companies and from the budget — we must ensure that we have private investors involved as well. For social housing, we need mortgage financing; we need the developers and the pension funds that finance these developments. We can’t just say that we have public funding, that’s all we spent there, that’s the only social housing that exists and otherwise everything else is a decision of the market. We really have to integrate both of these and use a blended finance concept.
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Senator Miville-Dechêne: That would require a pretty big change of mentality. I would like to hear your thoughts about the idea that we can focus on both the climate and economic growth. Our governments are timid. For a long time, people here in Canada have been talking about a CO2 emissions cap. That promise seems further and further away from being fulfilled. Is it essential to have a CO2 emissions cap to try to make up for lost time in terms of fighting climate change?
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Mr. Weber: If you want to achieve the goals to be at or near net zero by 2050, we need a strategy to control and track whether we are on our way. Caps that decrease over time make sense. Whether we use them as absolute caps that emissions must be below or we use them as our strategy to see whether we are on track, that’s a different question. But we need to follow a certain strategy to decrease emissions. We cannot wait until 2048 and then say, “We have two more years to achieve our goals.”
We must have these caps over time. Whether we connect them with a carbon price or use other strategies to stay below these caps is another discussion.
If you look at corporate strategies, they do the same. Companies that want to achieve their climate goals all have a strategy. What happens in the next 5, 10 or 15 years and where we want to stand is important, so we can measure whether we are on track.
Senator Gignac: I enjoyed your discussion with Senator Hébert about the possibility of this Chinese electric vehicle coming to Canada.
Staying with China and shifting topics, I perceive that you are not in favour of LNG projects, but if we develop LNG projects and it helps China to close coal mines, which has a huge carbon footprint, we sustain the global village. What is good for China would be good for the planet and good for Canada. Yes, Canada is already in the top 15 greenhouse gas emitters; I understand that. But at the end of the day, why not think globally? Overall, if it’s better for the planet, why not export and have a long-term contract for LNG with China? What is your reaction?
Mr. Weber: There are still coal power plants in China. There are new ones. They are substituted with renewable energy. They don’t substitute with gas. That is the problem. We might have an opportunity for the next five years, and there are detailed reports about that, but I don’t think that we have an opportunity in the long term because fossil fuel energy will not be substituted with LNG in the long term. It will be substituted by renewables and maybe nuclear and hydro as well. I think it’s a risky policy in the mid and long term.
Senator Gignac: Correct me if I’m wrong, but 60% of China’s energy comes from coal, which has the worst carbon footprint, so do you believe this kind of study that five years from now is the peak? Where did that study come from?
Mr. Weber: I can share that. That’s a global general peak, but China also has the highest implementation of renewable energy. Yes, they are still using coal, but they are on their way to reducing that.
That’s my estimate. I cannot predict the future, but I don’t see them substituting these power plants with LNG. Then the other question is whether there are supplies that are easier for them to obtain. China is still collaborating with Russia. We have to figure out whether we can really compete in this case. That’s another issue with that.
Senator Gignac: Fair enough. Thank you.
Shifting topics, since you are the CIBC Chair in Sustainable Finance, could you explain to us what happened with what our current Prime Minister Carney launched in 2020-21 regarding the Glasgow Financial Alliance for Net Zero? It was very promising at that time, with more than 450 financial institutions globally joining in. Suddenly, one by one and with President Trump, things accelerated, so it looks as if it is fizzling out and that’s it. Can you explain what happened and what the concept was for my colleagues and me, and why are we reaching this point? It was promising and then suddenly not working.
Mr. Weber: Yes. The concept was that the global financial institutions subscribed to a net-zero policy — that they have net‑zero emissions by 2050 or earlier. There was great enthusiasm, as you said. We realized, directly after, that most of those that signed this didn’t really know where they stand. So colleagues in consulting and colleagues in academia were getting calls from the financial industry asking, “How can we do that?”
I think there was a very quick decision to sign something and that they didn’t really know what they were doing. I am not saying that this was a bad agreement, but I think this was one of the big problems.
Then in the years after, the first issues came up: How do we get there? What do we really need to do? What is the strategy to get there? And I think this created a lot of insecurity. And then, of course, with Trump coming in and attacking these types of associations — and also some states in the U.S. saying as long as you are a signatory you cannot do any business with public entities there — that accelerates everything.
I think the real question was this: Did they really know what they signed? Did they have real strategies or start developing them? But if you look at these activities and compare them to what is usually done — before a bank signs an important agreement, there is usually a lot of analysis and due diligence before they do something — I think this was a bit too fast and there was not enough thinking behind what they would subscribe at the end. We have seen that with some banks as well. They kind of said, “We want to have $500 billion in renewables,” or “We want to have $200 billion in that.” Again, these figures are not really based on thorough financial analysis. They were rather communication. So I think we need to be careful with that.
If the financial industry is to address climate change, it has to so in a serious way and not a superficial one, where it just comes up with statements that it can’t back up.
Senator MacAdam: Canada released, in December of 2024, the Canadian Sustainability Disclosure Standards, which are aligned with international sustainability standards. Can you comment on the importance of these standards and what you believe are the next steps in making substantial progress on adopting them? Why have there been delays, and what is the impact of those delays for Canada?
Mr. Weber: Thank you. That is a great question, and it brings us back to the question from the beginning regarding exports to the EU. This is exactly what we need to be able to continue exporting to the European Union because these guidelines are aligned with international guidelines. If we implement them in Canada, it helps our economy to address these guidelines.
So from my perspective, they should become mandatory. I do not know why they are late. When I started my job in Canada in 2010, there was the Ontario Securities Commission guideline on climate risks, which should have been implemented immediately, more or less, and it’s still not implemented.
It’s political will, but I think we need it. I think most of the industry wants to have certainty with regard to that. I do not think there is resistance from industry to having these types of guidelines, especially if they help them with exports to the EU.
So yes, I think we should make them mandatory. Some countries have started to make IFRS 1 and IFRS 2 mandatory already. We are sort of on the way, and I think we should accelerate this process.
Senator MacAdam: Do you think it’s impacting our investments? Do you think Canada is falling behind globally? Was Canada at the forefront? Is it starting to lag?
Mr. Weber: I don’t think that Canada was at the forefront, but there is the risk that we start to lag if we don’t start to make them mandatory and focus on them. In the end, we will see how much they will impact the exports especially. I think this is the main issue in this regard.
Whether there is a direct impact on investments in Canada, I don’t know. But I think it helps to create transparency. If you have investors and have mandatory guidelines, you can say, “We have these measures in place.” It helps them with their due diligence and makes it easier for them to assess the risks and opportunities of these investments.
Senator MacAdam: There was a recent announcement that you have been named an Institute for Sustainable Finance Research Fellow and aim to develop a tool that enables finance industry players to assess their alignment with sustainable standards, regulations and taxonomies. Are you able to speak more about your work in this area and the gaps it will seek to address?
Mr. Weber: Yes. We found we have about 90 guidelines, regulations and taxonomies globally that are currently addressed by financial institutions in Canada, more or less. We use these guidelines. What we plan to develop is a tool that allows financial institutions, pension funds and others to upload their sustainability reports and see how much they are aligned with these different guidelines, regulations and taxonomies. And then, of course, they can decide which ones they think are more or less important.
Overall, it is a tool that shows a company whether they are aligned with these guidelines, and maybe in the future we will do that for other industries as well. But it should be a tool that supports them in seeing whether we are on track with all these guidelines or reporting or addressing different issues than are addressed internationally and nationally.
Senator MacAdam: Thank you.
Senator Kingston: Welcome, Mr. Weber. I’d like to dig a little deeper or get more specific on my colleagues’ questions regarding the sustainable financial policies that would make us more aligned with our trading partners.
You talked about how somebody would have to decide which of these are the most important. My question is this: What would you say are the most important, say, three of these to start with immediately, within the next year or two, to keep us moving in the right direction? I would also like to ask you something about incentives afterward.
Mr. Weber: I think addressing the EU guidelines — the reporting guidelines, the carbon guidelines — is important. That is the top priority, from my point of view, particularly now, with the U.S. background. We have to diversify, address the EU guidelines and enable our economy to be in line with them. I think that’s the first step.
Second, I think Canada needs a transition strategy and to align that strategy with reporting guidelines and regulations. We need to do that because, again, investments have been mentioned, so we need to be credible and transparent in where we go. I think we need to implement a serious strategy, regulations and reporting guidelines in Canada. Those are the priority items.
I think the third item is focusing on what we discussed at the beginning regarding the projects. We want to implement big projects in Canada. That is important. We currently see a connection with how to deal with China and India economically because they are important players and will become more important in the future. How can we address the issues there? What is their alignment with climate change? What do they look at? What are their reporting guidelines, if they have any? From my point of view, these are the main issues we should address.
Senator Kingston: In your opening remarks, you spoke about incentives. I’m thinking about incentives to the public; a couple of them have recently, to my understanding, started to disappear. One is the federal incentive to buy an EV. The other is the incentive of interest-free loans for solar panels for individuals’ homes.
How important are these? Are they the right moves? Do they make an impact overall in terms of the public coming on board with some of the things that need to be done?
Mr. Weber: They definitely make an impact. I have seen that as long as electric vehicles were subsidized, we had much higher sales numbers. We have to think about whether we can continue to afford that and whether we create the perception of injustice because some get subsidized to buy a car and others don’t. Of course, if someone buys an electric vehicle, others see benefits as well because there’s less air pollution, but this is a general problem. Can we still finance it?
I think it’s obvious that with both EVs and affordable solar panels, the subsidies helped to increase sales and use. The question is this: How can we create incentives with fewer subsidies? That is what I started with at the beginning: How can we collaborate with industry? In terms of mortgage lenders, what can they offer if someone wants to implement a heat pump or photovoltaics?
In other countries, there are clear connections between the credit risk of mortgages and the environmental activities that the homeowner is undertaking. Usually, those who have invested in renewables or insulation for their homes have less risk of credit default. We must think about the positive correlation, the positive connection between these two things, so we can get away from having money and giving it to someone. If the funding is gone, we can’t do that any longer. That is not sustainable. We must see how we can support this with, perhaps, some mortgage rules.
For instance, if you have higher building costs because of insulation or renewable energy installations, this increases the price of your house and kind of decreases the amount of mortgage you can get because you can only have 80% of what you could with a comparable house. This is a regulation. Even if a bank wants to do it, they can’t. We need to figure out if we can make exemptions where if we have higher costs but they are addressing climate risk and renewable energy, we have special regulations.
I think we need to create these financial incentives for renewables and electric vehicles, but we really have to think about how to combine public incentives and public funding of those incentives with market activities.
Senator Kingston: Thank you.
Senator Dalphond: Thank you very much for your presentation. I have two questions. First, do you think that the provincial governments, the federal government and even municipal governments are moving away from sustainable policies, considering the abolition of the carbon tax, the reduction of targets for non-electric cars, the disappearance of incentives to buy electric cars and the lack of infrastructure for electric cars outside downtown areas in many cities? Are we on the wrong path? Are we moving away from sustainable policies?
Mr. Weber: I would say partly, yes. We definitely need to continue supporting this financially as well. We have to think about whether a carbon tax helps or not. We have to be honest and analyze it: Did it reduce carbon emissions? Are there other ways to reduce emissions that might be more effective?
There might now be the impression that we don’t need a carbon tax any longer, but we have other issues. We got rid of other subsidies as well. This might indicate that we are neglecting climate change. On the other hand, there is infrastructure. In Waterloo, for example, what they have with respect to public transport, bicycles and other things is pretty impressive. There is much improvement in that regard.
I’m always eager to hear anything about trains and public transport infrastructure. In the Greater Toronto Area, or GTA, we need to do something. There is no way that we can continue with car-based transport infrastructure; it’s becoming worse and worse.
There are activities going on. From my point of view, they could move faster, and I think we need to have a look at those as well. In the Toronto area, we have big investments towards the improvement of the train system. I guess we have some things in other cities as well. When I’m in Montreal, they are always building on public transport infrastructure, but I’m not an expert on that.
We have to think about what activities really improve our performance. We have seen in Ontario, for instance, that the biggest impact came from phasing out coal. Carbon taxes and carbon pricing didn’t have a similar effect. I think we really need to think about what approaches have the biggest effect and follow them.
Senator Dalphond: Do we understand from your previous comments that, in terms of infrastructure — and I think it’s a good thing to build infrastructure — that maybe we aren’t focusing on the right kind? Instead of looking at pipelines, should we be building more fast trains, improving the electric grids in cities and improving the interconnections between provinces to ensure electric power gets across the country?
Mr. Weber: That should be a priority. How we determine we do one thing and not the other is another question.
There is a study in Toronto; if we really want to have the number of electric vehicles that we have planned, we must double electricity infrastructure. This is a big project, so we need to do that. There is no other way. We can’t say we want to sell one and a half times more electric vehicles but we can’t charge them. That is in a city, and outside of the cities, it might be even worse. Also, with respect to public infrastructure, we still put a lot of money into roads. Some of that is needed to repair things, but we have to think about where we put money in order to have a long-term strategy.
As I mentioned, we have to think about whether many of the pipelines are sustainable in the long term. Do we invest in something that will only be used for a few years? Are we really willing to do that? Or do we invest in long-term infrastructure, such as public transport, electricity infrastructure and so on?
That was asked in the beginning as well. We should have some of the big projects focusing on these problems.
Senator Cardozo: Thank you, Professor Weber, for your presentation. I apologize for not being here at the beginning. I had to be at another committee. I apologize for my question if you have addressed this, but I want to build on the question that Senator Dalphond asked and take it a step further. I look at the politics in the U.S.A., and with issues like this, they have a definite effect on, at least, the debate that happens in Canada. My sense is that there is a very strong push against anything that sounds environmentalist.
I look at the field of DEI — or diversity, equity and inclusion — which is somewhat the same. People who work in that area are being criminalized and fired left, right and centre, and to some extent, those in the field of environmental advancement are too.
Are you concerned that this kind of politics is coming here? As Senator Dalphond mentioned, there is a renewed focus on pipelines and less of a focus on some of the environmental issues and climate concerns. Are you concerned about the change in the political discourse and the sense that people will not be interested in moving in this direction — or will be steadfastly against it, making the case that these objectives are counterproductive to the economy and to the well-being of people, jobs and so on?
Mr. Weber: Yes, I am concerned, to be honest. We probably currently see the strongest consequences in the U.S., and this is kind of based on the electoral system that they have. But if we look at other countries, we have exactly the same problems. We have an increasing number of people and parties that work against these climate mitigation efforts, climate adaptation and also inclusiveness and diversity. We see that everywhere, and I think we need to do something to counter that.
There is good news. For instance, if you look at Texas in the U.S., there is a massive increase in renewable energy there. The cheapest way to produce electricity in Texas is via wind and solar, and they do that. On the other hand, Texas is against anything around the environment and climate change, as well as diversity in others, though there is an economic benefit to these things. Of course, it might not be enough and doesn’t prevent discrimination against people and so on, but yes, I think we have to be careful.
I am concerned that we will not be able to address these issues and will experience negative economic consequences from that. That concerns diversity as well as climate change: There are many studies that show that diversity helps with economic development. I think that’s an issue we need to address —
The Chair: Professor, we are out of time. Thank you for your presentation. We really appreciate it.
Mr. Weber: Thank you.
[Translation]
The Chair: Honourable senators, we will resume with this morning’s second panel. We are pleased to welcome, from Export and Development Canada, Scott Moore, Executive Vice‑President, Finance and Chief Operating Officer, and Ross Prusakowski, Deputy Chief Economist and Director, Country and Sector Intelligence. We also welcome, by video conference, Dr. Ian Lee, Associate Professor, Sprott School of Business, Carleton University. You have five minutes for your opening remarks, and then we will move on to a round of questions.
Scott Moore, Executive Vice-President, Finance and Chief Operating Officer, Export Development Canada: Thank you, Mr. Chair and members of the committee, for inviting me today.
[English]
Here with me today is my colleague Ross Prusakowski, EDC’s deputy chief economist, and we are looking forward to contributing to the committee’s study on Canada’s economy.
[Translation]
For those less familiar with Export Development Canada, please allow me a moment to provide an overview. EDC is a Crown corporation. We operate with a mandate to support and grow the country’s export trade through a suite of financial solutions to help mitigate risks for Canadian exporters and investors as well as through knowledge products, like webinars and digital content, and by building relationships with international financial institutions through our in-market presence. Together, these offerings give Canadian companies the tools they need to reduce financial risk, the capital to enter and invest in new markets with confidence and, ultimately, to grow internationally.
For some context, last year these products and services supported close to 28,000 businesses and facilitated more than $123 billion in exports, foreign investment and trade‑development activities.
As the committee may be aware, EDC has been consistently profitable throughout our 80-year history, and regularly pays a dividend back to the Government of Canada. We operate on financially sustainable commercial terms, always ensuring our work complements that of private commercial bankers and insurers. Consistent with this model, EDC does not provide grants or subsidies.
As all of us here know well, Canada is a trading nation. Our prosperity relies on a steady flow of goods and services into and out of our country. Together, imports and exports represent 65 per cent of the country’s GDP. Exports specifically account for 32 per cent.
This year, however, the country that was for generations our most reliable trading partner started moving in a different direction. There is very little certainty around Canada’s trading relationship with the U.S., and we are really starting now to see the effects of that.
This month, Statistics Canada released data showing exports contracted in August, pushing Canada’s trade deficit to the second highest levels on record. It’s a clear indication of the uncertainty exporters are feeling with regard to Canada’s trade landscape.
[English]
We see these feelings reflected in EDC’s Trade Confidence Index, a biannual survey that monitors and analyzes the sentiment among Canadian exporters and businesses that are ready to begin exporting.
The mid-2025 release showed the index at 65.7, down 3.3 points from the end of 2024 and continuing a downward trend in confidence levels seen since the end of 2022.
Digging in, we see that 40% of respondents said they saw a decline in U.S. orders. Six months earlier, only 16% said the same thing.
Despite this decline in confidence, the survey also found that exporters are actively exploring new markets. Most respondents — greater than 70% — said they plan to be in new markets within two years and are focusing on countries that have free trade agreements with Canada.
Still, we see the impacts of this disruption reflected in Canada’s forecasted GDP growth, which the Bank of Canada says is on a permanently lower growth path since the U.S. started enforcing tariffs.
To help mitigate the impact of the U.S. tariffs, several Crown corporations launched programs in the spring: the Business Development Bank of Canada, or BDC, announced $500 million in loans through its Pivot to Grow program; Farm Credit Canada is offering $1 billion in financing for the domestic agriculture sector; and EDC is ready to deploy $5 billion over two years to help small- and medium-sized exporters, the backbone of Canada’s economy.
We know it’s critical to increase EDC’s support because our customers fare better than exporters who don’t leverage our offerings.
A Statistics Canada study from last year found that Canadian exporters receiving EDC support generated 23% more revenue, had 16% higher employment and had 6% greater productivity than similar exporters who were not EDC customers.
Beyond the additional financial capacity, we’re also offering knowledge products with a focus on market diversification — our recent “Export to Europe” webinar, for example, drew 500 live viewers. That was great news, because diversification — to Europe, Latin America, the Indo-Pacific countries and beyond — is the key to unlocking the transformational opportunity this year of uncertainty has presented us to move away from the economic dependencies of the past and towards a competitive, resilient and secure economy built on reliable trading relationships with markets across the globe.
[Translation]
Thank you for giving me the time to share some information about EDC.
[English]
Ross and I look forward to offering more information to the committee and to answering any questions you may have.
[Translation]
Thank you.
The Chair: Thank you, Mr. Moore.
[English]
Mr. Lee, you have the floor.
Ian Lee, Associate Professor, Sprott School of Business, Carleton University, as an individual: Thank you very much, distinguished senators.
I will begin with my disclosures: First, I do not belong to or donate money to any political party or allow any lawn signs. Second, I published the definitive empirical analysis of the 1995 Chrétien government downsizing program — the article was called “Pink Slips and Running Shoes” — as well as the 2013 Harper government downsizing, both published in McGill‑Queen’s University Press’s How Ottawa Spends.
Senators have been discussing fiscal deficits, sustainability, fiscal guardrails and so on, which are critically important to our future.
For the record, I do not believe Canada is on the fiscal cliff of imminent collapse. Yes, we are going down a steep, dark, dangerous road to ever-greater fiscal indebtedness, especially when properly and accurately recorded as gross, not net, debt as a percentage of GDP, which is the ninth highest in the OECD in the latest OECD publication.
But to frame it in a binary manner reveals how we incrementally arrived where we are today, again, after all the hard learning in the 1980s and 1990s, culminating in the largest downsizing in our history.
Indeed, it is extreme sophistry to argue that any one dollar of new spending at the margin is okay because it will not cause the collapse of the economy — well, of course not — instead of asking the vastly more important and critical question: Should we be spending in each of the major areas we now spend in?
Therefore, in my short time today, I want to go meta or macro to address what I refer to, perhaps humorously and tongue‑in‑cheek, as “manufacturing fetishism” — hat tip to Karl Marx — that has taken us to the present.
I trace it to the 1965 Auto Pact. In 1965, some Canadians were so concerned about saving a small failing auto industry that the Ontario government convinced the national government that it was in the country’s national interest to save an industry overwhelmingly concentrated in southern Ontario, with an outpost in Sainte-Thérèse, Quebec.
We did save the auto industry, which would undoubtedly have closed down without access to the largest market in the world because of our tiny population and the economic fundamentals of enormous cap expenditure and gargantuan R&D costs in auto manufacturing, requiring very large production runs to achieve economies of scale to make money, which was often stated by the late brilliant Sergio Marchionne, then CEO of Fiat-Chrysler.
Last year, the European Automobile Manufacturers’ Association calculated world auto manufacturing R&D at €150 billion — or about C$200 billion — just to play in that one industry.
Throughout the late 1960s and through to 1995 in Canada, our national policy elites believed in what Harvard business professor Alfred Chandler called the “visible hand” of centralized, top-down direction, or what French scholars have called “dirigisme” — that people at the top with superior education, but with no experience actually managing large businesses, possessed a deeper strategic understanding of market trends and opportunities than people who had worked all their lives in industry markets.
The near insolvency of the federal government in 1995 put these ideas on hold, due to the largest downsizing in Canadian history, for which we can never thank former Prime Minister Chrétien enough.
However, once affluence returned, generated by the prudence of the downsizing, it was inevitable that the spectre — hat tip to Marx again — of industrial policy would return to haunt the land.
Yet history never repeats itself exactly. In recent years, we are now witnessing two very different conceptions of industrial policy re-emerging.
The first could be loosely characterized as environmentalism and green central planning, which would involve the national government at commanding heights using a combination of regulations, such as carbon taxes, and subsidies, such as for EVs. However, we learned yet again that many people do not like to be told what to do.
But the second force emerged, very unexpectedly, in 2016, with the election of President Trump. A stunningly large number of politicians, pundits and professors characterized Trump as an ego with no purpose, direction, vision or understanding. I am not here to defend Trump. In retrospect, if we are honest, though, we now recognize how utterly wrong we were, for Trump represented the latest version of industrial policy: good, old‑fashioned mercantilism — using the full authority of the state to intervene in many sectors of the economy for nationalist reasons.
So what? Well, as another visionary, Jean Charest, noted recently — I think last week — one day we will thank Trump for forcing us to confront ourselves.
Since 1965, Canadians have bought into the utter fantasy that a tiny country of 40 million, smaller than California, can become a major manufacturing competitor against the three world centres of manufacturing, U.S., China and Europe; and can successfully build planes — Bombardier — cars and ships, notwithstanding the gargantuan capital expenditure and R&D costs needed to succeed. And so we spent billions and billions in subsidies for nought.
Senators, I think it is time, as the Deputy Governor of the Bank of Canada said, “ . . . to break the glass” and rip off our Band-Aid of illusion and delusion concerning our fantasies of becoming a world-class manufacturing competitor instead of a world-class resource developer, developing our trillions of dollars of resources in critical minerals, electricity, potash, timber, agriculture, fish, oil and gas.
Thank you.
[Translation]
The Chair: Thank you for your very enlightening presentation. Now we will go to the round of questions.
Senator Forest: Thank you for being with us today. This is very enlightening. Mr. Moore, you say that the key lies in diversification. I think that is an objective with a lot of potential. One of the areas of concern is that Europe and the United Kingdom will put in place a carbon tax in 2026-27. How will your organization support our exporters when this constraint could penalize them?
Mr. Moore: Thank you for the question, Mr. Chair.
[English]
Maybe a couple of thoughts from my perspective, and then I will ask my colleague to also maybe comment on that specific question. I’d start with Europe. Europe is absolutely on the minds of Canadian exporters.
I am just back from a couple of weeks in eastern Quebec; Moncton, New Brunswick; and Charlottetown, P.E.I., visiting Canadian customers. That wasn’t on purpose; it was pure coincidence in terms of where my schedule took me, and Europe definitely comes up as the first thing on their minds.
Now, Europe is more than one market, as we know, and there’s complexity associated with that. One of our missions at EDC is to make it easier for Canadian companies to actually access Europe, and we’re in the midst of trying to ensure that we have all of the capabilities we need.
Maybe I will let my colleague comment on your specific question around the environmental considerations, which also came up in the prior panel.
Ross Prusakowski, Deputy Chief Economist and Director, Country and Sector Intelligence, Export Development Canada: Thank you, senator. I think in terms of European policy, we’re seeing a number of different aspects of Europe. They are moving forward with these policies and announcements, but we’re not seeing them being implemented.
For example, their anti-forestry policy has been delayed again for another year, and we’re seeing a pragmatism in Europe, where they’re trying to move forward on the policy front but at the same time balance their national security, energy security and the multilateral trade ties that they’re building.
So, though Canada has moved away on a policy front in terms of the consumer carbon tax, we do still have a large-emitter carbon tax, and a number of other avenues that policy has put in place. That may be an opportunity for us to come to an agreement with the European Union and European governments.
But there is not certainty that the announced date — I believe 2027 — is the effective date that the carbon border adjustments policies will fully come into play. If they do, we might see some opportunities to work with then collaboratively, but I think that’s an area where Canada is well positioned given our current arrangements and discussions with them.
[Translation]
Senator Forest: In your major two-year, $5-billion program, are there specific, concrete measures to support our exporters in these circumstances?
[English]
Mr. Moore: Thank you for the question. So the $5-billion program was put in place in March of this year. It was intended to take our existing products and solutions, of which we have quite a few — insurance, guarantees, working capital, we can help with funding for acquisition, et cetera — and to expand our risk appetite to help Canadian companies that may be in more difficult positions than we were.
I think what has been interesting, as we have seen the reaction of the program, is many Canadian companies are very much in a wait-and-see mode. They’re feeling like it’s not the right time to take on more financial leverage, so ultimately that’s one thing we’ve learned.
We’ve certainly seen a thirst for information as a result of launching that program. So, to come back to your question, very practically, we’ve been providing a lot of information. This can take the form of webinars. It can take the form of our Export Help Hub, which has all sorts of very practical information about exporting to Europe, navigating regulatory or tax considerations, navigating other customs requirements and so on. It has been very much in demand.
Also, our team has answered more questions than ever before in terms of trying to help Canadian companies navigate what it would take.
A good sign is that there is more seriousness about how to actually export to France, for example, and what to do practically than there might have been previously, when there were more generic questions about being interested in Europe at some point. Now it’s actually getting to the very specifics of what is required to enter that market, whom to work with and whom to sell to. This is a very good sign.
In many cases, it is not yet at the point where they have a contract or need financial products or solutions to help them execute that contract.
Senator Cardozo: Professor Lee, I have to say once again that you never fail to provoke, which is exactly why we want you here.
One of the reasons I enjoy listening to you is that you are also very well read in terms of reading a lot of reports about trends and things happening around the world. I stopped taking notes because you had so many gems. I just thought I would look at the transcript afterward to recall what you said.
What are some major global trends we should be thinking about? I’m reminded of doing a session with you a few years ago, and you were talking about the housing crisis before anyone else.
Tell us what you think are the global trends that we should be watching and concerned about, especially those that we’re not talking about.
And at this time, Mr. Moore, I would also like to ask you something, to further the discussion you had with my colleague as to why we have all these free-trade agreements but are not using them — the private sector isn’t using them. I suppose it is because trading with the U.S. has been so easy, relatively. Is that going to change now?
Mr. Lee: Senator Cardozo, it’s always a pleasure. We have probably known each other for 35 years or more and had many excellent policy conversations.
But in terms of your question, I appreciate it. And by the way, I’m not opposed to trade diversification. It’s the way to go. And I applaud EDC. I think they’re doing excellent work and have done so for years and years in this area, but there are some larger trends, as we know. Unfortunately, we’re moving away from a trade-based world. I’m not suggesting it’s the end of globalization. I don’t believe that. There is a remixing going on and countries, such as China, from which we’re decoupling, and so forth.
I’m not suggesting there’s going to be deglobalization. That’s the first thing I want to put out there.
Second, I want to re-emphasize what I said already. When you step back and look at the global data from the WTO or United Nations Trade and Development, or UNCTAD, it’s overwhelming that Europe, the U.S. and China — and when I say China, I mean China and Japan — are the three centres of world manufacturing. There are other countries that have relatively small pockets, but they are just not the dominant markets, and that’s not an accident. It’s because they have the population that small countries don’t have. That’s why Sweden exports to Europe. We are not 1.3 billion people as China is. I’m not going to repeat all the numbers.
My point is that, first and foremost, we only succeeded for the past 60 or 70 years in manufacturing for one reason: We were lucky in 1965, when former president Lyndon Johnson agreed to help us bail out our auto industry and gave us access to the largest market in the world. It was successful as long as we had access to the market.
However, three or four days ago, the President, echoed and reinforced by the Secretary of Commerce, made it very clear that we’re not going to be able to sell cars and export cars tariff-free any longer.
I assume that’s the new policy of the United States. That suggests we have to re-examine the entire economic structure of our country. That suggests to me that we have to pivot towards resources, and I don’t just mean oil and gas. There are many more resources, as we know. Quebec has electricity, and we have fish, agriculture and so forth.
The second point that I want to emphasize, and then I’ll stop, is that unfortunately, we’ve moved away from belief in a rules‑based trading order. I don’t think China ever believed in that. The record of them cheating from the day they ascended to the WTO is well documented by Canada, the U.S. and others. We have to adjust to the reality that it’s now a much more mercantilist world. We’re going to have to follow Kissinger’s advice that nations do not have friends or enemies; they only have interests.
So we have to define our national interest in Canada. It may be resources. Some of you may disagree, and maybe it’s not. If you can put forward a compelling argument that we can achieve economies of scale with 40 million people, though I don’t think you can, maybe we’ll continue to emphasize manufacturing. I think we have to go a different route, which is services and resources.
Senator Ross: My question is for Mr. Moore and Mr. Prusakowski. I come from a small business background and am interested in what EDC can do to help small businesses and SMEs. There are over 1 million of them, but probably only about 15% of them are exporting. What can EDC do to help them quickly, because they’re talking about their challenges being tariffs, global economic conditions, identifying customers, cash flow, rising expenses, difficulty maintaining profitability and — as always — small business challenges in accessing financing.
So what can you do specifically for those SMEs and those perhaps in the start-up phase who are looking to quickly jump into exporting? We need them.
Mr. Moore: Absolutely. Great question. Small business is actually a significant part of what we do. It may not be a big part of the $123-billion number that I quoted earlier, but it’s a very big part of the 28,000 customers we touch on an annual basis.
What we’re seeing today falls into two categories. First, for small business, information is really important. I think about some of my recent customer visits. There is a big difference between a $1-million, a $10-million and a $100-million revenue company in terms of the capacity they would have to actually figure things out very simplistically. A lot of the knowledge products that we offer are really valuable.
Actually, our chief economist is not here today but in St. John’s, Newfoundland — why? Mostly to talk to small- and medium-sized companies about information because they don’t have their own chief economists or access to some of the information that larger companies would. We’re seeing a huge take-up rate of information, and it is very basic to a degree. What is a tariff? How do they work? How do I work around them? When I want to export to Europe, what do I do? What is a free trade agreement? How does it work? An enormous amount of information is being provided. We’re very proud of that. That is helpful.
The second piece is that we are hearing the same thing in our own listening posts, be it through formal surveys or otherwise: Gaining access to capital is very difficult for small businesses. Margins are compressed. Small businesses are having more of a challenge than medium- and large-sized businesses in all sorts of metrics we look at. We are absolutely willing, through our $5‑billion program and otherwise, to provide working capital to small businesses. We do that principally through the banks because many small businesses already have a relationship with one of the banks in Canada. There are obviously a number of larger ones and many smaller ones. We find it’s easier to go through your existing banking relationship, and we provide a guarantee to increase that amount of working capital. We do that all day long.
That’s a program that is actually being used under the expanded risk parameters, and we would want to continue to do so. We found that pretty effective, so they don’t have to create another banking relationship directly, which is a lot of paperwork and extra steps. Doing it through their bank has been very effective for us, and we have automated quite a bit of that over time to make it easier.
Senator Ross: What are your main vehicles for educating the small business sector on the services that you have? How do you reach them to let them know that you are there for them and what you can do?
Mr. Moore: That is a challenge because there are a lot of them, obviously, in Canada. There are a range of ways we do that. First, we create visibility around what EDC can do through many different modern channels, such as LinkedIn, YouTube and all sorts of platforms. I still say with a smile that we’re probably Canada’s best-kept secret for people trying to go outside our borders. We’re trying to make it less of a secret. It’s not on purpose; it’s actually not that easy to get out to all the businesses in Canada. Social media channels, et cetera, is one way.
Second, we spend a lot of time travelling across the country. I have been all over the place. Ross has been to at least as many places as I have. As I said, our chief economist is currently in St. John’s talking to companies. We often do a lot of round tables with chambers of commerce, which is a great way to do it because they have access to a lot of local members and small businesses.
Also, I would love for financial institutions to do even more to talk about EDC. That is something we are talking a lot about because I think we are underutilizing the opportunity for the financial institutions in Canada to make our services better known.
[Translation]
Senator Miville-Dechêne: Mr. Lee, I found your presentation very enlightening and very refreshing in a committee like this one. I would like to hear your thoughts on the fundamentals of the economy. We have always been told that the primary sector does not add enough value because we very quickly export our unprocessed resources. Instead, the manufacturing sector has been perceived as the future of our capitalist society. You are dismantling that idea. Doesn’t the future lie in a dematerialized economy, meaning everything to do with artificial intelligence rather than potash?
[English]
Mr. Lee: Thank you for the question. As Senator Cardozo noted, I read enormously. I don’t consult to anyone. I teach a lot in Europe and China every year, and I read enormous reports. I don’t mean academic, scholarly journals, though I’m not putting them down. I read UN reports and WTO reports. I read the stunning report by the former governor of the European Central Bank about the problems facing Europe, as well as the Mario Draghi report on declining European competitiveness. I hope every one of you read it. It’s a stunning report.
To your question, it’s one of the great urban legends promulgated from the time I was a child that being a hewer of wood and a drawer of water was just a very bad thing to do, and we’ve all been raised on that ideology. I say “ideology” because when you look at Professor Stephen Gordon, a very distinguished economist from Laval University who has published many articles over the years, and an up-and-coming young star economist, Professor Tombe in Calgary, they show that the value-added and the contributions to our productivity and prosperity have been the highest in the resource sector. When you look at the contributions, they are just stunning, and this is hard econometric data. This is not arm-waving and opinions. Trevor Tombe has been publishing very similar studies that parallel and confirm, if you will, what Professor Stephen Gordon at Laval University was publishing back in the 1990s.
I urge every one of you to look at that data. When you look at it and compare it to manufacturing, you cannot make the argument that manufacturing has a greater — I don’t want to say net present value, but a greater contribution to Canada. The resource sector in the last 15 or 20 years has contributed about three quarters to the increase in our standard of living. These numbers are stunning.
The larger point is that we have a natural comparative advantage in resources. The geography was around countless years before we arrived, as we all know. The Chancellor of Germany, when he came to Canada a couple years ago, said he does not want our cars; he wants our LNG. The Premier of Japan said the same thing. I should have answered this to Senator Cardozo’s earlier question, but the irony of the new advanced digital economy is that it needs more resources. We need lithium. We need all kinds of critical minerals in the new green economy. The paradox is that the resource sector is even more important than it was in the old, traditional economy of the latter half of the 20th century.
Again, when I refer to resources, I don’t want people to think that I’m using that as a code for oil and gas. I mean all resources. We have an enormous advantage. I think we are fourth in the world for reserves of critical minerals. The Americans, as we know, are terrified of China’s stranglehold on the U.S. I read Foreign Affairs and Foreign Policy, and the intelligentsia in Washington publishing in those two journals every month are clearly terrified by the threat of China because they have a chokehold on critical minerals. The U.S. is finally waking up to this, and Trump is signing agreements. He just signed one yesterday with Australia. We should be there.
[Translation]
Senator Dalphond: My first question is for Mr. Moore and the next one for Mr. Lee. In your September report, you mention that many export businesses want to move toward new markets. However, they need financial help and support and they want to diversify in the next two years, so it is already happening. Have you seen an increase in the amount of business at your organization to date?
[English]
Mr. Moore: Regarding what we have seen in our own activity, it’s actually down and not up in total, but it’s important to look underneath that and see why. There’s definitely an effect in our credit insurance, which is a big piece of what we do to help insure buyers. That is actually positively impacted by diversification, so people selling into new markets is a good sign. There are fewer sales going into the U.S., so you see an offset, in part, from the U.S. side of our business.
If we look at what we do from guarantees in financing, that is where the wait-and-see approach is probably more obvious, so companies that are making fewer investments in new distribution centres, new automation and so on. So those numbers would be down in a Canadian context to allow for trade.
Where they would be up is absolutely in Asia-Pacific. We’re seeing an increase, and that effort has been there now for a few years, from EDC and Canada. In Europe, we’re seeing modest increases in that part of our business. We’re starting to see signs of diversification at play in our volumes, but in total, we would be down based on some of the U.S.-oriented slowdown and the wait-and-see in Canada.
Senator Dalphond: If there is a wave coming, you would be ready to handle it.
Mr. Moore: We would be happy to support diversification.
Senator Dalphond: Professor Lee, I know we are trying to do a deal with the U.S., and the free-trade agreement is upcoming with everything being discussed. From what you said, I understand that the government and Canadians should be focusing on rare minerals, energy and maybe even water, as well as joint defence and our share of the defence spending. Then, regarding the rest, like the auto industry and these types of things, we should more or less say goodbye.
What about financial services?
Mr. Lee: Thank you very much. I’m not advocating that we walk away from the United States. I know there are people who have said so in the national media, and I think the idea is preposterous. If one studies different pairs of countries around the world — and I have because I taught over 100 times in Europe throughout the 1990s, after the collapse of communism. I studied Germany and Poland because I was teaching there two or three times a year. Who has been the number one investor forever and ever in Poland? It’s Germany.
If you look at Argentina and Brazil, who do they most do business with? Each other. So the idea that we’re suddenly going to walk away from a country — this is the largest economy in the world — and somehow take two thirds or all of our trade, put it on an airplane or boat or something and then take it to Europe is just preposterous.
Yes, regarding trade diversification, if we can get down 10%, from 70% to 60%, that is great progress, and congratulations to EDC for trying to push in that direction. But to your question, we must have a relationship with the United States. We must continue to have one, though it is going to be a different relationship. I applaud the Prime Minister. I think he is doing it properly. I applaud him for not implementing retaliatory tariffs because they are a tax on us and not the Americans.
We will have a different relationship; it’s going to be based more on resources. But to your question, I have yet to see anyone respond to the argument I’m making, which is that, with auto manufacturing only, with capital expenditure and R&D — which are not the same thing — the capital expenditure of these companies is just stunning. The late Sergio Marchionne said that the industry was becoming so huge, so capital intensive, it could not support 10 major car companies in the world. Imagine — he said it will have to consolidate to five.
Yet people are saying that we can create our own made‑in‑Canada automobile manufacturing, shipbuilding and airplane manufacturing. We can’t because we’re not big enough. It’s not because we are not good enough or smart enough; we don’t have the economies of scale, and we won’t unless we have access to the U.S. market, and it seems that Mr. Trump is shutting that down.
One more quick point for those who would say that we will outwait Trump until the Democrats get back into office: The Democrats have always been protectionist. They voted against Bill Clinton’s NAFTA deal, so the idea that either of those parties will save Canada on manufacturing is not a fair assessment.
We have to say that we cannot go down that road. Hopefully, we can retain auto parts manufacturing. Lutnick said two days ago they’re not going after that. So I’m not suggesting we’re going to shut down all manufacturing. I’m saying that regarding the lodestar, the centrepiece, which was auto assembly, it seems like we’re going to have to come to terms with and recognize that it is coming to an end and we have to do other things.
Just one more quick note — this is not the end of the world for Canada. Australia exited auto manufacturing in 2017, and everyone predicted they would become poorer for it. Their GDP per person, which was lower than in Canada in 2017, is now higher than in Canada. Australia is booming, and they don’t make cars anymore.
Senator Gignac: As an economist, I very much enjoy your testimony, Mr. Lee, both your opening remarks and this conversation. It is very useful — one of the most useful experiences in my last four years at the Senate.
Mr. Lee: Thank you.
Senator Gignac: Let’s talk about resources. Canada had great names in the past: Inco, Falconbridge, Alcan, all these Canadian companies are gone and have been taken over by others. Now we have tech, with a potential takeover by Americans. Regarding natural resources, I agree with you, but we have to capture the rent; otherwise, the biggest winners are not Canadians but the shareholders.
What do you think about the possibility of doing what Trump is doing in Washington, state capitalism, where suddenly the government participates in a natural resource company in order to capture the rent? Otherwise, it will be just a few jobs and all the benefit will go to the shareholders.
Mr. Lee: That is an excellent question and issue that I hope we discuss more. I am not a big fan of state capitalism, but I am not dogmatic about it. I would rather do that than pour billions more down the hole of trying to subsidize and create an auto manufacturing industry that is not sustainable because we don’t have the economies of scale.
To your question specifically, Trump, of all people, is taking positions in critical minerals; you’re quite right. It’s something that we should certainly be looking at. At the same time, we have to be very careful — and I’m really channelling my inner Professor Mintz on this — about China. As much as I respect China — I have been teaching there every year since 1997 and have phenomenal Chinese students in their thirties and forties who are at mid or senior levels — they are not our friend or ally, and we have to acknowledge that.
So we probably need restrictions on foreign investment takeover by regimes hostile to Canadian interests. To your question, yes, we should be examining whether the Government of Canada should take positions in any of these industries that are critical to our future in the resource sector.
Senator Gignac: To continue, in the previous panel, there was a conversation with my colleague Senator Hébert about this tariff on the Chinese EVs, and it is tricky for Canada because we have the automobile industry. Maybe we no longer have a significant future, but we don’t want to upset Trump, who could react in a significant way.
Do you see some path or potential to open our market to the Chinese EVs, for example? It would be an affordable electric car. Is it via quota or just harmonized to the Europeans, for example, who have a tariff around 30%, rather than a 100% tariff on Chinese EVs?
Mr. Lee: Again, thank you. This is a very important question. The whole debate has been very binary: Either we have tariffs on everything from China, on EVs, or none. If we look at the EV industry, there is an excellent new study from the International Energy Agency, or IEA: Global EV Outlook 2025. It’s fascinating. I urge you to read it. There are many graphs and charts. It’s phenomenal. China has 60% of the world EV industry. That is the first point.
The second point — I’m being personal now — I have been teaching every year in China and Shanghai. This is an EMBA, essentially, and the students agree. They divvy it up: “You pick up Professor Lee on Friday morning and take him to class. You take him home on Friday night.” This has been going on for 10, 12 or 14 years. I think I’ve sat in every Chinese EV product, and they are so far ahead of us that it is not funny.
I’m just being very honest with everyone. The Chinese EVs — yes, they did it with huge amounts of subsidies. I’m not disputing that, but where I’m going with this is that we cannot make a $15,000 EV in Canada. If there is a way, I have never seen it. They are making a Chinese EV for $15,000 — it’s called the Seagull — which they are exporting into Brazil. Maybe we should be saying, “We will protect our industry at the threshold where our industry kicks in,” which is probably $70,000 or $80,000 per EV car.
What is the point of having tariffs on China EVs for a $15,000, $25,000 or $30,000 car if we are not capable of manufacturing them and the Americans are not either?
Maybe we can segment the market in terms of tariffs by saying below the threshold, we won’t charge a tariff, which will help modest-income Canadians to buy an EV — because those are the $30,000 and $40,000 vehicles — and we will keep the tariffs on the higher-priced EVs. That is one possible compromise, which would go a long way towards blockading the Chinese.
Senator MacAdam: My question is for Mr. Moore. Being a P.E.I. senator, I am very happy to hear that you were in P.E.I. recently.
The clean tech industry on P.E.I. is growing, according to the P.E.I. government, with the sector significantly contributing to our province’s GDP.
In releasing your 2025 clean tech report, EDC highlighted that, as climate goals stall and trade tensions rise, clean technologies remain resilient.
What are the most significant investment programs you offer to clean tech companies?
Mr. Moore: It was a pleasure to be in Charlottetown last week. The range of industries was amazing, actually. Finding biosciences also being represented was a nice surprise for me last week. I didn’t know as much about it.
Various programs are at play. Clean tech companies range from very small to slightly larger, but many of them are smaller companies.
Some of our products I described earlier, our programs would fit well. Sometimes there’s working capital required. We’ll do a guarantee through the bank to give the clean tech company more funding.
We have an investment-matching program where we work with other players who are putting equity dollars into promising companies in that space. EDC will match if it is a promising company that has the potential to be an exporter in the future. That’s been a successful program for us.
At times, we’ll go further than that and make our own investments in clean technology companies that have the potential to be Canadian champions. Those are probably the spots that are most common.
As they become a little bigger, some of our other products and services would come into play. Guarantees to bid on contracts come into play for companies that are slightly bigger, building on a public project that requires some form of a letter of credit or otherwise. We can support that.
As they scale further, we can help with lending to build a bigger manufacturing facility for export, or perhaps an acquisition of another company in the industry — quite a range of products.
Then at the top end, we will support large-scale renewable energy projects where there is a Canadian involvement, either from one of the Canadian pension plans, one of the Canadian engineering companies involved or suppliers of Canadian products into those big projects. I would say it runs the range from very small to very large.
Senator MacAdam: Do you work with provinces in setting up programs they might have that would dovetail with some of the financing options that you have?
Mr. Moore: We definitely work with the provinces and Team Canada. There didn’t come up a lot today, but there is a lot of effort to ensure we are working together where we can.
In the provincial context, there could be incubator-type programs available to some of these companies. We would ensure companies are aware of the different offerings. Often, I come back to information being the hardest thing to come by for smaller companies.
Sometimes it will be us explaining to a small clean technology company that a province has programs available and how they can access them. We won’t directly offer them together, but we can sometimes be the example leading them to one of these other programs. The same could be true of a federal program.
An example that came up when I was in Rimouski a couple of weeks ago was a federal grant program the company wasn’t aware of because they simply didn’t have the capacity to look at every option. We guided them to the program that was available. Could it be simpler? Probably. But I think we have a role to play in guiding to what’s available.
Senator MacAdam: How long does it take, on average, for a Canadian exporter to enter a new market? I know there are big and small companies, but as a range.
Mr. Moore: I will ask my colleague to answer.
Mr. Prusakowski: From our studies and things like our Trade Confidence Index, it generally takes a couple of years on average. The spectrum can be quite large.
For smaller companies, it was easier up until the suspension of the de minimis arrangement with the United States, where you could set up an online shop and start exporting fairly quickly if you were running an Etsy shop, for example.
We know from our own experience that when we put an international representative office in a new city or market, it takes up to two years for us, even internally, to start to see business facilitated and Canadian exports grow.
Senator Kingston: My question is for Professor Lee. It is something that came up in the last panel but was not touched upon all that much, and that is one of the major projects in Darlington. They are going to be focusing on small modular reactors.
New Brunswick also has a nuclear plant, Point Lepreau. It has a Canada Deuterium Uranium, or CANDU, reactor. It needs some work; I’ll leave it at that. But I think it would also have the capability of having something similar.
In your opinion, is that major project in Darlington a good one? Is it one we should be looking at for other nuclear sites in the country?
Mr. Lee: I hope so. I have certainly attended presentations by people in this emerging industry. I have read papers, in fact, from the Government of Canada. It looks very promising because it’s much less expensive than the big mega reactors.
I believe the last major one in the world was in France, and it had — typical of these large reactors — massive cost overruns. I think it hit €30 billion, or something staggering, whereas with these small modular reactors, the scale is so much more doable. You can roll them out and do the implementation much more rapidly at a vastly lower cost per kilowatt hour.
We have a desperate need. As the previous speaker and panel suggested, we have a desperate need for electricity increases. What we have learned from the IEA, which has changed its tune — and I am not here to sell oil and gas — is that we need all of the renewables, plus the oil and gas, because the appetite is increasing so much because AI, Bitcoin mining and so forth have generated huge increases in demand for electricity.
We need to do a lot more. The modular reactors are one of the important parts of the puzzle.
[Translation]
Senator Hébert: My first question is for Mr. Moore and his colleague.
My colleagues talked about supporting small and medium-sized businesses. I am well aware of the key role they play in the Canadian economy and that of our regions, but we know that Canadian exports will not remotely affect exports on an international scale.
Given what Mr. Lee said about the fact that we need to “pivot toward resources,” what efforts has EDC made to support the biggest players in international markets in sectors that are strategic for Canada?
[English]
Mr. Moore: That is a great question. Indeed, it is important we serve companies of all sizes. The large Canadian companies have a big role to play.
I’ll answer two different ways. One is Canadian companies in Canada — critical minerals, which we’ve talked about today — we have a role to play alongside others to develop critical minerals in Canada. Why? Because, first, it’s for our own needs; and second, there is an opportunity to export to and work with countries around the world. We are participating in a number of projects already. We have a pipeline that is quite significant.
Why is it interesting for EDC to be involved? Given the relationships we have around the world with other international banks and export credit agencies, we can bring a lot of capital into these projects. It would be great if they were financed. That is something we can do.
We’re extremely active. Yesterday, we had a round table at EDC down the street. We had partners from Korea, Japan, Australia and the U.K. on critical minerals and how we work together to get critical minerals projects done in Canada. That is an example in country.
The second is large Canadian companies operating in markets. Australia is a great example. I was in Australia in January, meeting with the large engineering or mining companies doing work, winning business and forming relationships in Australia. Again, we can provide financial services to those companies that make it competitive for them to win projects in a market like Australia, which then allows them to be successful and probably bring back sales into Canada as a consequence of that.
So I would say there is a Canadian and international aspect to it.
Large Canadian companies are more sophisticated. They have more capacity to go to new markets. It’s easier, to a certain degree, to work with them in some of the new markets around the world and encourage them to bring medium and small Canadian companies along. The really interesting part of it is the supply chain, and we’ve been really focused in our activities as to how we introduce and really encourage the Canadian companies.
Take my Australia example: Who are you working with from Canada? Which clean technologies are you using from Canada? Do you need introductions? We know them. Here you go; here is who you should be working with. That’s becoming very powerful to bring medium-sized companies first — and eventually small ones — into supply chains in markets around the world. Australia is my example, but I could go to Korea, Japan or Chile. We could talk for a long time, but it’s a very interesting way of helping Canadian companies go elsewhere. Thank you.
Senator Hébert: Professor Lee, you talked about services and resources, but we know the research industry is collapsing in the United States right now. What should Canada’s strategy be in that sense?
Mr. Lee: Some of the universities in Canada, as you probably know, are actively seeking to recruit scholars from the United States. I think the University of Toronto, to be frank, is probably going to be the most successful because it is the largest and most prestigious of the Canadian universities. That’s one possibility.
To your point about services, I was thinking in more traditional terms. I’m a former banker from years ago. I believe the big six, including the National Bank of Canada, are incredibly formidable competitors. They have been in business for over 100 years — some for over 200 years. I think EDC will have better numbers at their fingertips than I do, but if I’m not mistaken, our services exports are increasing more rapidly than our goods exports. If that is the case, that seems to be an opportunity we should be developing further.
[Translation]
The Chair: I will extend the meeting by two minutes so that I can ask Mr. Lee a question.
You talked about critical and rare earth minerals. We have far fewer rare earths than China and Australia. Even Greenland has larger reserves than we do.
You are telling us to focus on our capacity. I hear you talk about rare earths. After the agreement between President Trump and the Australian Prime Minister was signed last week, I found it funny seeing President Trump threaten China by boycotting canola oil and compensating with rare earths. I wondered if it was a joke.
This is a real stretch for Canada. Rare earths require extraction, separation and refining. These are extremely complex industrial processes at which China is very skilled. What is Canada doing about this, aside from creating projects? Are we not playing catch-up in a game we can’t win?
[English]
Mr. Lee: Thank you for the question.
You validated what I said earlier about the resource sector, which has the stereotype of being low tech, low value-added and dirty. It is absolutely the opposite when you study it, as I do with my students. It uses advanced technologies with some of the most advanced and sophisticated people — geological engineers — and they’re using drones and surveillance technologies. The tech in the resource sector, I think, is more advanced than in manufacturing if we were to try to create some kind of SWOT analysis, if you will.
First, it’s very expensive and capital intensive, as well as very sophisticated, but, at the same time, we must start somewhere. The demand is so great and growing — it’s not static and hasn’t plateaued. So, yes, some countries are ahead of us — there is no question about it — but as an example, I use someone you will know very well, who was that brilliant former premier of Quebec, Robert Bourassa. I remember as a young man, I was at the Bank of Montreal at the time when that plane crash happened when all the executives went down looking at James Bay. Bourassa, in his vision, brought that up and took it from no development whatsoever into the extraordinary success that James Bay turned out to be, as a huge generator of electricity, which Quebec is selling very profitably to the United States. He did this in a relatively short period of time.
So, yes, there are a lot of barriers, and they are formidable. We have to fast-track the development, as the Prime Minister has suggested for critical national projects. It could be the key to a new agreement with the United States if we work on the basis that we must give them something that they want from us. They need critical minerals. They can’t need our cars — they don’t want our cars, as he said — but they do need our critical minerals.
[Translation]
The Chair: Thank you, that was extremely enlightening. What a great morning spent with experts. It was very much appreciated. I think the people listening to us appreciated the various answers and presentations just as much as we did. Thank you very much.
This concludes today’s meeting. Thank you, everyone. We will see you tomorrow at 6:45 p.m.
(The committee adjourned.)