Report
Executive summary
The Standing Senate Committee on Banking, Commerce and the Economy (the committee) is calling for an urgent update in the federal government's policies as it relates to incentivizing and retaining commercial value of businesses in Canada. The economic advantages that defined Canada’s strategy in the 20th century were centered around a resource-based, tangible economy, but we are also entering a new era.
Current government policies, programs and technical knowhow are not adapted to the realities of the innovation-based and data-driven economy – or the intangible economy. This is where the lion's share of value is created today and will likely be created in the future. Most peer nations, including the United States, have already shifted their attention. Without coordinated policy changes that adapt to the realities of the intangible economy, Canada will continue to see an erosion in both domestic and foreign investment, and in standards of living.
Business investment has exhibited a lacklustre trajectory over the past couple of decades, resulting in a notable decline in Canada’s productivity performance compared to other Organisation for Economic Co-operation and Development (OECD) countries. These concerns have been brought to the attention of the government and this committee on multiple occasions, including in the committee's 2022 interim report titled Fourth Report: Business Investment in Canada and its 2018 report titled Canada: Still Open for Business?
In the present study, the committee received evidence suggesting that in order to stimulate business investment, it is imperative to adopt policies that foster a coordinated and targeted whole-of-system approach towards the generation and preservation of intangible economic value in Canada. This approach encompasses the following key aspects:
- Accelerating the implementation of a globally competitive intellectual property (IP) regime. A robust IP regime plays a central role in promoting innovation, cultivating high-growth enterprises, and ultimately driving productivity growth and economic prosperity for the Canadian population.
- Establishing a national data strategy and digital standards. To establish a strong national data strategy, Canada should become a leader in developing digital standards so that Canadian interests are reflected in the technologies that Canadians use.
- Unleashing new streams of capital. Promoting business investment inflows is vital for economic growth as it stimulates economic activity, drives productivity and innovation, and supports infrastructure development. Increased investment fosters job creation, enhances competitiveness, and generates a multiplier effect that benefits various sectors of the economy. Canadian pension funds and banks could play an important role in this regard.
- Modernizing government procurement policies. To drive economic growth, the federal government should use public procurement as a strategic tool to support growing Canadian companies rather than foreign multinationals.
- Urgently updating federal framework legislation for data usage, privacy and competition. Modernizing the Personal Information Protection and Electronic Documents Act (PIPEDA) and competition policies should be a top priority if Canada wants to compete with other jurisdictions in an innovation-based and data-driven economy and become the most trusted jurisdiction globally.
Recommendations
RECOMMENDATION 1
That, as part of its Strategic Intellectual Property Program Review, the federal government update its intellectual property strategy to account for the expanding role that intangible assets play in the Canadian economy. In particular, the strategy should require that:
- the federal government facilitate the acquisition of intellectual property rights;
- federal research grants be conditional on significant intellectual property rights being retained in Canada for the benefit of the Canadian economy;
- the federal government establish a “one-stop shopping” approach to guide innovators through the intellectual property and commercialization process;
- the federal government promote collaboration between all levels of government, academia and industry, both in Canada and internationally, so that innovation best practices can be shared;
- the federal government support the development of educational programs and skills development in intellectual property, entrepreneurship and commercialization that are targeted to students, researchers and businesses; and
- the government strengthen Canada’s intellectual property laws and enforcement mechanisms so that they are globally competitive.
RECOMMENDATION 2
That the federal government develop a national data strategy and data governance legislative framework that provides clear rules regarding the use, sharing and storage of data, protects privacy and promotes data literacy.
RECOMMENDATION 3
That the federal government, in collaboration with relevant standards organizations, support the development of digital standards.
RECOMMENDATION 4
That the federal government review whether the mandate of the Public Sector Pension Investment Board (and if possible, the mandate of the Canadian Pension Plan Investment Board in collaboration with the provinces) should be expanded to ensure a continuing contribution to Canada’s economic development.
RECOMMENDATION 5
That the federal government, while still respecting its obligations under Canada’s international trade agreements, update its procurement policies and directives to establish minimum targets for the percentage of contracts it awards to Canadian companies, particularly small and medium-sized enterprises.
RECOMMENDATION 6
That the federal government prioritize the advancement of reforms in privacy and competition law.
Ottawa – A new Senate committee report calls on the Canadian government to urgently update and refocus its policies for incentivizing and retaining business investment in an increasingly digital and data-driven economy.
The sector of businesses that create wealth through digital, data, intellectual property and other intangible assets is growing much faster than the more traditional, resource-based sector. However, current government policies and programs have not adapted to this reality and business investment has been lacklustre in recent decades, the Senate Committee on Banking, Commerce and the Economy found.
The committee’s report, Needed: An Innovation Strategy for the Data-Driven Economy, makes six recommendations to the government to help encourage higher investment and productivity growth in Canada.
One key recommendation calls for updates to the federal intellectual property strategy; Canada needs a modern and robust regime that fosters the acquisition and retention of intellectual property. The committee also recommends that the government develop a national data strategy and data governance framework.
The report calls on the government to encourage more ambitious thinking in the development of Canada’s innovation policies. Without a comprehensive strategy and targeted policy changes, domestic and foreign investment in Canada — and standards of living — will continue to erode.
Quick Facts
- The Senate Committee on Banking, Commerce and the Economy began studying business investment in December 2021. The committee’s interim report was released in June 2022.
- Between 2002 and 2019, labour productivity grew by an average of 22.1% in the digitally intensive sector, compared to an average of 6.3% in the non-digitally intensive sector, according to Statistics Canada.
- In 2021, the Organisation for Economic Co-operation and Development (OECD) projected Canada will have the lowest per-capita GDP growth among OECD member countries between 2020 and 2060.
Quotes
“The world is entering a new era centered around the innovation-based and data-driven economy. Other countries have already moved to strategically adapt to this new reality. Canada will be left behind if it doesn’t do the same.”
- Senator Pamela Wallin, Chair of the committee
“Catalyzing higher levels of business investment in digitally intensive sectors requires government to update its laws for data usage, privacy and competition, and to urgently adopt a focused strategy around a robust intellectual property regime, modernized procurement policies, agile regulatory reform, the establishment of national data standards and the development of new capital streams.”
- Senator Colin Deacon, Deputy Chair of the committee
“The committee also heard that the success of an innovation strategy based on intangible assets requires efforts in entrepreneurship education and the development of digital and data management skills among the Canadian workforce.”
- Senator Diane Bellemare, member of the Subcommittee on Agenda and Procedure
Associated Links
- Read the report: Needed: An Innovation Strategy for the Data-Driven Economy
- Follow the committee on social media using the hashtag #BANC.
- Subscribe to email alerts for Senate committees.
- Sign up for the Senate eNewsletter.
For more information:
Jérémie Spadafora
Communications Officer | Senate of Canada
343-550-6111 | jeremie.spadafora@sen.parl.gc.ca
Senators who participated in this study
Pamela Wallin
CSG - Saskatchewan
Colin Deacon
CSG - Nova Scotia
Diane Bellemare
PSG - Quebec (Alma)
Clément Gignac
CSG - Quebec (Kennebec)
Tony Loffreda
ISG - Quebec (Shawinegan)
Elizabeth Marshall
C - Newfoundland and Labrador
Yonah Martin
C - British Columbia
Sabi Marwah
ISG - Ontario
Paul J. Massicotte
ISG - Quebec (De Lanaudière)
Pierrette Ringuette
ISG - New Brunswick
Larry W. Smith
C - Quebec (Saurel)
Hassan Yussuff
ISG - Ontario
Ex-officio members of the committee: The Honourable Senator Marc Gold, P.C., or Patti LaBoucane-Benson, The Honourable Senator Donald Plett or Yonah Martin
Other Senators who have participated in the study: The Honourable Senator Andrew Cardozo, The Honourable Senator Pat Duncan, The Honourable Senator Rosa Galvez and The Honourable Senator Yuen Pau Woo