INDY Committee Meeting

STANDING COMMITTEE ON INDUSTRY

COMITÉ PERMANENT DE L'INDUSTRIE

EVIDENCE

[Recorded by Electronic Apparatus]

Thursday, December 11, 1997

• 0907

[English]

The Chair (Ms. Susan Whelan (Essex, Lib.)): Order, please. This meeting is pursuant to Standing Order 108(2), study on a document entitled “Sustaining Canada as an Innovative Society: An Action Agenda”.

Before I ask the witnesses to introduce themselves this morning, I would like to point out that we're now beginning our second round table in our study of the support for basic research in Canada. After we've heard from the witnesses today, I would like members to stay for a short while if they could so we can briefly discuss the science and technology activities and the committee activities in February and March.

With that, I would ask Dr. Brzustowski, president of the Natural Sciences and Engineering Research Council of Canada, to begin.

Dr. Tom Brzustowski (President, Natural Sciences and Engineering Research Council of Canada): Thank you, Madame Chair.

[Translation]

Thank you very much for having invited us. If you will allow me, I will be making my presentation in English.

[English]

I have a very brief presentation to the committee. I am very grateful for the opportunity and I want to do only one or two things. With your permission, I won't go into the details.

On the first page we introduce ourselves. The Natural Sciences and Engineering Research Council of Canada is an agency of the federal government whose name is not always accurately known even in this city. It is best known as NSERC. We have a little bit of information about the council and a little brochure that I might leave, which contains all the information.

For the present I would just draw your attention to page 2, to the two points in italics. They are that in supporting research in the universities, NSERC provides only the direct costs. That means the costs of research assistants, staff, supplies, instruments, computing costs, and field travel. We do not pay any of the indirect costs such as heat, power, and light in university labs, salaries of professors who lead the research, administrative overheads, and those things.

• 0910

To give you an idea of the scale of the operation, which has been going on now for about twenty years under this name and for another twenty before that under NRC's name, there are thousands of people supported in research work by NSERC.

If I may move on to the next page, I bring to your attention the fact that there are four research councils in Canada. Among the four of us—and we're all here at the table this morning—we invest in research covering the whole range of human activity, everything from the most technical to the most humanistic: social activities, environmental, medical, the whole spectrum. Also, collectively between us we support young people in research who are educated in research and training in research to do all sorts of things, not just research. We do that across all levels, from senior undergraduates right through to post-doctoral fellows in NRC labs.

The point we wish to make—and this is the second last bullet on page 3—is that we firmly believe we are a strategic resource for the country and the knowledge economy. We develop the high end of the labour market, the young job creators in this country, the people who create jobs for others by being right at the top of current knowledge. We give Canada access to the vast majority of the world's research—97%, maybe even 98%—that we don't pay for. These days, having access to knowledge doesn't mean just downloading it off the Internet; it means understanding what it means and knowing how to use it.

Finally, I think we have to make the point that we're a key element in the national innovation system and the country's capacity to bring new goods and services to market to create new institutions, to do all those things. If we are a strategic resource, we feel we should be funded in a way that would allow us to meet the expectations people have of us, particularly in comparison with the countries with which we compete, with which we trade.

The last four pages of my presentation introduce some indicators of funding. I will simply go to the bottom of page 4 to say that there is a bill recently introduced in the U.S. senate that we find immensely interesting because of the numbers and the long-term commitment, but also because of the language in it. It's a bill to invest—I underline the word “invest”—in the future of the United States by doubling the amount authorized for basic scientific, medical, and pre-competitive engineering research. The words are key.

On the next page, my italicized comments are at the bottom. I think they are italicized in the English version but they didn't get italicized in the French version.

[Translation]

I apologize, Madam, for this small mistake.

[English]

The point is that this is a ten-year commitment to a sustained 7% annual growth compounded annually. This is for basic and pre-competitive research. This isn't for industrial research. This isn't for the D of R and D. This is for basic research. It would be hard to speculate, because we don't know the precise definitions, as to what the comparable Canadian base would be, but we think it would be significantly less than even the traditional one-tenth of the American $34 billion.

On page 6, it's very interesting to notice that the object of the American doubling of their commitment is to produce peer reviewed basic research that is put in the public domain and to do this with 100-cent dollars. There's no matching condition. This is the federal government in the United States making a long-term commitment to double its investment in creating the stock of ideas for future innovation, and in the process it's training highly qualified people.

• 0915

Finally, Madam Chair, on the last page, I make the point that this American commitment begins at a level of government spending as a percentage of GDP on research and development that is already double what ours is in relative terms. The point I'd like to underline is that we're well aware that part of the reason for that is the fiscal capacity of the country and the fiscal problems that governments have faced, but that's not the whole answer. It's also an issue of attitudes and priorities.

Unless Canadians see attitudes and priorities changing soon, we risk two things. We risk directing our most gifted young people, the job creators, from being trained to compete in the world in the most current, most advanced levels of knowledge and its use, and secondly, we risk losing many of those in whom we've already invested a great deal not just in terms of their education, but in providing their capacity to do research, to do development, to work at the leading edge; we risk losing those to other countries, where they see better opportunities. When we lose them, we lose their capacity to add value in our economy, to promote prosperity and well-being here.

Madam Chair, that concludes the remarks I wanted to make. I look forward to some questions. I hope you will find both the introduction of NSERC and the four councils and the example of the American bill informative and useful. Thank you very much.

The Chair: Thank you very much.

Mr. Werner Schmidt (Kelowna, Ref.): Madam Chair, are we going to hear from all the councils first?

The Chair: Yes, we're going to hear from everyone, and then we're going to go to questions. I'm sorry, I should have pointed that out at the beginning.

Mr. Werner Schmidt: Thanks.

The Chair: With that, I would like to proceed now to Dr. Carty from the National Research Council.

[Translation]

Mr. Arthur J. Carty (President, National Research Council of Canada): Madam Chair, members of the Committee, I wish to thank you for having invited us here this morning and for having given me, personally, the opportunity to table with you some information on the National Research Council of Canada.

[English]

Like Dr. Brzustowski, I'm going to make my presentation in English for reasons of speed and time.

First of all, I would like to say that we've passed out some information. I'd also like to say at this point that we're very much looking forward to your visit to the National Research Council at the beginning of February, when I'm sure we can provide you with a lot more information.

I'd first like to tell you what NRC is. It's a truly national institution with a presence from coast to coast to coast in our country. Its mandate is to undertake, assist, and promote scientific and industrial research in the national interest. That is the same mandate the NRC has had since it was formed in 1916. Indeed, one of NRC's strength over the years has been its ability and adaptability to look at national interests and its ability to change with respect to those interests.

What are we? Well, NRC has twenty research institutes and research centres across the country. We have an industrial research assistance program and industrial technology advisers in ninety communities in every province and every territory. I think that gives you an appreciation of our reach and our national nature.

We carry out three things. First of all, we do research and development in our institutes, technology centres, and innovation centres. We provide national facilities for our partners and clients. We operate the Canada Institute for Scientific and Technical Information, which is one of the world's leading sources of scientific, technical, and medical information. If you read the Ottawa Citizen yesterday, you may have noted the role that CISTI is playing, for example, in helping the universities adapt to the great amount of information they're being deluged with and the costs of providing that information to students and researchers.

• 0920

Thirdly, we run the industrial research assistance program of NRC, which provides technology help and assistance to small and medium companies and is recognized as being the best program of its kind, not just in North America but in the world. I can certainly provide you with more information on that.

I think it's fair to say that NRC plays a unique and distinctive role in Canada's efforts to build an innovative, knowledge-based economy. As Dr. Brzustowski has mentioned, research councils such as MRC, NRC, NSERC, and SSHRC very much have complementary programs and all contribute vital elements to Canada's national system of innovation. Together, of course, we constitute a very large fraction of the public sector investment in research and development in this country.

NRC is positioned in the middle of the R and D spectrum. We translate fundamental knowledge into real world applications that can be commercialized in the marketplace. What we do is we help to bridge what I describe as a strategic research gap, which is a result of Canada's unique industrial and public sector structure. That is illustrated on page 3 of my presentation; it's entitled “Bridging the Research Spectrum”.

There is a very peculiar industrial structure in Canada in that we have had in the past a resource-based economy. We have many branch plant companies here that don't do R and D, and as a result very few major corporations that invest heavily in medium- to long-term strategic research and development. That puts a very heavy onus on labs such as the National Research Council and industry-university programs such as the granting councils have to fill that gap.

It's a very peculiar structure and we believe we are uniquely positioned at NRC to help in that regard, bridging the gap between basic research and development through medium- to long-term strategic R and D in collaboration with partners. Of course, on the small and medium enterprise side, IRAP plays that role.

At NRC we don't adopt a scatter-gun approach to research. We very much focus on areas that are of economic importance and important for wealth creation in Canada, such as information technology, telecommunications, biotechnology, manufacturing, and aerospace construction. We help to bridge that gap between the fundamental research in those areas and real world applications.

We recognize that if we have a forge effect of linkages between industry and the universities, then we must have significant credibility and be committed to excellence and relevance in those areas where we choose to invest. So it's very much focused research. We work very closely with industrial sectors. I should perhaps point out that this means essentially if you really attract the interest of partners, you have to be leading edge in those areas. I want to emphasize that it's very much focused research in key sectors of wealth generation for Canada and we expect to be competitive with the best in the world in those areas.

We have a new vision, a vision to 2001, which I can state very simply. As Canada's leading research and development agency, we will be committed to being a leader in the development of an innovative, knowledge-based economy for Canada through science and technology. I don't want to read all the elements of the vision, but I can simply point out that the first element is a commitment to excellence and relevance, the second to working in partnership to develop and exploit key technologies, the third to help in development and be a leader in putting together a system of innovation for Canada, and lastly we have an entrepreneurship program, which is helping greatly to transfer technology and to form new enterprises.

I'm going to skip partnerships because I just have to state that we do work in partnership with universities, with industry, and with other science-based departments and agencies. Partnership is a fundamental principle of the way we operate.

• 0925

I'd like now to turn to building an innovative economy.

Our vision focuses very much on innovation and knowledge and helping to put in place in Canada a national system of innovation. We're accomplishing that in a number of ways, first of all by focusing on local and regional innovation, building community-based innovation centres across the country, bringing all of the players together from the universities, industry, government, finance, to forge local systems of innovation based on the technology thrusts that communities have and to which they aspire.

Our labs are acting as a magnet for attracting companies and investments. Saskatoon, for example, has been built into one of North America's leading centres of agricultural biotechnology, to a considerable extent on the basis of the National Research Council's Plant Biotechnology Institute and its interactions with the community. Our institute in Montreal, the Biotechnology Research Institute, has attracted major multinational companies, such as Bio-Intermediair, simply because of its expertise, its facilities, and the attraction associating with one of our forefront labs has for a major company. That is attracting growth and jobs for Canada.

Of course we provide innovation support for small and medium enterprises through the industrial research assistance program, and our new entrepreneurship program, which is encouraging spin-offs from NRC, is providing training to our staff who wish to transfer technology and be involved in becoming entrepreneurs. It's also forging links to the investment community to help commercialized technology develop through NRC labs.

I've already mentioned CISTI.

In terms of our contributions to a highly skilled workforce, which Dr. Brzustowski has already mentioned, we have some unique programs, such as a women in engineering and science program that attracts to NRC for three consecutive years some of the best undergraduate female students in the country to learn hands-on and gain experience in state-of-the-art laboratories.

We have some unique programs with colleges. For example, with Red River College in Winnipeg we have a program that focuses on developing medical technologies using magnetic resonance imaging as the focus for that training with the college. In Montreal we have a program in training biotechnologists or bioprocess technologists, in part through our pilot plant and the facilities we have in Montreal.

Next week we will be announcing phase two of an innovative program called Ovitesse here in the national capital region. This is a program in collaboration with seven companies, including Nortel, Mitel, Cognos, Newbridge, ObjecTime, Computing Devices Canada, and the two universities, Carleton University and the University of Ottawa, coordinated by NRC. The thrust of this is to reskill scientists and engineers to become software engineers. We've gone through phase one with 10 students; the next phase is 50 students, and I would certainly invite you to attend that opening of Ovitesse, phase two, next week.

In the last page I just mention a few of the many contributions NRC has made to Canada over the years.

Some of the organizations here, NSERC, MRC, Atomic Energy of Canada Limited, began at NRC, and the Canadian Space Agency—these are all spin-offs of NRC.

Some of the other contributions are canola, contributions to eradicating the wheat rust problems.... We have developed transgenic wheats, which will be on the market soon.

In security, the anti-counterfeiting patch on your $20 and $50 bills was developed at the National Research Council and you have that in your pocket every day.

NRC invented the heart pacemaker. We have meningitis vaccines against infant meningitis, which will be on the market in a year or so.

Computer animation technology was invented at the National Research Council, and two of our researchers received an Academy Award earlier this year for that. It's spawned, of course, a complete industry in the entertainment area.

• 0930

NRC developed the space vision system for the Canadarm. We're responsible for the National Building Code, which is a significant integrating element in Canada's infrastructure, and of course the time signal.

Over the years we have spun off about 70 companies in the Ottawa-Carleton region alone, with 7,000 employees at present. In the last 18 months we've spun off 10 companies from NRC, all of which are creating jobs and helping the economy to grow.

That's a brief presentation on NRC. Thank you very much.

The Chair: Thank you very much, Dr. Carty.

We'll now turn to Dr. Renaud, from the Social Sciences and Humanities Research Council.

[Translation]

Mr. Marc Renaud (President, Social Sciences and Humanities Research Council): Madam Chair, ladies and gentlemen, good morning. Thank you very much for meeting with us this morning.

I would basically like to speak to you this morning about two things: firstly, the role and the contribution of the humanities in Canada, and, secondly, the future and what should be done in the area of social sciences and the humanities so as to help our country develop itself even better.

A text has been handed out to you.

[English]

I've been told I cannot speak for more than five or ten minutes, so I won't read that text, but I do hope you will have a chance to read it later on. I will use only the various graphs at the end.

[Translation]

When we look at the work that has been accomplished in human sciences over the last few years, we realize that this work has brought about a tremendous number of discoveries, but these discoveries nevertheless tend to be forgotten. Take, for example, the economic theories of John Maynard Keynes, the impact of the existentialists' philosophy on life and our place in the world, the impact of psycho-analysis, the game theory and the various factors that contribute to one's good health. These are all areas where extremely important discoveries have been made, bringing about profound changes in our lives. But we tend to forget that these discoveries have resulted in changes and that they are based upon research in human sciences.

[English]

If I had to characterize in just a few sentences what my colleagues are working on, all of them, the 20,000 all across Canada, are working on what I would describe as the great transformation we're now undergoing. People now say this repeatedly: we're undergoing the third most important change of the millennium; not of the century, of the millennium. The first one was driven by the printing press, the second one by the steam engine. Now it's by the communications and information revolution.

The consequences of these changes are mind-blowing. We're not talking only of globalization of world markets. We're talking about people's identity changing. We're talking about family structure changing. We're talking about a whole phenomenon. What people in the social sciences and humanities are doing is basically trying to understand this, and further, trying to figure out how we can adjust to these mammoth changes we're confronted with.

That's what we're talking about in the two first pages of this paper. Then the paper moves on to talk about SSHRC and what SSHRC does. “SSHRC” means Social Sciences and Humanities Research Council; Conseil de recherches en sciences humaines du Canada.

[Translation]

The SSHRC is an organization that, like the other granting councils, finances university research in a wide range of areas.

The SSHRC represents

[English]

55% of university professors of Canada and 55% of the graduate students. We're sitting basically on the gold mine of Canadian universities. Yet we have only 12% of the funds going to the granting councils at the federal level. That means concretely that 95% of our graduate students in Canada can have no hope of getting any kind of support from us to do their work. That means concretely that 85% of the university professors in those fields cannot have any hope of getting access to the kind of research money we're providing.

That's the global picture in which we're located. What I've been doing in these last three months—I've been in Ottawa for the last three months—is I've asked the staff at SSHRC to take all the ideas they had on their turf and try to make a plan out of this. That's what I would like to talk to you about.

The easiest way to present this is by using these tables. I don't know if you have them.

• 0935

The Chair: Not everyone has them. Mr. Schmidt doesn't have them. There you go, that's it.

Dr. Marc Renaud: That's it.

These pyramids are what some would call simplistic, but they're a nice way of explaining what the research effort is. Each pyramid is, in a way, a field of inquiry. Let's say it's health, immigration, or family violence. At the extreme top of the pyramid, where there's a big dot, there's either a policy, a reorganization of services, or a product.

The idea of these pyramids is to show that the research enterprise has all kinds of aspects to it. At the bottom of the pyramid is what we call curiosity-driven research. It's research coming out of what people in universities—but it could be outside—have as key problems to address with specific methodologies, and so on. That kind of work is a high-risk investment. It doesn't always get results, and it's best done in universities.

Then the next layer up, the next tier in the pyramid, is what in our jargon we call strategic research, or long-term, pre-competitive, applied research. There are all kinds of words to indicate this.

The third layer is quite different. It's more R and D in the limited sense of the words “research and development”. What it drives to is more directly focused, policy-relevant research.

Finally, at the top of the pyramid, I present a little triangle, which indicates in fact that governments have to develop the receptor capacity in order to get this knowledge to be used in policy development. Similarly, human service organizations, need to have the receptor capacity in order to capture the various research results.

I'm presenting all of this because SSHRCC, in the past, has been basically investing at the bottom end of the pyramid. It has been trying to invest in the second tier; about 10% of our budget is going there. We've just begun to invest in building up partnerships, which is the third level up in that pyramid.

What we've been discussing among ourselves in this new context in which we're living now is we really have to try to develop more than what we've done in the past, with more partnerships and a more focused type of research. It's also part of our mission to help this government structure its own receptor capacity, its own in-box, so to speak, research group to capture the knowledge.

Here's just a quick example for you to understand. A few years back the immigration department realized that we didn't understand a thing about immigration in Canada. We knew immigration was happening and yet

[Translation]

we had no idea of the numbers, of what had to be done, of the problems, etc.

It was therefore decided that we would create in Canada centres of excellence. These centres are run in partnership, at the local level, with community groups and, in some cases, with provincial governments. These groups are very closely tied to one another. There are four or five of them in Canada. At the same time, the Department of Citizenship and Immigration has developed what is called the Secretariat of Metropolis to delve into all of that and to guide the policies of the federal government, in the same way that provincial governments use their own centres, in the various regions, in the development of their policies.

As for the future, we are hoping that for every dollar that we invest in the top part of the pyramid, another dollar will be invested at the bottom of the pyramid, because basic research is essential. That is simply a fact.

To be in a position to develop the upper middle half of the pyramid, if you turn to Appendix 2,

[English]

we list there the various organizations we've been partnering with in the last few years. I can tell you that we have now 25 others that have knocked on our door to ask us to go with them. They say there are things they want to understand, so they want to join hands in order to develop research, chairs in universities, research centres, networks, and what have you, in order to tackle those problems.

Take the next slide. It's called appendix 3. It's the innovation scenario for next year. There are three components to it, and I will rapidly go through this, but if you read the text, you'll understand better. If you want to know in more detail how we get to these numbers, we can be extremely precise as to how we get them.

[Translation]

We would therefore be very happy to supply you with this information if necessary.

In the first column, to the left, we say that there are knowledge gaps.

[English]

There are knowledge gaps out there that are pretty well identified.

We had an amazing experience in these last few months. SSHRCC led a consultation throughout Canada to identify where people felt were the key knowledge gaps for the future.

At the same time, Jocelyne Bourgon of the Privy Council conducted the same experiment here in Ottawa and came up with the document called “Economic Growth, Human Development and Social Cohesion”, which is in fact quite remarkable. It's quite surprising that bureaucrats could produce such good research. I'm impressed by that document. In our consultation and that document we say exactly the same thing.

• 0940

There are five sectors in which we have to invest quite drastically if we want to have a better future for ourselves. One is economic growth. Another one is human development. Another one, a key one, is social cohesion, because social cohesion is undergoing tremendous challenges because of globalization. The other one is governance, and finally, the fifth one is the issue of globalization itself and how we position ourselves there.

So seeing that there was this homogeneity of opinions about the priorities, for next year we suggest—and we're ready to go if we can get the money to do it and with all these partners with us—new targeted research initiatives, which would fit very well in the governmental social research agenda.

Second, in that same spirit, we've realized that there is a problem with the exchange of expertise in this country. People talk a lot about transfer of knowledge. That's difficult, but transfer of people is damn effective. Why don't we bring more professors here who are on sabbatical? Why don't our departments open up internship programs for younger students, for post-docs, so that they can come here? We think there's a need for a better match between the needs and the expertise, and again, we're ready to go if we could get the money to do this.

A third area that we really have to invest in is the area of data development analysis and expertise. Statistics Canada is probably one of the best—if not the best—statistical agencies in the world. StatsCan has developed three major cohort studies over the last few years, and these databanks, so to speak, deal with

[Translation]

the numbers of people who enter and leave the labour market, the health and the development of children. These three studies have supplied us with extraordinary data. We have an international reputation for the quality of our data, but no one is analyzing it. There is no one out there. Of our 20,000 researchers, only fifteen or twenty are analyzing this data. This is unacceptable. On the one hand, we have an extraordinary research tool and, on the other, our research capability has not been developed. We therefore believe it is our duty and mission at the SSHRC to invest in the development of that capability. But this will require new monies.

Finally, still in the same column, there is the famous idea of the community research and information crossroads, based on the idea that we must establish structures through which we will be able to transmit knowledge, not to the government, but to communities, here again in the framework of partnerships. That takes care of the first column.

[English]

The second column is about what we call La Relève, the next generation. We do have to make major efforts in that sector. Canada is now undergoing all kinds of efforts to penetrate world markets and yet we realize that we don't necessarily have the expertise. We need the cultural expertise—the philosophical expertise almost—in order to penetrate some markets like eastern Europe, Asia, and so on. Also, the universities are not well structured to cope with this.

We suggest that we develop a master's degree program—that we start at the beginning—for people who would, for example, work in China, understanding Confucius, understanding the language, or understanding the economic and physical structure of China. We're telling ourselves that if we're indeed going to penetrate those world markets, right now we have to build up part of the next generation's capacity to understand how to penetrate those markets and to help business people to do so.

The other one there is the Canadian teaching company scheme. That's a thing that has been a tremendous success in Australia and Great Britain. It brings young graduates into working hand in hand with businesses, with a supervisor in the university and a co-supervisor in the business. It doesn't apply to all the fields we cover, but it does for administration, business and industry relations, all those fields that are targeted towards the management of businesses.

Finally, under that same heading, we're looking for human science career entry awards. Do you know how many post-docs we finance every year? At SSHRC it's 100. It's ridiculous. We have 2,000 Ph.D. students finishing every year and we help only 100 of them to penetrate the market.

• 0945

Quebec has made a much more important effort than the other provinces in that respect. I have been chairing the Quebec board for social research for six years. It's remarkable what we achieved with post-doctorals and what we call in French chercheurs boursiers, the young scientists award. These people have literally transformed the university. They even created their own jobs by creating a new nest and going out and creating the market for themselves. That's very important for us at SSHRC to invest in now.

Finally, there's a third component that's also very important, which is sustaining a strong innovation capacity through basic research and training. We basically say it doesn't make sense that the success rate in our competition is 24%. We have to increase the number of people we're subsidizing. Every year, after the competition, we realize that about less than half of the projects recommended cannot be financed and we're losing a lot of material in there.

We also have to give better scholarships for students, damn it. The Ph.D. scholarships we're giving are $5,000 below the poverty line. We are $3,000 below what NSERC gives. We therefore ask for more money. We ask for $21 million for the first component, $11 million for the second, and $33 million for the last one.

Let me conclude on this, and I'm going to read the conclusion because it's pretty clear. The total bill for the three components of our innovation scenario is about $65 million. This would be, according to us, a sound strategic investment, not just for SSHRC but also for Canada, since our country benefits immeasurably from having top-notch universities and world class social scientists and humanists within them.

As we move into a knowledge-based economy and focus increasingly on technology and innovation, we need to remember there is more to becoming a smart country than just plugging in the machines. We have to focus on the people behind these machines, the institutions in which they live, and how they adapt to the new environment we're developing.

We have to remember that technology, innovation, and economic growth are vital, but only as a means to an end and that this end is to sustain the people of Canada, their well-being, their health, their sense of belonging, their family, and their community lives. That's why we need to learn how to better manage the human dimension of technology and innovation. That's why we need to invest more in human science research today than ever before in our history.

In other words, we have to mount almost a war effort for the people of this country to adjust to change and to bring innovation to our institutions. In this war, the key weapons are ideas.

[Translation]

In this context, the SSHRC could make the difference. Thank you.

[English]

The Chair: Thank you very much, Dr. Renaud.

I'd like to move on now to the Medical Research Council of Canada. We have Dr. Henry Friesen and Mr. Marc LePage with us.

Dr. Friesen.

Dr. Henry Friesen (President, Medical Research Council of Canada): Thank you very much, Madam Chair.

I have with me my colleague, Mr. Marc LePage, who is the director of business development.

My background and experience in the medical research field extends over a 30-year period as a physician, as a scientist, and as a teacher. So I bring to some of the thoughts I present before you some considerable length of experience and I believe insight.

I would like to agree, first of all, with a number of representations made by colleagues, which really positions the activity we're engaged in supporting—that is, science—as being international. It's an international endeavour. Canadian science, after all, produces only 2% to 3% of the world's knowledge base each year; 97% comes from elsewhere. Dr. Brzustowski has made the point that accessing this is more than just accessing information; it's interpreting, choosing, exploiting, and developing it.

If Canada and Canadian scientists are going to be internationally competitive, my proposition is that Canadian scientists deserve and expect—and I think Canadians would expect—to receive an internationally competitive level of support.

MRC, like NSERC and the social sciences, operates in the universities, provides direct support for project costs and for the support of development of people, the career scientists, at an early stage of their development.

There is one important dimension that's different about the Medical Research Council's venue. Somewhat less than half of our research activity takes place in the university structures. The other 60% happens in the hospital-based sector, the research institutes that are often associated and affiliated with the hospital institutes like the Heart Institute, the Montreal Neurological Institute, or the Hospital for Sick Children.

These are very dynamic and competitive environments in which both training and development, and the application of that knowledge to the patient sector, take place.

• 0950

There are three points I really want to bring to your attention. I want to share with you some aspects of my vision for the health research and health industries sector. Second, I want to underscore that there's a whole new dynamism of our field, of the health research sector, that has developed very rapidly, and I want to dissect and bring to your attention some of the ingredients of this new dynamism. Thirdly, I do want to underscore that health research in this country today is hurting—in my view, it's hurting badly—and if we don't recognize those warning signs we're at great risk of losing what has been built carefully, and I think managed with a considerable effort, to the high state of development that exists today.

In the document “Jobs, Growth and Research”, I draw to your attention the size of the enterprise. As this is the industry committee, I particularly want to emphasize that there is an important link between the investment in fundamental science and its application and the growth potential. Seventy thousand individuals work in this sector. That's larger than the aerospace industry, and the potential for growth is very considerable over the next period of time.

The new reality, the new dynamism, is to recognize that the transfer of the discovery chain, the new knowledge that has been generated, to the marketplace has reached a pace and degree of activity and sophistication that was not imagined even five years ago. It's supported by remarkable amounts of new venture capital, with a fivefold increase just in the last three years.

Less than three weeks ago, I met with a group of Quebec investors who would like to invest $1 billion in the life sciences sector in Quebec. By their estimate, that sector would absorb a quarter to a third of all graduates in the field, but they're worried. They're concerned about choosing Quebec as their investment site. Would there be enough young people? That's a whole new reality that we face, and it's not restricted to Quebec. It's happening right across the country, and I think it's important to recognize that there are some very important government instruments that shaped this new reality. The networks of centres of excellence program created an enormous cultural attitudinal shift in this country. That program has generated a large number of spin-off companies right across this country.

This morning, I just happened to see a statement by the minister of education, research and technology of France cross my desk:

What was needed now, he said, was the creation of an entrepreneurial scientific culture and a less cautious and more innovative approach to research and to industry. In France there are only about 20 biotech companies compared with over 1,300 in the US.

To underscore my point about the new reality and the new dynamism, there are 200 biotech companies in Canada, as compared to 20 in France. We have a huge opportunity, a great advantage, because of this new reality. In my view, as I cross Canada, nowhere is that better expressed and seen and developed than it is in Quebec, but again I underscore that it's not unique to Quebec.

BioChem Pharma, the fourth-largest capitalized biotech company in the world was one idea that NRC, NSERC, and MRC supported with their grants twelve years ago. Today, it's capitalized at $4 billion, is employing 1,200 individuals, has a lead compound in the treatment of AIDS, and has on the horizon a new and most innovative product to treat hepatitis. The market potential for that would be expected to exceed $1 billion in sales per year. That's a remarkable new reality.

So I say that the vision I have for this country is to see the health industry sector as one of the leading growth sectors of the Canadian economy, creating and generating job opportunities for highly skilled, trained Canadians who are funded, supported, and developed through our university and our granting council structure. This is a real opportunity.

• 0955

What is the concern? The concern is at the starting point of this discovery chain. The investment in basic research has been truncated, has been compressed, has been reduced, and we know the reason for that. But there's a strategic moment here, I say, to begin the process for reinvestment.

We must be internationally competitive. If the environment in Canada isn't attractive, as my colleague Dr. Brzustowski said, intellectual capital, investment capital is highly mobile; it will move. It's ramped up quickly, but it will just as quickly disappear. The choice is ours as a country. Will we seize the moment and the opportunity?

The Chair: Thank you very much, Dr. Friesen.

We're going to begin with questions. I believe we're going to start with Mr. Schmidt.

Mr. Werner Schmidt: Thank you very much, Madam Chair, and may I extend my welcome to each of the respective experts here. I am particularly impressed with the knowledge base they represent, both individually and collectively. I think we have a demonstration here of a problem that in their minds is an extremely real one.

You have all focused on one problem and that seems to be basic research, in particular the role of basic research and the whole business of commercialization of innovation, developing a knowledge-based economy, developing innovative companies with medical research, and things of this sort.

You are all not unaware of what's happening in the world. Every one of you knows what's happening and every one of you knows how much extra money the federal government and every other government in this country has, so every one of you is asking for more money.

The question is, does basic research depend upon money? Does basic research depend upon a reallocation of a focus? We know the Canada innovation fund has been developed. We know there's a technology partnership program. These are all multi-hundred million dollar programs, and this money has to come from somewhere. Do you think this money is perhaps misplaced? Ought it to be in basic research? There will be no technology partnerships to develop if there isn't basic research on which to have these new ideas. What would your recommendation be to the government as to where this money you're asking for should come from?

I'm asking that to each one of the heads of the specific departments, because I think the case you make is a powerful one. I agree completely with your case. The problem I see is, how do we allocate the funds? Where is the money to come from?

The Chair: Dr. Brzustowski, do you wish to start with that?

Dr. Tom Brzustowski: That's a very difficult question, and it's structurally difficult. Let me start off by agreeing immediately with what Mr. Schmidt has said; namely, that without the basic research, without the stock of ideas on which to base innovation, we're going to make incremental innovation that will be smaller and smaller and the rest of the world will overtake us.

One of the problems your question poses with me is this. While I can talk with some expertise about reallocation within the main of research spending and in fact the relative priorities and how we spend the funds at our disposal, I know far too little about all the implications of all the responsibilities that government has in order to say, well, take it from there and put it into that. That's extraordinarily difficult for me.

But let me identify a couple of things that come to mind very quickly, and this ties immediately into the last comments Dr. Friesen made.

Think of the young people who might be making a decision about whether to enter postgraduate studies. Who are they? They are generally the very brightest in our graduating classes, the people at the very top, and they have a lot of choices. One of their choices is to take a paid job. University graduates have a very low unemployment rate. The best of them are competed for by the companies.

They face, then, the possibility of two years of foregone earning if they're going for a masters, maybe five or six years if they're going for a Ph.D. That's a loss immediately.

• 1000

Secondly, some of them might be coming to that decision point with a debt accumulated from having gone through undergraduate studies.

Third, what kind of support might they obtain? If they are very, very good, they might get from us an NSERC scholarship of $15,600 per year, taxable, against which they have to pay tuition fees of something in the order of $3,000.

That's where they are today. Some 30 years ago they might have been getting a scholarship of $3,000 tax free, at a time when tuition fees were a couple hundred dollars and the starting salary of a Ph.D. might have been $6,000 or $7,000. Today these people can start at close to $40,000 with their first degree.

That's the economic position we're putting them in.

If on top of that, at the end of this process of receiving their advanced education, their advanced training in research, they see little opportunity at a personal level to use their talents to do the things they are really interested in, and at the economic level to find a decent job, you can imagine what their decisions might be. They might be two. One is not to enter into that activity at all, and therefore be a net loss of potential to the country. The second, perhaps even more seriously, is to develop their talents somewhere else, and the somewhere else is very close. It's not far at all. Then their value-added activities, the activities that are the key to wealth creation, from which everything else flows—prosperity, personal well-being, social well-being; all these other things—might be in somebody else's economy.

I know you asked me where I would reach to get the money. My response is, having reached, that's where I would put it: in the focus on young people.

Mr. Werner Schmidt: You really didn't help, because we knew that. We knew where we should put it. That we know. You didn't tell us anything new there.

The Chair: I would like to remind our witnesses and colleagues that our time limits are going to run out very quickly if we address all questions to all four individuals. I have to ask for brevity in response, because we have a number of people who wish to ask questions. You could briefly sum up, please, because I need to go to the other three witnesses.

Dr. Tom Brzustowski: I'll stop right there. I accept the criticism.

The Chair: No criticism.

Dr. Carty.

Dr. Arthur Carty: I want to come at this problem from a slightly different perspective. Most people recognize that over the years Canada hasn't invested enough in research and development and in science and technology. Our statistics do not compare very well with our competitors'. If we really do believe in Canada we're going to create a globally competitive, innovative, knowledge-based economy, then Canada has to find a way to invest more and to give a higher priority to research and development, and science and technology.

Our competitors, such as Japan.... Japan has promised to double its investment in basic research by the turn of the century. That's an enormous investment. France is increasing its CNRS budget by 6.5% in the next year. Yet collectively the councils at the table have had their budgets cut by more than $200 million over a period of four years, including 1998-99. That's a very significant erosion of our support for research and development.

We know there is to be a balanced federal budget in the next few months; the next year. My argument would be that Canada has to increase its investment in R and D from the current 1.5% of GDP upwards. In fact, some of that will have to come from what is currently described as the “fiscal dividend”. Otherwise I don't really see that we have any chance of changing our structure from what has been in the past a natural resource-based economy, and an economy with multinational companies not carrying out R and D in Canada, to a really knowledge-based, innovative system.

The Chair: Dr. Renaud.

Dr. Marc Renaud: Your question is whether basic research depends on money. I'll try to tackle it differently from my two colleagues.

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In my opinion, the answer is no and yes. No, because good quality basic research above all depends on brains. The issue is whether these brains will stay here. Will the best and brightest stay here with this

[Translation]

pathetic amount of money put at the disposal of scientists?

[English]

But money does count. When I look at it from the point of view of the disciplines I deal with here, we would desperately like to have financial partners outside of government. It's not as easy as it may be in some other centres. It's possible, but it's not as easy.

Let me just take one example. We now know that the drug component of the health industry is more expensive than the payment to doctors themselves. The issue, then, is whether people prescribe drugs and consume drugs correctly. So the issues are pharmaco-vigilance, pharmaco-economics, psychosocial behaviour around drugs—all kinds of questions that are in the social science and humanities field. I have discussed this several times with drug companies, saying, “You see we have a problem in the elderly in this country consuming three times more drugs now than ten years ago, without the pills having changed. Shouldn't we do research on this?” They all say “Yes, but we cannot give money to you because you cannot give us a tax exemption”.

If you're not providing us with new money, please provide us with the tools to get the money from outside.

The Chair: Thank you, Dr. Renaud.

Dr. Friesen, did you have anything to add?

Dr. Henry Friesen: It is an important question. It is a question of choices and priorities—priorities that match in terms of the financing. I would respond, Mr. Schmidt, by returning to the recommendations of the finance committee, of which I believe you were a member, that recommended support for the councils and basic research and called on the finance minister to make some choices amongst the many difficult choices he will have to make as he crafts his budget. But I'm heartened that your committee so strongly endorsed the important role the councils play.

To pick up on the last point Dr. Renaud made, inefficiencies in the health system are extraordinary. Most thoughtful observers imagine them to be 10% or 25%. Imagine if we took 1% of the health care costs and invested in research to find out what really works and what doesn't work. That's the U.K. model. We could apply it with benefit in Canada and thereby perhaps identify the 10% or 25% of inappropriate procedures that cost billions. In Canada, $2,000 per capita is spent for health care costs, and Canada is investing through the MRC $8 for research.

The Chair: Thank you.

Thank you very much, Mr. Schmidt.

Mr. Werner Schmidt: Am I finished?

The Chair: You're well finished. We're well past five minutes. It's more like thirteen.

Mr. Murray please.

Mr. Ian Murray (Lanark—Carleton, Lib.): Thanks, Madam Chair. I, too, want to welcome our distinguished guests here this morning. All of you have been here a number of times. You may find it very frustrating to keep repeating the same comments to politicians that may seem to be deaf and dumb when you're talking to us, but I do appreciate you being here.

I had a sense, though, listening to most of you, that the exercise you've gone through in having to deal with major cuts in your funding has led you to be more market-driven, if you will. This is something that struck me most with Dr. Renaud's presentation.

Just talking about the social sciences and humanities for now, are we moving away from the traditional peer review system? If you're trying to address all of these gaps that you perceive, who is going to identify those, if you're trying to redirect your money in certain areas as part of this pyramid scheme, if you will?

Dr. Marc Renaud: That's a very good question. Peer review is the key to this. It's not the best system in the world, but it is the best we know for judging the quality of a research project. You're right, we are more market-driven, in a way. I'm pleading with my colleagues, asking them to show how useful they are. Because they are useful, but they don't think that way.

We're living in a utilitarian age. You have to show; you have to argue it. I'm saying to everybody the whole rule was perish or go public, and now it's go public or perish. That's a change there.

What that means for the peer review system is perhaps we have to move towards a merit review system, where the scientific quality of the proposal will be assessed, but also the partnership, the transfer of knowledge capacity of the team we're evaluating, and so on and so forth. It's not impossible that we move towards a system of adjudication where there are going to be scientific people but also consumers of research around the table.

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Mr. Ian Murray: Would it be fair to say that this whole exercise of living with the cuts has redirected the granting councils in healthy directions? You're talking about partnerships more and more all the time. Again, as Dr. Renaud pointed out, there is a real need to let the public know what you're doing, and again Dr. Renaud's council is the one that's often.... Examples are often shown in local newspapers of expenditures that seem very hard to understand by the typical person on the street. If all your wishes came true, would you see the granting councils returning to the previous structure of granting, if all the money was there? Really, the question is this: has this been a healthy thing in one sense, in that you've had to redirect your thinking?

Dr. Tom Brzustowski: Madam Chair, may I deal with this?

The Chair: Certainly.

Dr. Tom Brzustowski: In the case of NSERC, the the university-industry partnerships began about two decades ago. The last program that had to find itself limited by the budget, the program we had running demand-driven in the sense that really good proposals had a pretty good chance of being funded, was the university-industry partnership program.

This year, because of the cumulative cuts, we had to cut back on that.

When you're dealing with university-industry partnerships, this isn't just a question of an academic writing a proposal. This is a question of a company working with academic researchers to try to develop a strategic proposal that involves elements of partnership that go far beyond just the academic thing.

It requires time, and we know—we have been told, it's very clear—we cannot ask industrial partners to enter competitions in which the success rate is very low. We're really suffering from that.

But the philosophy of university-industry partnerships, bringing together those who produce knowledge and those who use it productively in the economy, is something that we've been implementing for 15 or 20 years, and it is the latest victim in the cuts.

My colleagues are always aware, as I am, that the only certainty we have about next year's budget is another 3.5% cut, the last of the four-year program of 3.5% cuts.

So, no, we would not go back to what might have been, in the case of NSERC, 20 years ago, strictly a council that gave out money for basic research. We have a well-established culture in Canada of university-industry partnerships that work extremely well. In our case, a thousand companies have been involved, and they've invested over $600 million in the last 15 years in their side of the partnership.

The Chair: Dr. Carty, do you wish to add to that?

Dr. Arthur Carty: I would just like to put a plug in for the other three councils that are at the table here and NRC in this regard, because Dr. Brzustowski and I happen to meet once a year with the heads of the G-7—it's now going to be the G-8—research councils. We have a two-day meeting in which we have the opportunity to discuss funding and policy, and I think we can both assure you that Canada has been very inventive and very innovative in the way it has developed partnership programs: through the councils and industry-university interactions, through NRC in its partnerships with the private sector and with universities and other government labs.

There isn't a country in the world that's been as innovative as Canada in entering into these partnerships and developing them fruitfully. It's a real success story. The fact is that it's now becoming much more difficult, because there isn't any money to invest even in those programs.

Mr. Ian Murray: Do I have time for...?

The Chair: No. Sorry, Mr. Murray. I'm going to feel like the Grinch that stole Christmas pretty soon, but there are about ten people here who want to ask questions, so we have to move along.

Madame Alarie.

[Translation]

Ms. Hélène Alarie (Louis-Hébert, BQ): First of all, you made very interesting remarks and statements. You talked of an innovative scientific culture. I think we have reached this stage and I also believe that this implies societal choices.

• 1015

We sometimes say the same thing in other committees. What really pleases me today, is that, more and more, we are hearing statements and seeing tables that have punch. It is very difficult to talk about basic research or research in the field of the humanities if you are unable to use high impact expressions that everyday people are able to understand.

I went to a conference with Dr. Friesen at Laval University, in the Immunology Centre. There was a demonstration dealing with basic research. Among other things, an invisible condom project was discussed. The newspaper only mentioned the invisible condom part. Everything else was left aside. This is why I find it marvellous when we have words or graphs that really grab people. Please keep this up.

And now, I would like to share with you a thought. It deals with La Relève. You all talked about it, and this really concerns me, because a study revealed that in Quebec graduating students have debts of 12 000 $. One has to be really courageous to go on to post-graduate studies, especially in fields where the chances of finding a long-term job are slim.

Certain things bother me a little, but I do agree that projects should be judged by peers. I find that the bar is very high for getting a project accepted. As a matter of fact, good projects and good scientists are competing against each other, whereas research should bring together various projects that aren't necessarily always sexy, if I may use that term.

We therefore see these students watch what is going on and watch their tutors or the researchers who work with them go begging, because they're forced to seek out partnerships everywhere.

Do you see a solution to this situation?

[English]

The Chair: Who wishes to begin? Dr. Renaud.

[Translation]

Mr. Marc Renaud: It's a little like what we are saying to ourselves at the SSHRC. We fund 5% of the 40,000 students in our field. We fund a tiny fraction of the people who finish their doctorate. This is unacceptable. We must find the means to help them further. Otherwise, people will lose interest in their studies or leave. This is why we have been telling ourselves that there are all sorts of new tools that we should be thinking about: internship programs with the private sector, programs in which companies will help supervise and pay students. We have a whole series of suggestions.

There is one we have been working on—and you will probably be getting involved—and it is the famous Canada Millennium Scholarship Endowment Fund. We don't really know what it will involve, but rather than creating a new fund, why not give that money to the granting councils that are equipped with legitimate management tools? There isn't a soul in Quebec who would criticize the SSHRC for increasing its student bursaries from 5 to 20%.

I believe that that should be our first priority and that we should be imaginative. It isn't just a matter of bursaries; bursaries are part of it, but there are also programs with the private sector, with governments, with councils and with professionals, so that our students feel that they are full-fledged participants in life.

The Chair: Madam Alarie, do you have another question?

Ms. Hélène Alarie: No, not for now.

[English]

The Chair: Mr. Shepherd.

Mr. Alex Shepherd (Durham, Lib.): I was wondering if I could be devil's advocate for a little while. This is a Conference Board of Canada report on Canada's productivity. I think it touches on some of the items you have mentioned here. One of the overall comments made by people working on the report was that our universities are bubbling over with people taking humanities but in reality we're very short on some of the basic science skills in our universities. It goes to my background as an accountant. I'm looking at the allocation of the total moneys between MRC and the social sciences and I'm wondering if that is an appropriate allocation.

Dr. Marc Renaud: My answer is no.

Mr. Alex Shepherd: I guess I'm asking you very specifically, based on that weighting and based on some of the comments that are being made on why we're not competitive, is the level of funding for your portion of this appropriate?

• 1020

Dr. Marc Renaud: Let me answer with a slogan. I met recently with a very well-known human resources specialist. That person told me, we hire people because of their technical skills, but we fire them because of their lack of human skills.

A lot of the training given in the humanities and social sciences is learning about others, learning about cultures, learning about differences, learning how to cope with all these things. Matthew Barrett, head of the Bank of Montreal, said, when I'm looking to hire somebody in my bank, I'm looking for somebody who has some lateral thinking more than somebody who knows how to read a ledger, because he will learn the ledger on the job, but what I need is the human skills.

In that context, the context that we're providing that side of it, it's not perfect, I agree with you, but at least that's what people in literature, in philosophy, in economics and business, are trying to get their people trained in. In the context in which this effort is being mounted, it's ridiculous that we have only 12% of the budget of the granting councils.

I'm not attacking my colleagues—I respect them a lot—but that's true. I respect tremendously what they are doing, and I can see in my own university, the University of Montreal, how much there needs to be renovation, rebuilding of lab capacity; how much they need money there. I'm not at all trying to wage a battle where, as we say in French, “je déshabillerai Pierre pour habiller Paul”; I would undress Pierre to dress Paul. That's not what I'm talking about. I'm talking about the amount of money we have on the table to help the people in my fields get going, and get this country going. But when you tackle it from the angle of proportion, of course it looks ridiculous.

Mr. Alex Shepherd: It's just that people are saying jobs are evolving in this country in the area of science and technology but not in the humanities, yet we have a tremendous mismatch in our universities, people taking humanities for jobs that don't exist.

Dr. Marc Renaud: Let me give you a couple of examples. I've just come back from the University of Alberta. I was flabbergasted with what I saw. There is a linguistics centre there; extremely abstract people. Do you know what they are doing? They are trying to figure out the concepts underlying the structuring of a language, what we call in French the “spirit” of a language. They are so good at it.... Rather than translate word to word.... You can put text in a computer now and it has to translate word to word, but it's not a translation. What they are working at is the conceptual structure behind it. There's a Microsoft boiling out there, because when that's discovered and we have the right equations, then we can have the computer doing automatic translation of text.

Another example. In that same university there's a group of women working on the feminist literature of the end of the 19th century. That seems a far-out thing, right? Yet they are developing software in there in order to archive the kind of data they are looking at. Several little companies are looking to buy that software, because it's a really interesting way to read human history and to interpret it for us.

At the same university—I can go on and on—there's an Austrian centre to understand what has been happening in Austria. I asked, why the hell are we doing this, 19th century, 18th century Austro-Hungarian Empire? In response to my question they said, well, when you think about Quebec and Canada you have the Paris-London metaphor, but you're wrong, you should have the Budapest-Vienna metaphor, because it much more resembles the kind of case we're in. I said, wow, that's interesting; I should think about this.

We need these kinds of studies.

The Chair: Mr. Bachand.

[Translation]

Mr. André Bachand (Richmond—Arthabaska, PC): I must tell you that I will have to leave following my questions, not because I don't find you interesting, but because I have a scheduling problem. I do apologize.

I found your presentations very interesting. It once again boils down to a question of money. This issue comes up often because everything has been cut in the past three or four years. However, in the political arena, you'll have difficulty getting that message across, because people will say that it isn't true, that the federal government took on its responsibilities and that in a few years' time, and perhaps even as early as next year, with the two new projects that we heard talk of this morning, namely the Canada Millennium Scholarship Endowment Fund and the Canada Innovation Fund, Canada will be investing 2 or 3% of its GDP in research and development. You are therefore going to be lacking in arguments.

You must fight now. You are facing more competition now than ever before as far as research and development in Canada are concerned, and this competition isn't coming from the rest of the world, but from the government. It is therefore going to be difficult for you.

• 1025

However, in meetings such as the one we're having today, we will perhaps be able to gain greater knowledge about what you have accomplished in the past and what you are doing today.

There is another problem. You have been faced with cuts. If only a freeze had been enough in the meantime, because in the end, we are killing the cash cow. It isn't easy. We could have sold a few members of the herd, but we sold the entire thing. There is therefore a problem: nothing more is coming in.

I would nevertheless like to tell you that you aren't alone in this. In Quebec, we have problems getting books. Teachers are having difficulty getting photocopies. There are problems everywhere. But we aren't the Finance Committee. As Dr. Friesen was saying, if we were the Finance Committee, then things would perhaps be different.

For my part, I find this very interesting. I would however like to hear what you have to say on the problem you are faced with. The new industry-university relationship is the very foundation of the applicability of research, and you now have competitors coming onto the market. How do you see your role vis-à- vis this new competition, if it is competition for you?

[English]

The Chair: Dr. Brzustowski.

[Translation]

Mr. Tom Brzustowski: I will try to answer in English, if I might, because it would be somewhat difficult for me to answer in French.

[English]

What's the competition for us? When we use the word “competition”, it's referring to applicants asking for our money, but you're using the word “competition” in the sense that somehow there are other organizations competing with our councils. Am I correct on that?

[Translation]

Mr. André Bachand: I used the word "competition", but it was rather in the context of the available financial resources. There is competition for financial resources between applications made to the government, but not necessarily between organizations. It is between those organizations before the federal government or before other governments.

[English]

Dr. Tom Brzustowski: The answer I can give to competition on that scale comes back to the point Dr. Carty made. We're well aware that the fiscal capacity of the nation made cutting necessary. Probably none of us feels it was something that didn't need to be done. However, it's when the funds become available for investment that one can then compare what the investments are. We're talking about strategic investments in people and their knowledge.

The reason we think of these investments as strategic—and you have that across the table here—is that they have the capacity to lead to developments, to lead the transition from an economy in which we really didn't add knowledge to what we were given in the ground, to an economy in which the knowledge content of what we sell to the world is very large. It's the people who will drive that and create jobs for others and create the wealth, the revenues that can pay for better health care, that can pay for better primary education and care of the elderly. It's all of those things that we consider strategic.

As I mentioned to the finance committee, I use the words “strategic investment” with great care. To me, a strategic investment in the area that we're talking about is investing today in order to put the tools in the hands of the young people who will be given an incentive to develop their talents and use them in this country for the benefit of everybody.

When you say we're competing with that, we're not in a position to judge the elements of the competition of one against the other, the competing elements. The government is responsible for that. The best we can do is to present, from the point of view of the research councils, our view of the strategic importance of the investments, and we support that with what other countries are doing. They are seeing the same environment. They are seeing the same global economy. They know something that we don't know, if their trend is totally opposite from ours.

[Translation]

Mr. André Bachand: Sorry to interrupt. Ultimately, the government will be able to say to the world in two years' time that the percentage of the GDP given to research and development has increased from 0.3 to 0.5%. But this won't give you one cent more in your pockets. This is what I mean. It is important and we need to be aware of this. I'm sure you are even more aware of it than me, but I think it is important to say it.

• 1030

There's one other thing.

[English]

The Chair: Mr. Bachand, very briefly.

Mr. André Bachand: That's fine. Thank you, Madam Chair.

The Chair: Okay. Mr. Peric.

Mr. Janko Peric (Cambridge, Lib.): Thank you, Madam Chair.

I'm really enriched this morning by your presentation, and I'm really glad to see two fine gentlemen, Dr. Carty and Dr. Brzustowski, who are from the Waterloo region, the University of Waterloo, one of the best in the country and probably in North America.

I think your argument is quite valid. Without strong support for basic research, I believe the prospects for the future of our industries won't be there.

Dr. Carty, you mentioned your meeting with researchers from G-7 or G-8 countries. Where would you put Canada on the scale with respect to those countries?

Dr. Arthur Carty: In terms of our investment in research and development as a percentage of GDP, it's well known that Canada is second from the bottom, with the bottom country being Italy. We haven't made much progress over the years.

In fact, this is an anecdote that I tell about a consultant in Ottawa who's written a book entitled, “From 1.5% to 1.5%: Twenty Years of Science Policy in Canada”. It refers to the fact that we haven't been able to increase our investment as a percentage of GDP in research and development for a long time. We're still down near the bottom. I've tried to explain some of the fundamental reasons for that, like a resource-based economy in the past and the fact that we have many corporations that operate in Canada but don't do research here.

Mr. Janko Peric: Lately we've heard some comments from some members of Parliament who think there's a brain drain. You're probably keeping in touch with this at the University of Waterloo, and you're probably aware of what Bill Gates is doing for the university and graduate students. Could you comment on that? How can we keep our graduates in Canada? What would you do to keep them here?

Dr. Arthur Carty: I think we'll have to recognize that highly qualified and highly trained people from the university system, or indeed from the National Research Council, will be sought after internationally and they'll be sought after particularly by United States companies. It is true that Microsoft sees those people in programs such as Waterloo's in computer science and computer engineering as extremely attractive. A very high-quality product is being produced by our educational institutions and it's attractive to people south of the border.

I think we have to try to create an environment here. It's partly salaries, it's partly, I think, quality of life, and it's partly building our industrial capacity so that our young people can see that there really is a future here. It's a very difficult competition. The salary scales in the United States and the bonuses that people get to sign on there are significant incentives for them to move south of the border.

I wish there were a stream coming in the opposite direction. As yet, I don't see that. But we do have attractions here. With appropriate thought, I think we can put in place incentives in working conditions, attractions that will help keep our best here.

Mr. Janko Peric: My last question—

The Chair: That was your last question, Mr. Peric.

• 1035

Mr. Lowther.

Mr. Eric Lowther (Calgary Centre, Ref.): Thank you.

I'm certainly very interested in all the presentations, and particularly, Dr. Renaud, some of your comments about the impacts of the information age. As you were talking, I was thinking about some of the statistics I've read or comments I've read. One is, today there are more scientists and engineers alive in the world than prior to the whole history of mankind. Another is, if an engineer is to graduate today with an undergraduate degree, he has to take his degree three more times in a 30-year career just to stay current.

I also heard another statistic some years ago. If you took all the information in the world today and had it in a big pile, 20 years from now it would be 3% of the new total.

So you look at those kinds of things.

I made note of your comments about the information age. Also, I think one of the gentlemen referred to a program to reskill with software engineering techniques some of the current researchers, and the impacts there.

When I look at all that and then consider the graph you presented on the base of the pyramid being this basic research that so much of our conversations here today have revolved around, I wonder if these forces don't require the research community to consider a paradigm shift, totally, from the way you approach funding of basic research. I'm theorizing; I don't know the answer to where the paradigm shift would take you. But if the bottom level is some sort of curiosity-driven thing that spurs basic research, perhaps there needs to be some sort of ranking of the highest curiosity component of all the various things that can be researched, and then those who have that curiosity participate in funding and possibly some of the fruits of it. I know that goes against the whole concept of free-flowing basic research, but a paradigm shift, if you could speak to that.... Maybe we need to change some things.

Dr. Marc Renaud: First, on the information age, I'm so convinced that we're undergoing really profound changes. I'm convinced that our great-grandchildren won't have a clue of the world in which we live now. So much of the world will have been transformed. As you say, jobs won't be the same, the kind of preparation—the changes are tremendous.

In that context, when I talk to my colleagues in the humanities and social sciences, the word I use the most is usefulness. I say you have to show somehow how useful you are. You have to realize that represents a paradigm shift, because in the past people thought if they had a Ph.D.... They were not psychologically prepared to go out and explain the relevance of what they were doing.

That's why at SSHRC now we're saying we're going to continue investing in curiosity-driven research. I'm a researcher, and if I'm not curious, my research won't be good at all. You have to understand.

I've been part of this group that worked on determinants of health in Canada. We were not preoccupied at all with relevance; we just wanted to understand where there was a gradient of health in populations throughout the world. That had a lot of political implications, but without us having that intention at first.

My point to my colleague is that we have to change a little the way we present ourselves. We have to show at the end of the day what help taxpayer dollars that have come to us have had.

The Chair: Dr. Brzustowski, do you wish to add to that?

Dr. Tom Brzustowski: Madam Chair, thank you. At this point, I will part ways from my colleague from SSHRC on semantic grounds. We at NSERC in fact do not use the term “curiosity-driven research”, because to a lot of people that sounds altogether too casual. The research is in fact very purposeful, and we define basic research through a series of attributes. We can no longer assume that everybody will interpret one adjective in precisely the same way.

It's very important to realize that in fact that paradigm shift is occurring. There is a program, for example, of NSERC industry-industrial research chairs, in which a basic researcher sits down with somebody from industry and they work out over quite a while the way the interests of that researcher and the directions of the researcher's work fit in with the strategy for technology of the company. If they can reach an agreement, they put their money on the table, we match it, and the resources are concentrated on this fundamental research out of which the industrial partner can see some use growing.

• 1040

I'm very happy to tell you that the program has been in place for 13 years. We've funded about 250 of these chairs across the country. They last for 5 or 10 years, and about 160 are active now. That paradigm is alive and well in the NSERC world.

The Chair: Dr. Carty, do you wish to add to that?

Dr. Arthur Carty: I just wanted to add a couple of things to that.

It's important to try to get away from the idea of focusing only on basic research, because sometimes there is a fundamental misunderstanding of what that is. Engineers, by and large, do applied research, and that's a very significant component of our research community.

The National Science Foundation in the United States uses the term “fundamental science and technology” to illustrate that there is a spectrum of activities that have to be supported in the area of science, engineering, and medicine.

You certainly need to invest in fundamental understanding in order to make technological developments. I think we have to see how that fits together before we start simply talking about curiosity-driven research in particular.

The Chair: Dr. Friesen, did you wish to add to that?

Dr. Henry Friesen: No.

The Chair: Mr. Lowther?

Mr. Eric Lowther: No.

The Chair: Mr. Lastewka, please.

Mr. Walt Lastewka (St. Catharines, Lib.): I apologize to the witnesses for having to leave for a few minutes to go to the House to table some documents.

I have been very carefully reading the presentations, and I have three areas that I will try to cover quickly.

We've heard over and over again about corporations, especially those with branch plants, not doing research in Canada, but that's not different from what we have by provinces or even in the Ottawa-Hull area. Research is usually done where the headquarters are, and I think over the last five or ten years there's been even more movement back to where the headquarters are. When you look at the budgets of our provinces and the Ottawa-Hull area, most of their expenditures on research are done in, for example, the Ottawa-Hull area, the Quebec City area, the Toronto area.

My concern is for the rest of Canada, how they are communicated, that they also get some of the dollars and the benefits of research that is done in the capital regions of the provinces and the country.

What can we do with corporations to spend more money in their branch plants? Should some incentive be given to them, like a tax for research?

Dr. Henry Friesen: I'll address my response with a focus on the pharmaceutical biotech industry. I think each industry sector is somewhat different.

Increasingly, I think there's an element of truth in what you say, but in the pharmaceutical industry there's a lot of outsourcing. Knowledge is shifting so quickly. It's the small start of biocompanies that are often the cutting edge, where industry scans the world and finds out where the best opportunity is. That's how BioChem Pharma's investment with Glaxo came about. They saw the opportunity and they invested.

We have encouraged the development of megaproject investments right across this country through the MRC programs, and I'm pleased to tell you that we can now see some of those target investments. As a council, we've recognized the regional disparity. The platform that is available in different regions is variable, so we have a regional partnerships program where we put in a dollar for every two dollars from the province or from those who can seek partners. Our colleagues in the universities can seek partners from the provincial government or, as is more often the case, from industry. So we have set aside in the last several years an enveloped fund to try to position the opportunities right across this country in the 16 academic health sciences sector.

The point you raise is an important one. There has to be some capacity and capability developed right across this country.

• 1045

There is a wonderful example of diversity—I think Dr. Carty referred to it—juxtaposed in the medical health sciences field in Saskatoon. The University of Saskatchewan is really struggling, while right alongside it is a world-class, internationally competitive agricultural biotech sector. In the same location somebody had the vision and put together the right ingredients, and the research and development in that sector is just flourishing phenomenally.

The Chair: Thank you.

Dr. Carty, would you like to add to that?

Dr. Arthur Carty: I want to respond in two ways. First, the industrial community in Canada doesn't just consist of large companies. There is a very high proportion of small to medium enterprises within our industrial sector and they are spread right across the country. I think the industrial research assistance program of NRC does a fine job of supporting innovation in those companies and helping them grow.

Some of the examples that were cited this morning are home-grown Canadian companies that have now become very large in their own right and have very significant research and development investments. BioChem Pharma is one. You could say Newbridge Networks Corporation is another one. Ten years ago Newbridge was nowhere.

We have to grow companies like that and have the programs in place to help them grow and innovate so we don't have to depend too largely on foreign multinationals, as important as they are.

Mr. Walt Lastewka: What about investment by multinationals with branch plants in Canada? They take advantage of many things that are available in Canada, but when it's time to spend their research dollars, their spending is very low in Canada.

Dr. Arthur Carty: Let me refer that to Dr. Friesen, because I think in the health care and biotech sector you have seen significant investment over the last few years as a result of incentives put in place and the change in the patent legislation.

Dr. Henry Friesen: I'd invite my colleague Mr. LePage to illustrate with two or three examples exactly the kind of response I think Mr. Lastewka's question raises.

Mr. Marc LePage (Director of Business Development, Medical Research Council of Canada): I was going to say on the benefit side in health, disease is a concern of all Canadians. With people suffering from breast cancer, for example, no matter where they are it would be curious to have Dr. Labrie move forward in Quebec City with sharing multinationals supporting his work—or prostate cancer or AIDS with BioChem Pharma and Glaxo. So we have local, home-grown talent and multinationals working hand in hand. The benefits are industrial ones, but it's also very clear there are health benefits for the patients from coast to coast.

Dr. Henry Friesen: There's the cancer vaccine program by Pasteur-Merieux-Connaught. The Technology Partnerships Canada program sort of facilitated that, but there's a $300 million investment, with $60 million of investment in Canada.

The Chair: Dr. Brzustowski, do you wish to add to that?

Dr. Tom Brzustowski: I think the points have been made.

The Chair: Okay, great.

Thank you very much, Mr. Lastewka.

[Translation]

Ms. Lalonde, please.

Ms. Francine Lalonde (Mercier, BQ): I have been waiting a long time to take part in this discussion. I have been very interested by all the presentations. To use the words of our Conservative colleague, it seems to me that the Standing Committee on Industry should tell the representatives of the National Research Council that they will not be the only ones to ask for a large increase in the amounts we invest for research and development and technological innovation, because we will have to review the document mentioned by Mr. Renaud, the report that was ordered by Mrs. Bourgon—I didn't know that before he said it—and of which I have seen an excerpt.

I think the Committee should request the full document. I got an excerpt simply because a Citizen reporter obtained it through the Access to Information Act. It is a chapter called "Improving Productivity". It says—and I think my Reform colleagues will be very interested in this—that Canada is lagging behind other developed countries in one key determinant of growth, of high income growth; that determinant is total productivity of input.

• 1050

We know that research and development and innovation are extremely important ingredients in this regard. If Canada had not lagged behind, the enormous cuts we had to make would not have been required. Our responsibility here is economic development. The Department of Finance is dealing with macro-economics; the Department of Industry looks after micro-economics.

Therefore, we need to plan development. According to this study, which is very well documented, one of the factors of growth, of a high productivity growth, is research and innovation, including in the area of social programs. I was extremely interested to note that innovative companies are not only innovative in the area of technical processes; they are also innovative in their manpower management and, generally, in their management of knowledge.

We certainly need to look at how best to support research, because research is required not only for us to remain competitive but also because of Canada's character. Studies have been done by the OECD that we should have here, in this committee. I am very happy that we are taking a look at this. The OECD showed very clearly that multinational corporations do their research in their home countries and this is one of Canada's problems: without investments by the government, there will be no research done here. It is well documented and it is clear.

I will stop there and table a motion later on. I would like Mr. Renaud to elaborate on the importance of social science research for economic development and social cohesion. Of Mrs. Bourgon's report I only have the chapter entitled "Improving Productivity". The report commissioned by Mrs. Bourgon is called Growth, Human Development and Social Cohesion, and we need to obtain it.

Mr. Marc Renaud: Thank you for your comment. There may be something else you should read; it is a very good document and I'm surprised that you haven't read it, because it's starting to get around quite a bit.

Mme Francine Lalonde: It's an internal document, Sir, but we are going to get it.

Mr. Marc Renaud: There is another text, which is probably the best article I have read over the last year. It is an article by Ralf Dahrendorf, the former Minister of Finance of Willy Brandt and President of the London School of Economics. He says in there that today's corporations face an extraordinary challenge and that the issue is how to simultaneously maximize economic growth, social cohesion and political liberty.

Dahrendorf says that at the end of the day it cannot be done. All we can do, or try to do, while pushing for economic development, is to not neglect the social side, to not push for development through authoritarian policies, etc.

Dahrendorf says that we really need to think and study these vast issues of the future and this will necessarily involve social sciences and the humanities, but as part of a cooperative effort. Research is something very specific, not something vague. It needs to be done step by step. Again, we have a program on the table and we're ready to go with your support.

Mrs. Francine Lalonde: We'll raise the question again in this Committee and we will also raise it within our party.

[English]

The Chair: Thank you.

Madam Jennings, please.

[Translation]

Ms. Marlene Jennings (Notre-Dame-de-Grâce—Lachine, Lib.): Welcome. First, excuse me for being late this morning. Like other members I had several commitments coming together at the same time. However, rest assured that I have read the presentations you have submitted. I would like to deal with two areas.

There is more and more talk of partnerships. A partnership can be of various kinds but I understand from your briefs that it is often a partnership between universities or research centres, researchers, private industry and the government; and when I say government, I mean both the federal and provincial governments.

Could you please explain the added value of these partnerships? They are something that did not exist twenty years ago. We only had government subsidizing research or some companies who had their own research and development departments.

• 1055

So, as you said, we're seeing more and more of these partnerships, whether in social sciences, in medical science or in other areas. So, when we talk, for example, about the subsidies provided by the Canada Innovation Fund, what is the added value?

[English]

The Chair: We'll start with Dr. Brzustowski.

Dr. Tom Brzustowski: Very briefly, Madam Chair, there are three elements. The first is the financial one. Each partner pays only a fraction of the cost and therefore a great deal more can be done altogether. Secondly, the partnership brings in a planning phase in which the partners must be satisfied that in fact there's strategic value in what is being done. It is very important because they don't put money on the table otherwise. Third, it brings those who generate knowledge close to those who use it. In practical terms, it means the researchers involved in the partnerships find very ready employment because they are working on problems of interest to the partners.

So from NSERC's point of view there are those three elements.

The Chair: Dr. Carty.

[Translation]

Mr. Arthur Carty: They are the same conclusions.

Mr. Marc Renaud: The concept of partnership in social sciences is more recent. I often tell the others they are our older brothers because we are just beginning to develop partnerships.

In Quebec, we have already created 22 research centres in partnership, not with the industry, although that would also be possible. Sometimes it is with community groups working on mental health issues, for example, and sometimes with social service agencies. The results are tremendous. Firstly, the areas of research change all of a sudden because people who need knowledge tell researchers: Go in such and such a direction because we need to understand this or that. Research results are almost automatically incorporated into organizational changes. This is why the SSHRC also needs, in my opinion, to move into this direction, especially since there is tremendous demand from government agencies.

[English]

The Chair: Thank you.

Dr. Friesen.

Dr. Henry Friesen: For the health sector, one of their partnership components that wasn't included in your list, a very important process, is the partnership with the voluntary sector—the Canadian Cancer Society.... The list is a very long one.

We have partnerships with many of these organizations. It offers an incentive for them in their fund-raising campaign, because we offer the peer review process, which is a quality assurance, a gold standard, that the investments of the donor are well targeted and appropriate. There's a coordination of coherence of approach. It avoids duplication of effort in terms of the adjudication process.

The other dimension that we find and increasingly recognize as an important value is the communications strategy. The point was made about how do we tell. We're doing good, we believe, and our obligation is to tell others more effectively than we have. What better way than through these partnerships that provide, in a sense, that third-party endorsement? The tens of thousands of volunteers...the Canadian Cancer Society is discovering the MRC for the first time.

The Chair: Thank you.

Madam Jennings.

Ms. Marlene Jennings: Thank you. I appreciate that.

There is another area I'd like to explore with you, or rather to hear you explore. There is an article in today's Gazette dealing with an economic impact study done for McGill University that shows, for the amount of research money it receives—federally, provincially, whether it's from industry, the private sector—the tuition fees and student spending, the kind of return it brings for Quebec.

Nowadays we're asking more and more to see results, and there's a certain amount of control that's built into the research grant in order to determine that it's actually doing what it's supposed to do. We're looking at returns on dollars as well.

In terms of the research funding you do at the council, do you take into account the economic impact that particular area of funding, grant, research project or program will have not only on the immediate community but on society in general, or a particular sector?

The Chair: Dr. Brzustowski.

• 1100

Dr. Tom Brzustowski: That question is one that preoccupies us. The councils are developing performance indicators.

Specifically, to answer your question, the long-term impact of basic research is something that is best assessed in hindsight. In fact there are many studies—NSERC has done one of them and you heard an example by BioChem Pharma—in which we could trace the development of companies, their employment, their sales, and their value-added in the economy to investments made maybe two decades ago in basic research. So we have that.

Secondly, a very large portion of the funding that NSERC provides to researchers is spent on salaries of research assistants, technicians, graduate students, and so on. That goes into the economy in the same way as any other salary money except that you're dealing with people who very often in fact require advance services. They are people who create a demand for new developments themselves, so there's a larger multiplier on that money than on a lot of others.

We also have studies, the most recent one in physics, in which, just looking at the formation of companies and products and sales, the conclusion is that the return on investment is something of the order of six times the amount actually spent on the research. Part of that, you realize, is that we only pay the direct costs so we get some leverage, because other people pay the indirect costs. But it's leverage that resides locally. The benefits are all local. These dimensions preoccupy us and there's a lot of work being done on them.

The Chair: Thank you, Dr. Brzustowski.

Dr. Friesen.

Dr. Henry Friesen: One of the other benefits of course is in terms of improved human health. As a reminder of that, when we had discussions with the CEO of the Hospital for Sick Children, he told us that within the past decade they have moved from being the largest children's hospital in terms of beds, with some 700, to having 300 beds. With improvements he imagines they'd be down to 250. The point he made is that there are 500 children sleeping at home with their families rather than being in a hospital as a result of progress made. That's just a small dimension of the kind of progress that's made.

You can think of the improvement in terms of transplantations. Instead of dialyzing people endlessly for years, we can transplant. The improvements in understanding immunology have led to productive lives. One could make a very long list of interventions that have been made possible through research that have literally transformed the lives of countless people around the world.

The Chair: Thank you.

Dr. Carty, do you wish to add to that?

Dr. Arthur Carty: I simply want to add that I think we're all in the business of measuring our performance. That means the reach we have, the organizations we reach and the impact we have on those organizations, the impact of the research results and the technologies we generate, is an essential component of the work of all the councils. It's increasingly been an element of our annual reporting.

The Chair: Thank you.

Dr. Renaud.

Dr. Marc Renaud: I do not have much to add. This is a key question, the discussion of performance indicators. We'd be happy to feed you with the material we have.

We are trying to assess the performance of our investments. Again, it's not simple but it has to be done. We would be happy to forward you the material.

The Chair: Thank you.

If the witnesses would bear with us, I know we were originally scheduled to end at 11 a.m., but if you could stay for ten more minutes we have two more individuals who would like to ask questions, if that's okay. If anyone has to go, we understand.

Mr. Schmidt.

Mr. Werner Schmidt: Thank you. I have a question for Dr. Friesen.

This committee has dealt with Bill C-91 and the patent protection and the 20-year period. You are one of the recipients of the money that was to be invested in research. Have you had any difficulty getting that money from the pharmaceuticals? If you haven't, why did you find it necessary to enter into a legal contract with them, if you did? Is there the same relationship between the way you grant money to the pharmaceuticals to do research and what the other councils do in terms of peer review?

• 1105

Dr. Henry Friesen: Yes, indeed, we did enter into a negotiation discussion, and ultimately a legal agreement, between the innovative pharmaceutical companies and the MRC. The agreement, in essence, had the companies, as a goal, investing $200 million over a five-year period, which was supported by MRC as $1 for $4 of industry.

Yes, we had trouble reaching the target. Things got off to a slow start. There was a cultural shift. I spoke about that a little bit in my remarks.

I think we're going to have real trouble reaching the goal, partly because of that slow start. The current numbers are at about $120 million, $130 million, I believe. We have a year to go, roughly. That's a long gap to fill. I think even with best efforts, we're going to fall somewhat short. We may be at $190 million to $200 million of the $250 million joint target. Still, that's a very substantial amount of money. I'm disappointed, and I think industry is disappointed that it had that slow start.

I remind the members of the committee that it's the only program of its kind in the world, so again, picking up on the point Dr. Carty made, we've been quite inventive. We need a legal agreement, because I think when you're talking in dollars of that kind, it's important to have the facts clearly on the table in the form of a contract.

Even with a contract, I must tell you, there were some subsequent interpretations that varied on both sides despite the agreement. So I think there are some lessons to be learned.

You had a third point?

Mr. Werner Schmidt: Yes, it has to do with—

Dr. Henry Friesen: Peer review.

Mr. Werner Schmidt: Yes.

Dr. Henry Friesen: Peer review is identical in terms of rigour. It's somewhat different in approach in that, quite clearly, the circumstances of the research are a little different. MRC exclusively manages the peer review. That's within our domain. We judge it by asking: is it interesting? Is it good science? Is it innovative? Do the same criteria apply to all of our programs?

We have offered—it's quite interesting—a business-like approach with a 60-day turnaround. We said there's no reason why we couldn't offer a quality review in a shorter timeframe. That's kind of an important innovation, and industry has appreciated that.

Mr. Werner Schmidt: Thank you very much.

The Chair: Thank you, Mr. Schmidt.

Mr. Bellemare, briefly, please.

Mr. Eugène Bellemare (Carleton—Gloucester, Lib.): Thank you.

To make it very brief, you've spoken of mechanics all the way through and you've been very convincing. I think you would have quite a cheering team at this committee.

Obviously, the problem is one of funding. Of course, you appear to be always wanting more money with your hand out, which is embarrassing for the type of work you do. You're obliged to appear to be looking when doing that.

I do have suggestions of perhaps ways we could skin the cat differently. Instead of just giving money—only that—we could also change the tax system so that there would be incentives for corporations and individuals to donate or to invest, depending on the situation. We could even have some coercive tax system where, if you're doing business in Canada, you pay certain parts of votre chiffre d'affaires for research and development, either internally or through some of these agencies or organizations you represent.

Dr. Tom Brzustowski: Madam Chair, I have one very immediate response to this. I'll leave it to my colleagues to talk about how good our R and D tax credits are.

One could make an enormous difference in the area of attracting la relève, the next generation, if for example the scholarships given by the granting councils were, once again, tax-free. It would make a huge difference to the young people.

The Chair: Thank you. Dr. Carty, did you have anything to add?

Dr. Arthur Carty: I'll just add that I've heard a number of presentations over the last three years on R and D tax credits, SR and ED tax credits, and it does seem that in principle at least Canada is one of the most competitive countries in the world in terms of tax credits for research and development.

• 1110

I recently heard, and I suspect some of my colleagues have been hearing, stories about difficulties with the SR and ED tax credits. Because of interpretations that Revenue Canada, for example, puts on research, the definitions of research sometimes are a bit bizarre. For example, there are situations where Revenue Canada has decided that a company investing with a university in a research chair funded by NSERC is not research. Well, I have great difficulty understanding how Revenue Canada can make that decision.

So there are problems.

The Chair: Dr. Renaud.

Dr. Marc Renaud: You just made me learn a new expression, “skin the cat”; how can we skin the cat in a different way? Tax benefits really can be helpful, but we don't use this in the social sciences and humanities, because for some reason governments have always thought we were irrelevant for this. Yet what Tom just mentioned about scholarships is damned true. It would make a hell of a lot of difference.

What I mentioned earlier about the drug industry and the need for investment in social research on drugs—again, pharmaco-vigilance, pharmaco-economics.... We've developed a national centre of excellence for tele-learning. They are developing software for people to connect throughout the country and throughout the world and to learn to do this. They are marvellous. Again, no tax credits. That could be very helpful.

The Chair: Dr. Friesen.

Dr. Henry Friesen: On that last point, OECD recognizes those kinds of studies as eligible for tax credit; Canada doesn't. That would be a very important, helpful intervention on behalf of this committee for the pharmaceutical industry. These kinds of studies really underscore the importance of making sure that when innovations in science take place the tax credit system keeps up with the pace of development.

The venture capital opportunities really have...the Canadian tax regime, the labour-sponsored venture capital system, was very helpful in launching a number of the innovations I've spoken about. Some adjustments were made, I think. Perhaps the mark was overshot a bit in some of those adjustments, but it's quite clear that has transformed the landscape of venture capital and has driven developments dynamically in this country. I applaud that regime.

The Chair: Madam Alarie, one final question.

[Translation]

Ms. Hélène Alarie: I want to follow up on the question I asked earlier. I will develop it, because I heard very interesting information. Return indicators, basic research, all of that creates a small problem for me and I believe it also creates a problem for some researchers. They have a four-year project in an area of basic science, but in some cases they will need eight or twelve years. I don't know for how long we have been doing research on AIDS, but if there is a return indicator, how can we apply it in the area of basic research? Are we more tolerant? If we aren't, that could lead to tremendous insecurity for researchers who work within a team and who believe that after four years, their performance will be examined even though the problem will be just as great as ever.

[English]

The Chair: Dr. Renaud.

[Translation]

Mr. Marc Renaud: Research is, by definition, a sector where there is little job security. You win or you lose, and there is always competition between everyone. What you must understand is that the peer review system is a judgment system. For research teams, a project might last ten years, because the area is so complex that you have to work for ten years before accomplishing anything. It is therefore very important that we ask them to come back every four years before a jury to see if things are moving along as they should.

I believe that that is the fairest way to spend public funds. We cannot take a risk with a ten-year endeavour by closing our eyes. It is absolutely essential to require of scientists that they be competitive and that they stay up to date. That is the rule of the game.

[English]

The Chair: Dr. Carty.

[Translation]

Mr. Arthur Carty: There are immediate results and long-term results. In the short term, there are, for example, publications, patents, reports, presentations at conferences, etc. It is the immediate impact that we can subject to peer review.

• 1115

As far as the impact of technology is concerned, this is more long-term. We must look at the other measures: the creation of companies, for example, revenues from licenses and royalties. It is complicated, but one can measure the impacts and the immediate return through the publications and the scientific and technical activity.

[English]

The Chair: Dr. Brzustowski, did you have anything to add?

Dr. Tom Brzustowski: No. I think it has all been covered.

The Chair: Dr. Friesen?

Dr. Henry Friesen: No.

The Chair: I want to thank the witnesses before us today. This has been very informative. We wanted to have you. We apologize for the brief notice, but we wanted to meet with you before the Christmas break and before we went off, to give us some final food for thought as we embark on our basic research in the research part of our new agenda. We thank you for being with us today and for the very enlightening conversation.

We are having a brief recess. While we are recessed for January, it gives the committee an opportunity to review what has been discussed today and what was discussed in October with the AUCC and to develop some thought processes for February. It's a recess, but we will still be working.

Thank you very much.

I remind the committee members that we will now proceed in camera to discuss our long-term study, because of the problems we had on Tuesday with our bills coming before the House at the same time.

[Editor's Note—Proceedings continue in camera]