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Creation of the Competition Policy Review Panel

In its long-term economic plan, Advantage Canada, and Budget 2007, Canada's New Government committed to undertake a review of Canada's competition policies and its framework for foreign investment policy. Competition and investment policies are closely linked, as both underpin the strength of Canada's economy. The key objective of establishing competitive marketplaces is to create a more resilient, adaptable economy to provide Canadians with more and better jobs as well as with low prices, choice, quality and service.

To deliver on these commitments, Canada's New Government is establishing a Competition Policy Review Panel to examine the Competition Act and the Investment Canada Act, including the treatment of state-owned enterprises and the possibility of a national security review clause. It will also examine Canada's sectoral restrictions on foreign direct investment and the competition and investment regimes of other jurisdictions to assess reciprocity between their rules and Canada's. Separately, the Panel will provide views on whether our investment policies are working effectively to encourage outward investment by Canadian firms.

The global economy — and Canada's place in it — is changing at a rapid pace and will continue to do so in the future. Trade agreements are opening national markets while global investments are reaching unprecedented levels. Business is also becoming global, and production is increasingly oriented around global value chains. While our competition and investment policies are serving us well, they have not been substantially changed since the mid-80s. In undertaking the competition policy review, the Government's objective is to ensure that Canada's policies keep pace with these changes in order to create a highly competitive national economy and help create more and better jobs for Canadians.

Structure

The Panel is composed of five distinguished Canadians named by the Minister of Industry on behalf of the Government of Canada. It will receive submissions from interested parties and seek public input, consult to gather information, and conduct focused research to support its work. The Panel will be supported by a dedicated secretariat and will report back to the Minister of Industry and the Government by June 30, 2008 with concrete recommendations that could form the basis of a legislative agenda to further enhance competition in Canada and ensure that the benefits of foreign investment are maximized.

Areas of Interest

Competition policy is more complex in a global economy because a great deal of market activity takes place outside Canada's borders. As such, market activity may also be subject to the competition laws of other countries. The Panel will therefore need to determine how our competition laws can best cope with these situations. It may wish to examine how other countries are managing these challenges, identify best practices and assess how they could be adapted to the Canadian context.

The Panel may also wish to examine the meaning of market dominance in global markets. Overall, it will be important to carry out research and hear views from Canadians on how markets can work more efficiently, while protecting consumers from unfair practices wherever they originate.

The evolution of the global economy further suggests that Canada's foreign investment framework also deserves examination. It has long been recognized that foreign direct investment brings benefits to Canada through new sources of capital, ideas, and know-how, while foreign direct investment abroad allows Canadian firms to be more productive and competitive and, ultimately, creates more and better jobs in Canada. At the same time, foreign direct investment has traditionally raised issues of foreign control of Canadian industry.

In this context, it is important to ensure that the Investment Canada Act remains current with our emerging appreciation of the long-term factors for success, as Canada's ability to compete in a knowledge-driven global economy will increasingly depend on attracting highly qualified personnel, increasing investment in research and development, and building world-class centres of expertise. Accordingly, the Panel will examine whether the Act's "net benefit" test is designed appropriately to capture the range of benefits that are crucial to Canada's economic success. It will also examine Canada's sectoral restrictions on foreign direct investment.

The Panel has also been asked to provide advice on whether Canada's investment framework needs to be updated to address national security concerns, as well as issues related to acquisitions by large foreign state-owned enterprises with non-commercial objectives. (Note)

Separately, the Panel will look at whether our investment policies are working effectively to encourage Canadian firms to invest abroad and become more diversified by reaching out to new investment opportunities.

 


Following the Industry Minister's statement on October 9, 2007, issues related to state-owned enterprises and implications for national security will not be subject to review by the Panel, as the government has signalled its intention to provide more immediate attention to these issues in the period prior to the Panel's report.

October 15, 2007

Mr. Lynton Ronald Wilson, O.C.
Chair
Competition Policy Review Panel
280 Albert Street, 10th Floor
Ottawa, ON K1A 0H5

Dear Mr. Wilson:

I am writing as a follow-up to our recent meeting in Calgary, at which time we discussed how to best focus the mandate of your Competition Policy Review Panel, so as to maximize the effective use of the time and resources available.
I was very encouraged by our discussion and the fact that such a distinguished group of Canadians has volunteered to address these critical issues.

At the core of your mandate lies a review of the Investment Canada Act and the Competition Act since they are two of the principal public policy mechanisms that influence competition and competitiveness. Ensuring that these two pieces of legislation are up-to-date and ready to serve Canada in an environment of global competition will be central to your work. I strongly support the approach that the Panel has taken towards these elements and look forward to receiving your recommendations concerning them.

In addition, I would ask the Panel to provide broad recommendations on the consequences of foreign ownership restrictions as they affect competition and investment. I appreciate that detailed examination of each of the sectoral restrictions on foreign ownership would require separate, more detailed analysis, and I therefore have no expectation that the panel would use its limited time and resources for that purpose.

I share the Panel’s broader interest in enhancing the long-term competitiveness of Canada and creating an environment within which Canadian-based firms can grow and successfully compete in global markets. I am encouraged by the Panel’s interest in providing broad recommendations on how Canada could enhance its policies to support Canadian entrepreneurs and corporations to compete globally.

Finally, as we discussed, the government has concerns about the potential impact the acquisition of Canadian firms by some types of foreign state-owned enterprises would have on national security and the strength of the Canadian economy. We agreed on the basis of that discussion that the government will need to address this issue much earlier than June 2008, when the Panel is scheduled to submit its report and recommendations. As a result, the mandate of the Panel will be modified to remove the issues of state-owned enterprises and national security considerations with respect to foreign investment.

I would like to thank you again for meeting with me and discussing the Panel’s progress and intentions for carrying out its review. I look forward with great interest to hearing from you and your fellow Panel members on these important issues for Canada.

Sincerely,

The Honourable Jim Prentice, P.C., Q.C., M.P.