Ivison: Canada’s multi-billion dollar bet on EV battery plants is 'disastrous' policy, Balsillie says

The co-founder of Blackberry, Jim Balsillie, joins veteran policy adviser Robert Asselin and National Post’s John Ivison to discuss the problems with Canada’s traditional and arguably outdated approach to innovation, trade and competitiveness — and why it leaves us dangerously vulnerable to U.S. economic power.

Watch the latest episode of NP Ivison, below. 

The man credited with remaking the smartphone industry with Blackberry in the early 2000s says Ottawa’s decision to give tens of billions of dollars in subsidies to foreign companies like Volkswagen to build battery cell manufacturing plants in Canada was a “catastrophically disastrous move.”

Jim Balsillie, the former chair of Research in Motion and more recently the co-founder of the Council of Canadian Innovators, told National Post’s John Ivison that he thinks Canada’s approach to trade and competitiveness is outdated and ignores the fact that in the knowledge economy, prosperity flows from ownership of intellectual property.

“The issue is Ottawa has had a flawed conception of how businesses prosper and make rents and returns over the last several decades. They say you have to buy technology (but) that’s a production economy model. Whereas in fact, what you have to do is you have to be the one that sells the technology and then you capture the value add. (Otherwise) you’re always just going to be at a commodity level of labour, competing against Kuala Lumpur,” he said.

“These are foundational policy failures by policymakers that do not understand how business operates in the global economy.”

Balsillie pointed the finger at François Philippe Champagne, the then industry minister and now finance minister.

“They talk about drawing investment, but most of that ‘investment’ is the high value-added machinery companies bring into Canada. We don’t get all the wealth effects, we don’t get all the profits. (The foreign companies) are given multi-decade profit holidays in Canada. We don’t get any of the value-added supply chains off that. And in this more automated type of factory, the number of workers is less and less every year. The value added is less and less. So our attitude is about maintaining a viable automotive industry, rather than being forward-looking. It’s been palliative to just maintain a diminishing share because the production piece is much, much less valuable and (employs) fewer people,” he said.

“You have to capture it more on the upstream and on the downstream aspects of it, whereas Canada is only focused on the midstream. You have no strategic control. And so what happens then is we’re vulnerable to predation.”

Balsillie said the focus on subsidizing foreign firms has the opposite effect than desired when it comes to diversifying markets because those companies do not have global product mandates.

Balsillie and Ivison were joined by Robert Asselin, a former advisor to Liberal ministers and prime ministers, and now the chief executive of U15, the association of leading research universities.

Asselin said that from his experience, there is an orthodoxy in the federal finance department about the so-called “Washington consensus.”

“The government’s role was seen as basically to be a spectator and to make sure that we provided a few R&D tax credits. As long as we signed free trade agreements, we’d carry the day. (But) I think we’ve realized, to our shock, that the world has changed and that countries are moving fast in terms of economic competitiveness. And so you have to be very intentional. At the end of the day, you have to align talent, capital, research in advanced industries where you can compete, and where you have critical mass and scale. And I think this kind of ‘peanut butter’ approach that Canada has had, of giving a bit to everyone in all regions and being captured by subsidies is something we really have to change,” he said.

Balsillie said the outmoded thinking was exemplified by Mark Carney’s recent visit to Germany.

“What did he say? We will supply you LNG and we will supply you raw materials, and the Germans will supply us submarines and bring refining technology for us to refine this stuff. So we’re persistently consigned to a low value-added economy that’s resource based. So the structure of Canada’s economy is much more akin to Russia’s, even though we have the potential to be a very, very high value add, very sophisticated, very sovereign economy. But it’s been a catastrophic policy failure in our policy community over the last 30 plus years as the economy transitioned, our policy community did not transition to the nature of the economy and the commensurate security that comes with that economy,” he said, saying there is “a closed-mindedness and parochialness” that has reinforced a losing orthodoxy.

Asselin said that Canada has a very competitive research sector that lacks the bridges to translate the ideas to the Canadian private sector.

Balsillie cited examples where the bridges led out of Canada.

“There were recent patents granted for University of Waterloo research with Huawei, giving away the best battery technology from Dalhousie to 3M and Tesla, giving away the best AI technology from Edmonton and University of Toronto to Google. We don’t have a capture structure. So until we fix that, which we have not, I’m extremely wary,” he said.

Asselin agreed with Balsillie that when thinking about economic growth, it is important not to focus on jobs but “to focus on where economic value derives”.

“Subsidizing jobs from foreign companies to come into Canada is the wrong way to think about it. Where the value is, is in the design of the technology, building the innovation assets that we have and keeping them in Canada,” he said.

He pointed to Ottawa’s establishment of a new defence research bureau, Borealis, as a promising source of new intellectual property, if it is well executed.

The idea is to co-design technology and allow the government to de-risk it for the private sector, crucially keeping the IP in Canada.

“For me, the promise of Borealis is that it is the first time that the government actually understands  that on the public procurement side, it has a responsibility and an opportunity to buy Canadian technology. And to have the government as a buyer is really important,” he said.

The key for Balsillie is the “capture structure” to ensure good ideas are commercialized in Canada.

“I was in Ottawa yesterday dealing with them on this. We have to get the ex-ante capture structures right before we throw more money into it. But that’s been a product of this colossal policy failure because they’ve used production economy attitudes where it’s a market failure, that you fix the market with a grant,” he said.

• Watch more episodes here
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