Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 3114 INFORMATION TECHNOLOGY ASSOCIATION OF CANADA ASSOCIATION CANADIENNE DE LA TECHNOLOGIE DE L’INFORMATION ITAC on Trade and Competitiveness | Page 3 THE VOICE OF THE INFORMATION AND COMMUNICATIONS TECHNOLOGY (ICT) SECTOR IN CANADA | www.itac.ca Support demand-driven R&D and a competitive business culture Beyond improving supply-side R&D drivers such as tax credits, the government must work to create a business environment that encourages competition and constant innovation. This includes creating a nimble, pro-innovation regulatory environment focused on reducing risk, while also allowing emerging and disruptive businesses models to grow. For instance, Canada’s regulatory approach to privacy should allow reasonable flexibility and create space for innovative uses of data.11 Canadian governments should also encourage broader experimentation within their own operations using sensors, actuators and autonomous devices that make up the Internet of Things (IoT). The government should also create platforms for Canadian businesses to deliver on-demand solutions to market challenges. For instance, the U.S. federal government’s Challenge.gov platform has led to the development of a range of new products based on government agencies identifying a market demand and running open competitions. Increase access to capital Access to capital is regularly identified as a competitive disadvantage facing Canadian ICT firms—particularly for mid-sized companies as they work to scale up.12 While Canada’s venture capital market has been growing in recent years, it is still 20 to 30 times smaller than that of the U.S.13 One serious challenge is that Canada’s large financial institutions are not inclined to extend financing to firms whose primary assets are intangible intellectual property. When mid-sized Canadian companies cannot access financing (or additional financing) in Canada, they are often forced to seek it out in the U.S., where banks and VCs will compete for their business. This can ultimately sow the seeds for these firms’ eventual sales or departure. Increase Access to Export Markets and Support Digital Commerce Canada is a small market. High-growth companies know that sales outside Canada’s borders are critical to their survival. The government needs to create the conditions that help Canadian firms succeed on the global stage. Finalize multilateral trade agreements and create interoperable regulatory regimes Over the last several years, Canada has finalized draft trade deals with key markets. This includes the World Trade Organization’s Information Technology Agreement (ITA), which removed tariffs from 52 ICT products, resulting in savings of approximately $52.2 million for Canadian importers of ICT products.14 While reducing trade tariffs is essential, many digital technologies require interoperable regulatory frameworks and strong intellectual property protections to ensure a level playing field. The Trans-Pacific Partnership (TPP) is the first major multilateral trade agreement to support digital commerce and services. Important provisions of the TPP for the ICT industry include: • protection of source code and cryptography keys,15 • a framework to develop common approaches to regulating the digital economy,16 • protection for uninhibited data transfers and storage across borders,17 and • measures that aim to reduce frivolous or extortionist intellectual property litigation.18 11 See ITAC’s Response to the Office of the Privacy Commissioner’s Consultations on Modernizing Privacy and Consent: http://itac.ca/wp-content/uploads/2016/08/ITAC- RESPONSE-Modernizing-Consent-and-Privacy-in-PIPEDA-August-2016.pdf. 12 See BDC, High Impact Firms: Accelerating Canadian Competitiveness. May 2015. https://www.bdc.ca/EN/Documents/analysis_research/high-impact-firms-accelerating- canadian-competitiveness.pdf#search=%22high growth firms%22. The Canada Venture Capital & Private Equity Association has also studied Canada’s lack of mid- stage bridge capital. See: http://www.cvca.ca/wp-content/uploads/2015/11/FINAL- Venture-Capital-First-3Q.pdf. 13 http://www.theglobeandmail.com/report-on-business/small-business/startups/ canadian-vc-funding-soared-to-10-year-high-in-2015/article28822342 14 http://itac.ca/blog/itac-welcomes-canadas-tariff-cuts-on-ict-products 15 See Trans-Pacific Partnership Chapter 8A Sec. A; Chapter 14, Article 14.17 16 See Trans-Pacific Partnership Chapter 14; Articles 14.6, 14.8, 14.9, 14.10, 14.14, 14.15, 14.16 17 See Trans-Pacific Partnership Chapter 14; Article 14.13 18 See Trans-Pacific Partnership Chapter 18; Article 18.74.10 The Government of Canada should support demand- driven R&D by creating a dynamic, pro-innovation regulatory environment, and new platforms for businesses to learn about and address market needs. As such, the federal and provincial governments should work with industry and provincial partners to increase access to venture and “scale-up” capital for fast-growing firms, including providing new sources of subordinated debt beyond the Business Development Bank of Canada. To advance free trade in digital goods and services, the Government of Canada should continue to work with partners to finalize approval of the Canada- Europe Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP). Canada should also continue to work with industry and partners in the World Trade Organization (WTO) to develop a new Trade in Services Agreement (TiSA).