OTTAWA — The federal government has now spent nearly $200 million to subsidize steel and aluminum companies using a fund originally designed to spur cutting-edge innovation, drawing criticism from policy experts for what they call a misuse of funds.
Ottawa has funnelled $194.9 million into various steel and aluminum producers and manufacturers through the so-called Strategic Innovation Fund (SIF), created under Prime Minister Justin Trudeau in 2017.
The most recent expenditures, announced late last week, include $20 million for an expansion of Gerdau Ameristeel’s Ontario facilities, and $16 million for Tenaris Algoma Tubes to upgrade its operations in Sault Ste. Marie and Calgary. Ottawa has promised as much as $2 billion in support to steel and aluminum companies — $250 million of which will come from the SIF — as a way to cushion any financial damages incurred by companies as a result of retaliatory tariffs levelled by Ottawa against U.S. President Donald Trump in July 2018. Those tariffs have since been dropped.
But several experts on innovation policy in Canada have criticized the fund, arguing that sound innovation spending should not typically flow into specific sectors just as they face acute crises.
“There is no strategy or any innovation in what the current government is doing with the fund,” said Dan Breznitz, professor at the Munk School of Global Affairs and Public Policy .
Criticism of the Strategic Innovation Fund plays into larger concerns that Canada is missing a crucial window to introduce innovation policy that will allow tech companies to thrive in an increasingly competitive and global marketplace. Industry Minister Navdeep Bains has been leading efforts by the Trudeau government to introduce such policies, including the establishment of the $1.26-billion Strategic Innovation Fund, which was later increased to $2.06 billion.
But policy experts say the fund, similar to past programs, has fallen into a familiar pattern of industry subsidization, placing too much emphasis on broader economic indicators rather than looking to commercialize promising new technologies.
“By and large it seems a pretty broad smattering of industry support and job creation more than a response to a focused innovation policy,” Richard Owens, senior fellow at the Macdonald-Laurier Institute, said of the program.
Policy experts have for years watched as innovation spending programs gradually become more and more politicized, especially ahead of general elections.
“The temptations for political favouritism are simply too great, in part because that’s what government feeds on,” Owens said.
The federal government, for its part, has defended its active spending record. Bains’ spokesperson Dani Keenan said Ottawa is “helping bolster the competitiveness of Canadian manufacturers” through the steel and aluminum subsidies. It has spent a total $1.7 billion under the fund, according to its website.
That includes expenditures on innovative companies including MindBridge Analytics, an artificial intelligence firm, and Carbon Engineering, which has developed a technology that scrubs carbon dioxide out of the atmosphere. Other funding included $110 million to Toyota to expand a facility that produces the RAV4 sport utility vehicle, and $49.5 million to Bell and 18 other partners to develop autonomous helicopters.
People skeptical of the fund say its focus has drifted from highly innovative areas toward what amounts to government subsidies.
“When it was conceived [the Strategic Innovation Fund] was meant for particular strategic sectors, not as a firefighting fund for industries that have run into trade disputes,” said Aaron Wudrick, head of the Canadian Taxpayers Federation. “They seemed to have repurposed what the fund is for.”
Other observers say the shift in focus is a natural reaction to global trade rifts.
“The priorities have definitely changed amid the Trump tariffs,” said Daniel Schwanen, vice-president of research at the C.D. Howe Institute. “I’m not terribly inclined to be critical there, because if they had not used that particular fund they would definitely have done something else.”
The SIF funding announced last week for Gerdau Ameristeel will help “improve mill performance and product capabilities,” according to a press release. Gerdau, its parent company, is a Brazilian steel conglomerate, while Tenaris, who also received funding last week, is a manufacturing firm based out of Luxembourg.
Ottawa had earlier announced subsidies for and Aluminerie Alouette, a firm owned by billion-dollar conglomerates including Marubeni in Japan and London-based mining giant Rio Tinto Group.
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