Canada has been abuzz with the plant’s newly revealed price tag. Volkwagen has committed C$7 billion to build the electric vehicle battery plant, its third and largest yet, in St. Thomas, Ontario. The federal government sweetened its offer with up to $13.2 billion in production subsidies, a deal that will remain in place as long as the Inflation Reduction Act is in effect.

The country’s existing automotive and parts manufacturing base, its quality of life and the comparable abundance of clean energy were carrots that were baked into Canada’s offer, he said.

“If it was just about money, it might have been easier for the company, frankly, to locate in the U.S., because the U.S. had already made this decision last fall — the incentives were there under the [Inflation Reduction Act],” said Kennedy.

Kennedy’s three-decade career in the public service includes six deputy minister-level roles with the Privy Council Office, Industry Canada, Foreign Affairs and International Trade Canada, and Health Canada. He was appointed deputy minister at ISED in September 2019, where his ministry is also occupied with artificial intelligence and health security.

The issue of resiliency, Kennedy said, is a through line running through policymaking today into the foreseeable future.

This transcript has been edited for length and clarity.

We have to talk about Volkswagen. The U.S. wanted the gigafactory, too. When was it first clear the deal was Canada’s?

Even prior to the Inflation Reduction Act, and certainly prior to the recent announcement by Volkswagen that they were going to be coming here to put their battery gigafactory, we’ve been working with all of the automakers to support them in their pivot to zero emission vehicles.

The battery is actually one of the most important, if not the most important, components of a zero emission vehicle accounting for as much as 40 percent of the value of the vehicle in terms of its sales.

Certainly, the view of the department, and I think the view of the government, was that as we try to pivot this very important sector of the economy to produce the cars of the future through light zero emission vehicles, then actually having key elements of the battery supply chain — if not the entire battery supply chain — in Canada and having it integrated with our assembly operations was an important part of the equation.

Think of a shopping mall. You have all of these small stores, but the mall is anchored by two or three very large department stores. These assembly facilities are anchor facilities.

The battery is such an important part of the car of the future, that actually these battery gigafactories are in a similar fashion an anchor for an entire supply chain of other manufacturers — the electrolyte production, the spacers, the copper foils, there’s all kinds of technology and parts.

If you go further upstream, all of the critical minerals, and the production of cathode active material and the production of precursor cathode active material — there’s a whole supply chain that goes into making the battery.

We’re also in active discussions with those other parts of the supply chain as well.

What’s a lesson you’ll take forward from that round of negotiations with Volkswagen?

Canada is a very serious player in the economy of the 21st century, and we have a serious value proposition to offer. Financial incentives are important but we have significant critical mineral supplies, we have a highly educated workforce, we have a competitive tax regime, we have a lot of clean energy, we have an excellent international reputation for rule of law and for transparency and so on.

The vote of confidence of having an organization like VW decide to make such a significant investment here speaks well beyond the issue of subsidies and matching the IRA. If it was just a matter of the financials, it’s not as obvious that you would just pick Canada.

We hear a lot of talk from the government about how Canada needs to make “strategic” bets. What criteria sets a “strategic” bet apart? What’s the rubric?

Well, it’s always better to be strategic than non-strategic.

Canada has some deep strengths. We have some sectors where we have really significant acknowledged expertise internationally. We also have certain kinds of capabilities in what I might call frontier technologies. For example, among our top scientists are considered some of the founders of artificial intelligence.

Part of being strategic is to recognize areas where you have acknowledged strength internationally, and ideally to try to reinforce those strengths.

I’ve named a couple. Quantum computing would be another. Certainly, we have strength in AI. We have strength in aerospace. We have strength in energy. Critical minerals is an area where we potentially have an enormous advantage just because we have such huge reserves. Clearly, we’re a world leader in mining. I could go on and on.

In a chat with Edward Greenspon last year, you mentioned how the pandemic brought forward this revelation that just-in-time supply chains, in your words, “goes to shit” when you have an international crisis and its every country for itself. What strategic advances, in terms of Canadian health security, does the country have in place now that it didn’t when the Covid-19 pandemic was first declared?

The government established a formal biomanufacturing and life sciences strategy, they have backed that up with significant capital. We’ve been working very closely with our provincial and territorial colleagues, but also with the business sector to execute on that strategy.

If you look at vaccine manufacturing, there is also a supply chain, to get vaccines from the research stage, when researchers and scientists are working on ideas, all the way into somebody’s arm.

You have pre-clinical research. You’ve got clinical research. You’ve got the clinical trials that take place. Of course, in our system, there are multiple phases of clinical trials to test, not just efficacy, but safety. And then ultimately, at large-scale trials to make sure that any unintended side effects are documented, and so on. And then, finally, you actually have to produce the vaccine at some sort of scale. And then it has to go into what’s one of the late stages called “fill and finish” — what actually gets put into the vials and so on and boxed up and then shipped off to the customer.

What we discovered in the course of the pandemic is that a lot of the capacity that we used to have had eroded over time. We maintained areas of serious expertise in that broader supply chain. We had a lot of scientists at the preclinical level. We had a lot of the research and development. A lot of the early stuff upstream. We have the ability, in some areas, to make the drug substance.

What we did not have is the end-to-end capability to make a vaccine such as the mRNA vaccines, for example. We didn’t have the ability to go from the very beginning stages all the way to the end manufacturing stages and have that be able to be shipped off to the population. And we certainly didn’t have the ability to do that at any kind of scale. And in an emergency, that’s what people are interested in.

One of the things that the government has been doing quite methodically is reinvesting, working with the business sector, working with provinces and territories, making these reinvestments at all of those key parts of the supply chain.

Part of what the strategy is about is methodically reinvesting in the various choke points that might prevent our ability to move very rapidly and to make something like a vaccine for a pandemic flu or for another coronavirus or something.

You’re only as good as your weakest link. And the challenge that we face as a country is when the pandemic hit, we discovered that actually, we had multiple weak links.

Artificial intelligence. How are you thinking about it? How is it coming up in your work?

Canada is one of the founders of the field. We’re quite proud. We have scientists like Geoffrey Hinton and Yoshua Bengio and others. The Government of Canada launched the pan-Canadian strategy for artificial intelligence, partly in recognition of the fact we have this critical mass of people in this field who are really world leaders. And we wanted to build on that. We were the first country in the world actually, to have this dedicated national strategy for AI.

I think the judgment is, this is a general purpose technology, that could be quite transformational and quite beneficial for our economy, for our environment, for society.

There are also, of course, concerns. And those have come up very recently in the context of a ChatGPT, for example, about the possibility of AI to be used in ways that might not actually improve our quality of life or might be used for nefarious purposes. The government has responded to that by actually introducing draft legislation.

There is a bill now, before the House of Commons, the Artificial Intelligence and Data Act, which is specifically designed to set out a framework for the responsible use of AI — and this is something that our ministry is helping to champion.

Do you use ChatGPT?

I’ve been following with great interest the whole debate. It’s certainly something we have been in active discussion with our colleagues in the AI community about. I haven’t personally used it.

What’s a sleeper issue you believe we’ll be talking more about a year from now?

The pandemic demonstrated pretty clearly the importance in our society and in our economy of resiliency.

How do you handle a shock or an unanticipated event? Virtually overnight, you can discover dependencies that maybe you weren’t even aware of.

For example, much of the personal protective equipment that our health care sector relies on is made by one or two jurisdictions on the other side of the world. That has implications for thinking about if you want to have not just a productive economy that delivers a certain standard of living and a certain GDP output.

In a world where you’re maybe more worried about systemic risks from things like pandemic illness, or you’re worried about the impacts of climate change, and potentially, even now, if you think about the war in Ukraine, about geopolitical risks, that you need to be mindful about resiliency.

A supply chain that is ruthlessly efficient, but as far flung across the world where maybe for efficiency’s sake you concentrate all of the production of one component in one jurisdiction — that maybe doesn’t make enough allowance for geopolitics and the weather and Mother Nature. We saw a signature example of this with Covid-19.

You might have thought with the emergence of Covid, that other kinds of priorities would have taken a backseat. But actually, the opposite is the case. You can make at least some case that some of these developments in the last few years that put even more urgency around trying to build even more resilient supply chains, paying even more attention to who it is you’re trading with, and how friendly they are and how reliable those connections are.

You can see, for example, in the United States, with the CHIPS and Science Act and the effort to re-shore or at least build additional capacity on semiconductors, I think that’s part and parcel of this concern about resiliency. You can see this in the discussion around critical minerals.

A lot of the issues around resiliency have kind of come to the fore in a way I think will probably be enduring and probably actually shape a lot of decisionmaking around Cabinet tables and around corporate boardrooms, probably for at least a decade to come.