According to the political logic now in play in Ottawa and too many provincial capitals, foreigners are to be feared — including “foreigners” from other parts of our own country. The decision by the federal Conservative government to reject the Australian mining company BHP Billiton Ltd.’s takeover bid of Potash Corp in Saskatchewan was only the latest in a series of anti-investment moves by a plethora of Canadian governments.
Here’s a partial list: One day before killing BHP Billiton’s proposed takeover, Ottawa blocked a proposed $815-million gold mine in central British Columbia, this on the justification the Taseko mine would have significant environmental impacts. Except that the federal and British Columbia governments already concluded the environmental harm would be minimal. However, despite the B.C. government’s endorsement of the project and the jobs it would create, Environment Minister Jim Prentice snuffed it out.
Add to that the Tory decision in 2008 to block a purchase of MacDonald Dettwiler and Associates Ltd. by U.S.-based Alliant Technology. Ottawa said the Canadian company’s unique radar imaging satellite was too important to the national interest to allow a foreign takeover.
But Alliant was not an Iranian company controlled by a theocratic government out to obliterate Israel — that would be a legitimate security concern. Instead, Alliant was a business in the United States, our ally. Similarly, BHP Billiton is based in Australia, another friendly power.
In addition to federal blocks to foreign investment on spurious grounds, investors also face opportunistic provincial attacks on their holdings.
Newfoundland premiers have demanded that a mining company (Inco) process iron ore in Newfoundland despite existing processing facilities in Ontario and Manitoba (Brian Tobin in the late 1990s) and demanded “equity” shares in energy companies as the price of allowing development (Danny Williams in 2006). Both were threats to existing shareholders, either through extra expenses to be incurred and/or additional dilution in shares.
More recently, in 2008 there was the Newfoundland expropriation, again courtesy of Williams, of AbitibiBowater Inc.’s land and water rights with zero compensation. Because that was illegal under NAFTA rules, Ottawa agreed to compensate AbitibiBowater with $130-million rather than let a $500-million lawsuit proceed, all this courtesy of another anti-investment pique from another Newfoundland premier.
In New Brunswick earlier this year, then premier Shawn Graham kyboshed the sale of the provincial utility, NB Power, to Hydro-Québec, after polling showed it was unpopular. So it appears that for some Canadian voters (Graham lost his job over this), even companies in other provinces now qualify as “foreign.”
It would be helpful to recall why foreign investment matters, especially as it concerns the fear that Canadian head offices are “hollowed out” in foreign takeovers. A 2006 study from Statistics Canada looked at the claim that head offices were disappearing in Canada due to such takeovers. The claim is false. Between 1999 and 2005, “domestic firms taken over by foreign firms created about as many new head offices as they closed,” noted StatsCan
In fact, on jobs, foreign companies created more head office jobs than did domestic firms in the period surveyed. Foreign-held companies added 21.2% more head office jobs between 1999 and 2005, compared with only a 5.8% increase for domestically controlled firms. Another StatsCan study the previous year, but over a longer period (1973 to 1999), revealed a similar trend: Foreign-owned head offices “had about 25% more head office workers than domestic firms.”
There is great disingenuousness and hypocrisy in all of this. Those who claim that resource ownership akin to oil and gas reserves was at stake are fibbing. As with oil and gas, the subject of the takeover attempt was a company that extracts the resource; it was not about ownership of the resource itself. Oil, gas and potash all belong to provincial governments.
On hypocrisy, on the one hand, the federal Conservatives seek and sign free trade deals around the world, continue the Liberal policy of lowering federal business taxes, and discourage American protectionism. But here, on Potash Corp., they stiffed investors and succumbed to rank provincialism of the worst sort with their anti-investment diktat.
But an equal-opportunity offender is Brad Wall. Back when he was Saskatchewan’s opposition leader, he regularly made pilgrimages to Calgary to hold fundraising events for the Saskatchewan party. Back then, Wall and his party had no compunction about accepting donations from out-of-province contributors, a sort of “foreign investment” in that party’s future.
Too bad the Saskatchewan Premier thinks Potash Corp. shareholders don’t even deserve an equal right to accept money for shares they purchased on an open market, with the notion it would stay that way.