Mr. Speaker, the misguided policies of this Conservative Government, and the Finance Minister, are making it increasingly difficult for Canadian businesses to succeed internationally. At the same time, Canadian companies are now particularly vulnerable to foreign takeover as a result of this government's income trust policy, and more recently- the wrong-footed corporate non-deductibility of interest proposal. The Conservative Industry and Finance Ministers stand by as strategic Canadian corporate icons are swallowed up by interests outside our borders - and the worst is yet to come. Energy and other natural resource companies are special targets of private equity players awash with cash, and by companies in emerging economies seeking more control over their commodity supply-chain.
Already the list of recent foreign takeovers is staggering -
INCO
Falconbridge
IPSCO
Dofasco
Algoma
Steel
Fairmont Hotels
Labatt's
CN
Four Seasons Hotels
Hudson's
Bay, the oldest commercial corporation in North America, Royal Charter granted
in 1670 to develop the fur trade - now in the hands of outside interests.
Canadian corporate icons, Bell Canada Enterprises, and Alcan are also in play as foreign takeover targets.
And what does this Conservative Government do? The answer is nothing. They stand by and rubber-stamp the takeovers using the toothless provisions of the Investment Canada Act. Since the Investment Canada Act was passed in 1985, there have been over 11,000 foreign acquisitions of Canadian companies! No investments have ever been blocked under the Investment Canada Act!
The reason for this is the current criteria under this Act - with the exception of certain financial services, telecommunications, transportation and cultural industries - the criteria are strictly economic. The stated purpose of the Investment Canada Act is to "encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities, and to provide for the review of significant investments in Canada by non-Canadians in order to ensure such benefit to Canada."
Typically what happens today is the following - a non-Canadian company wishing to acquire a Canadian company convinces Industry Canada that their transaction will result in more investment and more jobs. Industry Canada signs off, perhaps after achieving some modest concessions, and the deal is approved. They are all approved Mr. Speaker!
What
happens in the medium-long term to the companies that emerge from these transactions
after the 'dust has settled'? Who monitors the commitments made? While it is difficult
to get straight answers on this from Industry Canada, we have anecdotal evidence
that would suggest that after the passage of time the acquiring company's real
strategy emerges. Plants are closed, corporate decision makers are located outside
of Canada, and product mandates and core competencies are focused in jurisdictions
outside of Canada. When hedge funds and private equity players are involved, we
can assume that short-term increases in shareholder value are the goal. Assets
are downsized, stripped and sold for short term profit.
Mr. Speaker, what should we do about this hollowing-out of corporate Canada?
Our Liberal Government, in the last Parliament, introduced changes to the Investment Canada Act to give more power to the federal government to reject unwanted takeovers. This Bill died on the order paper because of the January 2006 election - and this Conservative government has not re-introduced similar legislation. This is not surprising given the laissez-faire attitude of the current Industry Minister and this government. I have great faith in markets, but markets alone do not always respond in ways that are beneficial to Canadians. That is why Canadians elect MP's to this House of Commons - to protect and assert their interests - not stand by and watch while our national assets are being eroded!
In my view, Mr. Speaker, we should amend the Investment Canada Act and replace the current net benefit test with a national interest test, or at the very least with a the national security test.
There are many countries that have such criteria. Companies wishing to acquire a corporation in the United Kingdom must demonstrate that the transaction is in the public interest. In Japan, foreign takeovers are reviewed to ensure that they do not pose any public security, public order, or public safety threats; and that they do not have the potential to adversely influence the national economy.
Not surprisingly, Mr. Speaker, foreign takeovers of strategic assets in countries like China, Mexico, Russia, and India are difficult, if not impossible.
In Australia, a
takeover must prove to the satisfaction of the Australian government that the
proposed acquisition is in Australia's national interest. In Australia, national
interest is considered in relation to the widely held concerns of Australians,
laws and policies, national security interests, and economic development.
In
my view, Australia's approach to defining the national interest is sound.
Some argue that 'national interest' or 'public interest' tests discourage foreign direct investment (FDI). We need to encourage, not discourage, investment by foreign interests in Canada. I agree with that. Let us look at the experience in Australia.
Although it seldom occurs, Australia has used the national interest test to block large-scale foreign investment. For example, in 2001, the Australian government rejected an attempt by Shell Oil in a hostile takeover bid for an Australian energy company - Woodside Petroleum Ltd. This AUS $ 10 billion bid was rejected on the grounds that Shell would operate the company as part of its global portfolio and not in the best interests of the company itself. Sound familiar Mr. Speaker?
Following this decision by the Australian government, while there were market reactions in the short term, the impact was short-lived.
Foreign Direct Investment into Australia has grown from US$ 9 billion in 2001, to US$58 billion in 2004.
Mr. Speaker, if we moved to a 'national interest' test for foreign takeovers, how should we define this? As I mentioned earlier, I believe the Australian model is a good one. National interests need to be defined, as best one can, by policy, by regulation, and with guidelines. We should have a debate around this in Canada. In my judgment, Canadian companies that are of strategic importance to Canada because of their size and reach; companies that are focused on the development, and environmentally sound exploitation of our natural resources; and Canada's energy assets should be subject to careful review and protected from foreign acquisition.
If Canada adopts a 'national interest' test for foreign takeovers, will this impact on the ability of Canadian companies to grow and expand internationally? Not in the least I submit, Mr. Speaker. These Canadian companies will still have to meet the tests imposed by those countries in which the acquisition target is located. How can there be retaliation when so many jurisdictions have national interest or national security tests of their own?
We must stand up for Canada. When non-Canadian companies wish to acquire Canadian companies, it is often quite obvious what their agenda is. The question for us as Parliamentarians to consider is - what is Canada's agenda? What is in our national interest?
We cannot avoid this question. It is time to act.
I thank you.