It’s hard to say what is more remarkable about the Conservative government’s record on foreign investment—the variety of ways they’ve fumbled the file, or the sheer volume of blundering. The blooper reel is long: the will-they-or-won’t-they reality show surrounding BHP Billiton’s scuttled bid for Potash Corp.; the minutes-before-midnight rejection of Petronas’s bid for Progress Energy (eventually reversed); and the long-delayed approval of the China National Offshore Oil Co.’s (CNOOC) purchase of Nexen. As the government lurched from one muddle to the next, they promised clearer rules and a more transparent process. They haven’t delivered.
Instead, each reform just makes things murkier. Witness the new rules for takeovers by “state-owned enterprises” —companies owned by a foreign government—recently unveiled in the budget omnibus bill. The legislation is stricter and offers far less clarity than expected: it expands the definition of state-owned enterprises (SOEs) to include any company that is “influenced, directly or indirectly” by a foreign power or, for that matter, any person under government direction. This could mean companies that would traditionally fall outside the guidelines—like Vale SA, which is publicly traded but partly owned by the Brazilian government, or China’s Huawai, which is privately owned but closely associated with its national government—would suddenly be branded as SOEs. Further, the minister of industry has discretion to decide who’s state-owned and who’s not. Pinning global trade deals to the whims of a single minister is the opposite of what was promised. In their analysis of the new legislation, lawyers at McCarthy Tétrault warned its “broad concepts and elements of uncertainty” could “place a heavy burden” on foreign companies looking to invest in Canada; the risk of a meddlesome minister torpedoing a deal is just too high.
At a time when Canada should be wooing foreign investment, we actively seem to be chasing it away. Merger and acquisition activity in the oil and gas sector dropped to less than $1 billion in the first quarter of this year—the lowest since 1994, according to figures recently published in The Globe and Mail.
That the government has placed a clear drag on industry is only the second-most-dispiriting part of this issue. Even worse is that the Harper government—self-proclaimed protectors of the economy—don’t appear to have any clear principles guiding these policies. We welcome foreign investment—but not if there’s the slightest chance it comes from a country we don’t like. We want to spur economic growth—but we’ll burden companies with onerous and muddy rules. Rather than the incremental fiddling that has occurred since the embarrassing Potash fiasco three years ago, the government needs to start again with a coherent policy vision and clear rules.
But after seven years in power and with the next election years away, Stephen Harper’s government is tired and listless. Its last major announcement was the budget, nearly three months ago. It now spends its time tamping down senatorial expense scandals. Faced with the lapses of Mike Duffy and others, Harper retreated to what should be a safe topic for him. “The world we are in remains a deeply uncertain place,” he told his caucus. “Canadians are looking to us to protect them—their jobs, their families, their communities.” He cited “expanding trade” and a “focus on jobs, growth and long-term prosperity” as two means to that end, which is hard to square with his government’s convoluted positions on foreign investment.
The Tories take considerable credit for steering Canada through a global recession, and deservedly so. But now it must prepare the country for a new reality, with newly powerful players like China and Brazil. Drifting to the next election based on past economic success would be damaging to the country and foolhardy for the Conservatives. Better to start articulating a new economic vision—one that corrects past mistakes and gives us a clear rule book for the foreign investments yet to come.
James Cowan is deputy editor of Canadian Business.