Since I first posted about Alcan on May 1, it has certainly become more newsworthy!
Hopefully, the letter and I are more coherent than Tuesdayâ€™s Globe and Mail editorial, which decried “Ottawaâ€™s complacency” and “enormous policy void” on takeovers without suggesting a single policy response (other than to parenthetically repeat the Liberal-Bay Street spin about interest deductibility.)
May 11, 2007
The Right Honourable Stephen Harper, P.C., M.P.
Prime Minister of Canada
Dear Prime Minister:
On behalf of the Canadian Labour Congress (CLC), I write to request thorough reviews of Alcoaâ€™s proposed takeover of Alcan and other major foreign takeovers. Your government should provide a full opportunity for working people, and the unions that represent them, to meaningfully participate in these reviews.
Foreign takeovers are a major economic concern. Figures compiled by Industry Canadaâ€™s Investment Review Division indicate that, from October 2005 through March 2007, foreign investors spent $156 billion taking over existing facilities in Canada and only $362 million establishing new facilities here. Since then, several major foreign takeovers have been proposed, including Alcoaâ€™s bid to buy Alcan for US$33 billion.
Manulife CEO Dominic Dâ€™Alessandro has suggested restrictions on foreign ownership in Canadaâ€™s resource sector. The Globe and Mail has called on your government to outline its position on foreign takeovers. Other newspapers have emphasized this significant issue.
The Investment Canada Act allows reviews of large foreign takeovers to ensure that they produce a “net benefit” for Canada. Proposed takeovers that fail this test can and should be rejected. However, previous reviews under this Act have been carried out behind closed doors and have never resulted in a major takeover being blocked. By contrast, the US government has been more aggressive in shielding American businesses from foreign takeovers.
The CLC believes that Canadian jobs, pensions and tax bases should figure prominently in rigorous assessments of “net benefit”. Takeovers that are approved should be accompanied by enforceable conditions that protect working people and their communities. The review process itself should be open to the general public, including workers and unions.
Many business leaders, including Mr. Dâ€™Alessandro, have argued that recent foreign takeovers result from your governmentâ€™s decision to end the tax-deductibility of interest on loans used to finance the foreign affiliates of Canadian companies. As outlined in my letter to the Honourable Jim Flaherty on MayÂ 8,Â 2007, this contention is inaccurate.
Your government made the right decision in ending foreign-affiliate interest-deductibility. However, a coherent approach to foreign takeovers is also needed as part of an economic strategy to maximize public returns from natural resources and create good jobs.
Kenneth V. Georgetti
Canadian Labour Congress