Foreign ownership in the resource sector
A centrepiece of Canada’s industrial policy is attracting foreign investment. This seems to me a lack of imagination on the part of our elites; rather than develop genuine industrial stategies, so much the better to just let foreign capital come and create the jobs for us. And in the resource sector, the flipside of investment is that we lose control over domestic resources while profits flow outside the country (usually south). But it is a two-side affair: some Canadian corporations are also big investors overseas, in particular in the area of mining. This explains why Canada is always so eager to negotiate new rules to liberalize foreign investment.
Duncan Cameron reflects on some of these considerations in his rabble.ca column:
Foreign ownership of resource based corporations turns Canada into a twenty-first century version of a tenant farmer: the absentee owners get the economic surpluses, Canadians get only enough to live on.
With the breakthrough of China and India into the front ranks of economic power, increased world demand for resources has pushed up Canadian commodity prices and increased corporate profits.
… Meanwhile in Chile, … Canada just happens to be the fourth largest foreign owner in Chile and the largest in mining. Promoting Canadian business as foreign owners was the Liberal â€œteam Canadaâ€ strategy, introduced by Jean ChrÃ©tien. Canadian patriotism was a cover for foreign exploitation. Now, with the Americas trip, the strategy is officially bipartisan and Harper is defending Canadian business ownership abroad.
Call this the assisted economic suicide strategy for Chile and the three other countries on the visit: Columbia, Haiti, and Barbados. Just as Canada gets bilked by its absentee landlords, so Canadian companies, aided by our government, can strive to bilk others by themselves becoming absentee landlords. Overall, Canada puts on a little imperialist face.
… The increased levels of foreign ownership in Canada are the best reason going for calling for higher tax rates for corporations. The Canadian Labour Congress has shown that when properly weighted for size, Canadaâ€™s corporate taxes are about the same as in other countries. Canada has the highest level of foreign ownership of any industrialized country. Since those levels are rising, the way to get appreciable benefits for our citizens from the exploitation of our natural resources is through corporate taxation.
As an example of how not to do things, the Alberta governmentâ€™s 25 cents-per-barrel royalty on the $60 barrel of synthetic crude from the Alberta tar sands will do nicely. Tar sands production is undertaken by American companies, at great environmental expense for super-profits and shipped to American consumers. The Alberta citizen gets two bits a barrel.
But I wonder what the punchline is: should we rely on our domestic capitalists as a better alternative to foreign capitalists? Or should we look more towards public ownership and/or ensure that the public gets a better royalty on its resource base? Norway, for eaxmple, has been much more aggressive in ensuring that the state has both a financial stake in oil development, and that they get a much higher share of the royalties than in places like Alberta. And has been noted previously, a higher royalty take in Alberta could slow the boom down to take the wind out of inflationary pressures, and reduce our CO2 emissions.