The Speech from the Throne and Foreign Ownership

Says that “Our government will proceed with legislation to modernize our competition and investment laws, implementing many of the recommendations of the Competition Policy Review Panel.”

The key recommendation of the panel was that only very large foreign takeovers worth more than $1 Billion (vs $300 Million today) should be reviewed at all, and that the onus should not be on the foreign investors to show net benefits to Canada, but on the Canadian government to show that a deal is clearly not in the national interest. So a foreign investment review regime that has, to date, resulted in only one denial ever of a takeover bid will be rendered even more toothless.

The Panel clearly opened the door wide to foreign takeovers in sectors where some regulatory hurdles and degree of Canadian ownership and control still exist – communications companies, the banks, airlines and the media/cultural sector industries. They said regulatory regimes should be reviewed every five years, with a clear bias to deregulation.

Immediate changes were recommended, including allowing 49% foreign ownership of Canadian airlines on a reciprocal basis, and liberalization of foreign ownership limits in telecom and broadcasting. They contemplate more or less immediate approval of all new investments in the cultural sector, and higher thresholds for review of takeovers in the cultural sector. They want to strip the Minister of Canadian Heritage of any role in the process. (The Minister can now ask for a review.)

An end to a de facto ban on bank mergers is proposed – which would likely lead to further liberalization of entry to Canadian financial services in order to maintain competition.


  • The holy trinity of neo-conservatives: low corporate taxes, privatization of public assets and services; and unfettered foreign investment.

  • What’s wrong with foreign ownership? If we’re concerned about productivity – and I think we all are – then we should be welcoming it. From the summary of this StatsCan study:

    Foreign-controlled plants accounted for most of the growth in labour productivity in the Canadian manufacturing sector during the 1980s and 1990s, a new research report shows.

    The study examined the contribution that foreign-controlled plants made to the growth of labour productivity in manufacturing by analyzing whether foreign-controlled producers exhibited superior performance, and whether their productivity growth spilled over to domestic plants.

    It found that foreign-controlled plants accounted for roughly two-thirds of labour productivity growth in Canadian manufacturing from 1980 to 1990 and the subsequent decade from 1990 to 1999.

    US-controlled plants made a larger contribution than other foreign-controlled plants to productivity growth. During the 1990s, US-controlled plants accounted for about 45% of growth in labour productivity.

    Other foreign-controlled plants accounted for about 22% of productivity growth during the period, and domestic plants the remainder.

    What’s the case against foreign investment?

  • Stephen — that statscan study may only be showing that foreign investors bought up the industries in which there was the most growth potential. It does not conclusively show any benefits of foreign investment as such.

  • My sense of the studies is that transnationals are more productiive than domestic companies. Canadian transnationals are just as productive as foreign transnationals in Canada, and locate more R and D and office work here. There’s an excellent study on this by Gregor Murray and others at CRIMT (University of Montreal.)

  • Sure. The real key is the international orientation of multinationals. Of course, if you want Canadian firms to operate in other countries, then it’s hard to justify foreign multinationals from operating in ours.

    Especially when they bring with them higher productivity and more R&D than domestically-oriented Canadian firms.

  • Poop. Please insert the word ‘preventing’ between the words ‘justify’ and ‘foreign’ in tha last sentence of the first paragraph above…

  • *sigh*

    ‘the’, not ‘tha’

    Would it be too much to ask for a preview function?

  • Back when working on my MA I did work on foreign takeovers over the 1990s. And the hardly shocking thing which emerged that was even when foreign ownership was declining it still was the case that those firms being taken-over had higher than National and sectoral productivity. So it would be hardly shocking to see that R&D and productivity was higher in the foreign owned section of Canadian economy.

    Of course nationalists need to demonstrate what the benefits of domestic ownership are over foreign ownership. Is it the case that Canadian companies invest more as a percentage of profits back in Canada than foreign owned companies? Do domestically owned companies provide higher pay, better work conditions or less antagonism to unions?

    I think it would be fair to say that too often domestic ownership is seen to be a good in and of itself.

  • A hypothetical: Is it better if the mega-profits from a dominant market position go to Ted Rogers or Galen Weston as opposed to a foreign company that is widely held by middle class foreigners?

    The criteria should be the number and quality of jobs provided, re-investment in the Canadian economy, and not avoiding their tax obligations.

    But ultimately we need to get past reliance on domestic or foreign capital to meet basic needs goods and services. The rest can be up for grabs.

  • The criteria should be the number and quality of jobs provided

    Indeed. Not the nationality of the investors providing the capital.

  • “Indeed. Not the nationality of the investors providing the capital.”

    Sure but it is only the question if you have already decided what the relevant metric is for “in the national interest.” That is, the non-nationalists have to answer the same set of questions as the nationalists.

  • That is, it is an empirical question. who has the proof we should be eating?

  • I think with the recent, last couple years or so, buy up of a good many companies by foreign based owners, you will see some changes that are shading towards the negative on many levels. It is the quality of the jobs, the cultural impact the management structure brings to the workforce and the profits ported off to another country. In Canada, the impact with respect to our resources compunds the problem of foreign ownership especially when we continue to lose our manufacturing base. That is, we will see a small marginal gain in technology transfer for resource intensive industries, who have no interest in developing much value adding within our country.

    So no, do not bring on the foreign owned firms. You know Steven we are not all just whistling dixie here. THere are reasons one has got to be leery of foreign absed interests. Nationalism, despite all the talk of flat plaents and such, still do have an impact on the nature and dynamics of business across borders.

    I would not say all are of this but a good many companies coming into our country pretty much water down any notion of sovereignty and the power of the citizens of that state. It is not all about productivity and profits. As we can see with the current mess we are in, globalization comes with its many barbs and especially in a small open economy like ours, we need to have more say over whom owns whom and where.

    The auto sector is a case in point. It will be a real struggle during these times to leverage our productive assets given the over capacity that now seems to prevail within the sector. When the squeeze comes, the tendency undoubtedly is to prrotect the home turf first. Without a good plan we basically are forced into a position of leveraging our selves. Now of course I am sure we would never have the foreign investment if we viewed all foreign based interests as negative. Hence the reason why we had the auto pact for so many years, a managed trade that was good for both.

    I would say an inverse relationship exists in many cases whereby the higher the value adding within the value chain the business entity is focused on, the more tech transfer and positive effects foreign based investment can be. But of course even these need to be regulated and managed.


  • There is a bit of a false dichotomy between foreign owned and Canadian owned, in my opinion. Is not a better question what sectors of the economy should be primary led by capitalism/market (reglulated, of course) and what should be public/national (or some alternative institutional structure like cooperative or non-profit)?

    It is all about what a mixed economy looks like in different national formulations. There are some areas we’d all agree on that should be sheltered from capitalist interests and that are therefore public and national — education, health care, etc. Other areas are better served by the dynamism that comes from capitalism (consumer electronics, clothing, cars, etc).

    The real debate is about the contentious middle (banking, telecommunications, transportation, resources, agriculture, etc) that may have a history of public ownership or restricted foreign investment but that in recent years have been privatized or come under pressure to be served by competition from national and foreign competitors.

    These areas are where the discourse is more tricky, but democratic states should have the right to exempt them from foreign competition if deemed in the national interest. This is where the evidence should weigh in about the respective merits of foreign exclusion or investment. Neither a rigid nationalist approach nor a foreign investment one serves us well.

  • sorry the last bit should have said a positive correlation between high value adding investment and technology transfer.

    Kind of weird, here we are talking about this amidst two major events today.

    1) the continued demise of the auto sector and lack of leadership from our federal politicians and the loss of foreign investment

    2) the PM signing a free trade agreement with Columbia. The political elite in Columbia have got to be held accountable with their murdering ways with union leaders and activists.

    I must say Mr. Harper sure has his ways about him and the audacity on a weekend that he should be focused on the auto sector. He has no morality or ethical basis to himself. I mean really, we need a strong showing in Washington with the autos ector and signing a Colombian free trade deal is doing nothing but pissing our neighbours to the south off. ahhhhhhhhhh, this blue party is too much.

    Both of these issues have much to do about foreign ownership and are the sides of the fence that need painting.

    I am grumpy today seeing that Colombian headline. I won;t be able to eat for the day, Harper makes me sick.


  • Marc I’m glad you mentioned that its important to protect some industries from distant ownership, and throw the nuke industry on that list…
    Paul I’m glad you mentioned the trade issue. That’s what I wanted to mention on this thread in response to Stephen’s initial question.

    NAFTA, lest we forget, includes investor-state clauses. If a company has only domestic investment, and sells domestically there is no problem. But if that company is, say, US-owned, and involves export, then NAFTA is triggered along with new powers to the foreign investors to sue our governments if new policies enacted eg.protecting the environment or human health are deemed to reduce the foreign investors’ profits. Decisions are made by an unelected NAFTA tribunal and supercede the democratic decision-making processes of our country. Most of you, I think know these dynamics, and the many cases where Canadian law in favour of the well-being of our residents, environment, and economy have been challenged or chilled. Every time a new element of a sector is privatized and sold off, every time a new foreign investor takes over a domestic entity whose resources/products cross border, we lose rights under NAFTA and WTO rules.

  • I would not let NAFTA artificially tie our hands. The left is always too keen on saying NAFTA does not permit this and that, but there is much more grey area in there than is typically acknowledged.

    I say play in that grey area liberally, and if we are doing something in the national interest that is broadly popular, and some foreign company has a problem with that, well, bring it on. It would only expose flaws in the agreement and would soften up the case for repealing it, which can be done on six months notice.

    There is something to the chilling effect on governments but let’s face it the cases actually settled, after 14 years of being in place, have not been earth-shattering, and if anything arbital panels have taken a more balanced view than many on the left, myself included, thought they might.

  • We should all rembember that the purpose of foreign investment review is to see if takeovers are of net benefit to Canada. We don’t need a general presumption that foreign ownership is bad or good; only a presumption that we should review transactions to see if they are in the public interest. To ‘liberalize” the investment process is to say that the actions of investors should be beyond review. For the record, I’ll acknowledge that foreign ownership does sometimes work for us.

  • Yes no hard and fast rules are the best foot forward. However, is there a point to having a such a vehicle if they never act. It has become pretty much a rubber stamp over the past few years, that is until recently when the Tories of all the unlikely candidates pulled one out of the hat last year with one company in the space industry (Macdew I think).

    There are many interesting dynamics towards this area and in Canada it has long been an area of concern in most part due to our big American Cousins. FIRA was undoubtedly the most active means to that end and one actually felt a lot better as an economist with a lively robust FIRA in place.

    However in the era of free trade notions such as this topic became relegated to the back of the bus.


  • good points all, and thanks Andrew for bringing our attention back to your main point that the direction of liberalizing investment sans review is a nail in our collective coffin.

    Unfortunately Marc most people don’t seem to notice when a company sues the country under NAFTA. Take the east coast oil debacle. It’s always left up to a few voices to critique, until a politician steps in. Then maybe there’s a fightback, but you won’t hear NAFTA mentioned in the politicians rants.

    And the chill is devastating. We now have a situation where laws are routinely written with language like, ‘consistent with existing legislation’. In the water field we have ENGOs bending over backwards on advisory committees trying to tow the line, to ill effect. We end up with laws that do not challenge NAFTA at all, and are filled with loopholes that drain the lakes.

    Take Harper’s new promise to ‘ban bulk water transfers and exports’, also in the throne speech. It’s bunk and will function to promote bulk transfers, specifically because Harper won’t tackle NAFTA head on. Like the Great Lakes St. Lawrence R. Basin compact and agreement, you’ll see language banning water diversions along with even more language around exceptions, new definitions, and ‘consistency’ with other laws (notably NAFTA) where water is an investment and a service, in a context where foreign investment is reviewed less (as in the throne speech), where new barriers to investment are prevented (as in the G20 communique), where existing major bulk diversions via canal systems are P3’d and become new foreign investments, where P3’d water data becomes impossible to access under property rights and (non) Access-to-Information law, we’ll simply see lake levels continue to drop and continue to wonder where all the water is going, on exponential slopes far steeper than climate change models.

    I’d suggest that this is not a future scenario. Already stateside there are major diversions exempted from the Great Lakes ban on diversion, which feed water into existing systems out-of-basin faster than canal diversions from the Hudson Bay Basin into Lake Superior (Ogoki, Long Lac). Already the inflow diversions to the Great Lakes can’t keep up with the outflow.

    What’s Harper going to do? Turn around the man-made inflow and send it back to Hudson Bay? Of course not. He’s going to word his new ‘ban’ to be consistent with existing legislation, to allow foreign investment in water works and infrastructure management/ technology, privacy protected, and the financial and water flows will increase south under our very noses. All done in a very incremental, calm, non-earth-shattering kind of way.

  • Jacqueline Heber

    I am here in 2021 doing some research in this area and find these comments remarkable and essential reading still today. Thank you to these Canadians from Canada’s future. Unfortunately the negative impacts of privatization in areas where the public good and the nation’s interests and disregard for our nation’s laws for the sake of so called global interests linger and are made plain with the pandemic….it is essential to continually prioritize such issues still today for the good of us all.

  • Jacqueline Heber

    No edit function leaves me also longing for that too…(as one man did in an earlier post)…hopefully my drift may be caught nonetheless….oh well…fact is the probability of anyone reading my comment…must be a very remote chance given the passage of time….and the stupid amount of info clogging the net landscape these days…

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