Industry Committee on March 3rd, 2011

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Do you consider this threshold increase from $312 million to $1 billion to be a good thing? Would we not basically be depriving ourselves of a tool that we will no longer be able to use for certain transactions? Currently, any transaction below $312 million is affected, but eventually, the Minister will not have a say in transactions below $1 billion. No government authority will be able to speak out. Do you think we are depriving ourselves of an important tool?

[Bruce Campbell]

The short answer is yes, and I don't think it's advisable to raise the thresholds.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

[The Chair, Conservative, David Sweet]

You have one more minute.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I still have one minute left? The answer was really short, it's true.

I would like to get back to the example of Rio Tinto and its acquisition of Alcan. In Quebec, Alcan is seen as a jewel, and people would like the Minister to set two conditions: the level of employment and the obligation to keep some processing plants in operation in our region. Do you think that it would have been a good idea for the Minister to include these two conditions in the acceptance protocol?

[Bruce Campbell]

Absolutely, and I think they should have been made public right upfront so that everything was clear from the perspective of the company as well as for the communities in which those companies operate. I think that would have certainly resolved the matter in a much better situation than what, in effect, happened with Rio Tinto.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

Thank you.

[The Chair, Conservative, David Sweet]

Thank you very much, Mr. Campbell and Monsieur Bouchard.

We're now on to Mr. Braid for seven minutes.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you, Mr. Chair.

I want to thank all of the panellists for being here this afternoon. I certainly feel that we've had two very thought-provoking panels this afternoon, so thank you again very much.

I'm hoping to get a question or two to each of you, and I'll start with you, Mr. Hart.

In your comments you indicated that you thought Canada was an outlier. Could you just elaborate a little bit on what you meant by that?

[Prof. Michael Hart]

Mr. Campbell mentioned that Canada is one of the large in-takers of investment. As a matter of fact, Canada is also a large investor abroad, so Canada should really properly be counted among the OECD countries that are capital-exporting as well as capital-importing countries. And in that sense Canada is an outlier, because only Australia, among other OECD countries, pursues similar kinds of policies.

I do not think we should consider ourselves to be part of the group of Brazil, China, Russia, and India. If you look at the economic development in Canada compared to the economic development in those countries, I don't think we want to emulate their policies.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

You've set me up perfectly for my second question for you. I want to ask you this.

We have this delicate balance that we need to try to strike where we want to make the appropriate, careful, prudent decisions with respect to proposed investments here in Canada, but at the same time we don't want to impede the ability of great Canadian companies that are operating internationally and are in the process of acquiring in one of the markets they're operating. Can you comment on that? How do we strike that balance? Is that an important consideration, and why?

[Prof. Michael Hart]

The balance is that we should accept that it's private capital and therefore the decisions of a private investor should be the primary consideration. I do not see why it is a matter of public policy what one group of investors thinks compared to another group of investors. I think in a mature economy that's the way it ought to be.

The fact is, in the kind of world in which we live, companies—in order to succeed in whatever line of business they're in—need to have an international focus; they need to be part of much larger value chains and supply chains. They need to have relationships with customers and suppliers around the world that may involve investment in some cases, and in other cases, other kinds of relationships.

I would not suggest that the government should be interfering in those kinds of decisions, that we should charge a group of civil servants in the Department of Industry to second-guess the decision of investors.

Having been a civil servant, I am painfully aware of the inability of civil servants to make those kinds of analyses and decisions. My view is that this should be left to the wisdom of investors who stand to lose or to gain.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

Mr. Bloom, as we segue into questions for you, recent reports, including Conference Board of Canada reports, indicate that Canada has been a net beneficiary of overall international investment activity. What are the factors that have been leading to that success?

[Dr. Michael Bloom]

First of all, it's the fact that we have an open economy and we have a willingness to bring capital in and let capital go out. Our gold companies, our banks now, and a number of our other firms are engaged in a very busy buying spree around the world. For the most part they're being received happily. I think the considerations around national security pertain in many places, but most places where we're going are open to us and most of the countries that invest heavily here are open both ways.

I think the thing is that we have an attitude that we actually want capital and that we're willing to invest where the opportunity lies. I hope that continues.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Thank you.

In your opening comments you listed eight recommendations. In your second one you suggest, as one recommendation, that we should consider a full range of benefits and costs. What did you mean by that?

[Dr. Michael Bloom]

I think if there are concerns.... For example, our analysis of 540 mergers and acquisitions between 1994 and 2007 found that the average premium paid to shareholders was 28%. This was the case of the surge in the resource sector that brought in an extra $50 billion or so to Canadian investors. You can track, and we do track, things like the shareholder return. We can also look at some aspects of the operational footprint and so on.

I think the concerns that come out—when you hear a discussion about champions and the broader impacts—are people thinking: what is it doing to our communities? Is it affecting our donations? Is it affecting the capacity of the region to support our schools and colleges, etc.?

I think if we have a typology that says we're looking at covering all the financial benefit, but going beyond that, it would give a level of confidence. People are saying there's a more holistic approach to this.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Great. Thank you.

Just to be fair, I have a final question for Mr. Campbell.

We spent a lot of our time in the previous panel talking about the importance of perhaps considering the minister having more latitude with respect to communicating the specifics of an individual transaction when that's appropriate.

Can you comment and speak to why that might be important? What are the advantages, not only on a case-by-case basis but over time, to this process?

[Bruce Campbell]

I think if you're talking about public consultation and the obligation, should it be at the minister's discretion whether to consult with the workers involved, communities involved, or with the lower level--

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Actually, it's not as much about the consultation, which is more front end. This is more back end, talking about the specifics of the transaction itself and the minister having more latitude to do that, to bring more--

[Bruce Campbell]

You mean to make public the commitments and undertakings.

[Peter Braid, Conservative, Kitchener—Waterloo, ON]

Yes, at the appropriate time.

[Bruce Campbell]

Absolutely, it's in the interests of transparency. I guess I would go one step further and say that it should be an obligation rather than at the minister's discretion. That should be made public. Those should be part of the results of the deal.

I wonder if I could comment on--

[The Chair, Conservative, David Sweet]

I'm sorry, Mr. Campbell, you managed to get that answer in under the time.

[Bruce Campbell]

Thank you.

[The Chair, Conservative, David Sweet]

I'm sorry to cut you off again. Time always marches on.

Mr. Angus, for seven minutes, please.