Mr. Speaker, I will be sharing my time with the member for Newton—North Delta.
The misguided policies of the Conservative government, especially its finance minister, are making it increasingly difficult for Canadian businesses to succeed internationally. At the same time, Canadian companies are now particularly vulnerable to foreign takeover as a result of this government's income trust policy and, more recently, the wrong-footed corporate non-deductibility of interest proposal.
The Conservative industry and finance ministers stand by as strategic Canadian corporate icons are swallowed up by interests outside our borders. The worst is yet to come. Energy and other natural resource companies are special targets of private equity players awash with cash and of companies in emerging economies seeking more control over their commodity supply chain.
Already the list of recent foreign takeovers is staggering: Inco, Falconbridge, IPSCO, Dofasco, Algoma Steel, Fairmont Hotels, Labatt, CN, Four Seasons Hotels, and Hudson's Bay. Hudson's Bay is the oldest commercial corporation in North America. It received its royal charter in 1670 to develop the fur trade in Canada and it is now in the hands of outside interests. Canadian corporate icons Bell Canada Enterprises and Alcan are also in play as foreign takeover targets.
What does the Conservative government do? Nothing.
The Conservatives stand by and rubber stamp the takeovers, using the toothless provisions of the Investment Canada Act. Since the Investment Canada Act was passed in 1985, there have been over 11,000 foreign acquisitions of Canadian companies. No investments have ever been blocked under the Investment Canada Act.
The reason for this is that the current criteria under the act, with the exception of certain financial services, telecommunication, transportation and cultural industries, are strictly economic. The stated purpose of the Investment Canada Act is:
--to encourage investment in Canada by Canadians and non-Canadians that contributes to economic growth and employment opportunities and to provide for the review of significant investments in Canada by non-Canadians in order to ensure such benefit to Canada.
Typically what happens today is the following: a non-Canadian company wishing to acquire a Canadian company convinces Industry Canada that their transaction will result in more investment and more jobs. Industry Canada signs off, perhaps after achieving some modest concessions, and the deal is approved. They are all approved, Mr. Speaker.
What happens in the medium to long term to the companies that emerge from these transactions after the dust has settled? Who monitors the commitments made? While it is difficult to get straight answers on this from Industry Canada, we have anecdotal evidence that would suggest that after the passage of time the acquiring company’s real strategy emerges.
Plants are closed, corporate decision makers are located outside of Canada, and product mandates and core competencies are focused in jurisdictions outside of Canada. When hedge funds and private equity players are involved, we can assume that short-term increases in shareholder value are the goal. Assets are downsized, stripped and sold for short-term profit.
What should we do about this hollowing out of corporate Canada? Our Liberal government in the last Parliament introduced changes to the Investment Canada Act to give more power to the federal government to reject unwanted takeovers. This bill died on the order paper because of the January 2006 election and this Conservative government has not reintroduced similar legislation. This is not surprising at all, given the laissez faire attitude of the current industry minister and this government.
I have great faith in the markets, but markets alone do not always respond in ways that are beneficial to Canadians. That is why Canadians elect members of Parliament to the House of Commons, to protect and assert their interests, not stand by and watch while our national assets are being eroded.
In my view we should amend the Investment Canada Act and replace the current net benefit test with a national interest test, or at the very least, with a national security test. There are many countries that already have such criteria.
Companies wishing to acquire a corporation in the United Kingdom must demonstrate that the transaction is in the public interest. In Japan foreign takeovers are reviewed to ensure that they do not pose any public security, public order or public safety threats and that they do not have the potential to adversely influence the national economy.
Not surprisingly, foreign takeovers of strategic assets in countries like China, Mexico, Russia and India are difficult, if not impossible.
In Australia, a takeover must prove to the satisfaction of the Australian government that the proposed acquisition is in Australia's national interest. In Australia, national interest is considered in relation to the widely held concerns of Australians, its laws and policies, national security interests and economic development. In my view, Australia's approach to defining the national interest is a sound one.
Some argue that the national interest or public interest tests discourage foreign direct investment. We need to encourage, not discourage investments by foreign interests in Canada. I agree with that.
Let us look for a moment at the experience in Australia. Although it seldom occurs, Australia has used the national interest test to block large scale foreign investment. For example, in 2001, the Australian government rejected an attempt by Shell Oil in a hostile takeover bid for an Australian energy company, Woodside Petroleum Limited. This $10 billion Australian bid was rejected on the grounds that Shell would operate the company as part of its global portfolio and not in the best interests of the company itself. Does this sound familiar? Have we had similar concerns?
Following the decision by the Australian government, while there were market reactions in the short term, the impact was short lived. Foreign direct investment into Australia has grown from $9 billion U.S. in 2001 to $58 billion U.S. in 2004.
If we moved to a national interest test for foreign takeovers, how should we define this? As I mentioned earlier, I believe the Australian model is a good one. National interests need to be defined, as best one can, by policy, by regulation and with guidelines. We should have a debate around this in Canada.
In my judgment, Canadian companies that are of strategic importance to Canada because of their size and reach, companies that are focused on the development and environmentally sound exploitation of our natural resources, and Canada’s energy assets should be subject to careful review and protected from foreign acquisition.
If Canada adopts a national interest test for foreign takeovers, will this impact on the ability of Canadian companies to grow and expand internationally? Not in the least, I submit. These Canadian companies will still have to meet the test imposed by those countries in which the acquisition target is located. How can there be retaliation when so many jurisdictions have national interest or national security tests of their own?
What will slow down international expansion is the rules the government has brought in on the non-deductibility of interest and also on the income trusts.
We must stand up for Canada. Where non-Canadian companies wish to acquire Canadian companies, it is often quite obvious what their agenda is. The question for us as parliamentarians to consider is, what is Canada's agenda, what is in our national interest? We cannot avoid this question. It is time to act.