The Big Takeover: Trudeau’s Legacy Gone to Pot(ash)
August 30, 2010 | 4 Comments
by Max Fawcett
Some anniversary present. As we approach the 10th anniversary of former Prime Minister Pierre Trudeau’s death, it looks as though the Canadian government is set to let an Australian company scoop up one of Canada’s most valuable corporate entities without so much as a second thought. BHP Billiton Ltd., an Anglo-Australian mining conglomerate, recently submitted an unsolicited bid of $38.6 billion for Saskatchewan’s Potash Corporation. The former government entity, is a leading global producer of Potash, a high-powered fertilizer that is increasingly in demand. It also almost single-handedly turned the province of Saskatchewan from a perpetual have-not province, the Newfoundland of the West, to the new Alberta, a province rich in a resource that everyone seems to want.
There was a time when the government would seriously assess the merits of such a proposed takeover, and determine whether it was in the interest of Canadians to permit its completion. When Prime Minister Pierre Trudeau created the Foreign Investment Review Agency (FIRA) in 1974, he tasked it with evaluating deals just like BHP Billiton’s proposed takeover of Potash. In making its recommendations, FIRA took the following factors into consideration: the effect of the investment on employment and economic activity in Canada; the effect on Canadian productivity, technological development and product variety; the degree of Canadian participation in management; the effect on competition; and the compatibility of the investment with national policies. In short, the agency’s job was to speak for ordinary Canadians, those who didn’t have a voice inside the cloistered boardrooms where deals like the BHP Billiton-Potash takeover get hashed out.
Not surprisingly, FIRA’s unwillingness to pull down its proverbial shorts and bend over to corporate interests made it a prime target of those who spoke on their behalf, and when Brian Mulroney defeated John Turner in the 1984 election it was as good as dead. Sure enough, Sinclair Stevens, Mulroney’s industrial expansion minister, revamped the agency, renaming it “Investment Canada” in 1985 and reversing the polarity of its mandate. Rather than critically assessing foreign investment, its job was to promote and encourage it. The Investment Canada Act pays lip service to the notion that it is expected to protect Canadian interests, but of the approximately 13,500 foreign takeovers that it has reviewed in the years since then it has rejected exactly one. Either foreign corporations are doing a really good job of looking out for Canada’s interests, or Investment Canada has decided that they don’t much matter in the grand scheme of things.
Under the Investment Canada Act, a foreign takeover must provide a “net benefit” to Canadian interests, but there is no specific mention of how that “net benefit” is to be calculated or considered. The discourse that surrounds the BHP Billiton-Potash confrontation offered some clues both as to how this clause has been interpreted, and why so few foreign takeover proposals have been rejected. Advocates of the deal argue that globalization and the removal of trade barriers makes the notion of economic sovereignty an outdated one. More to the point, they say, Canadian businesses make plenty of their own foreign acquisitions. As a 2006 editorial in the Montreal Gazette pointed out, “for 18 of the last 25 years, Canadian investments offshore have outstripped foreign investments in Canada.”
This conflation of Canada’s economic interests with those of its richest citizens is a cunning trick, but it’s a trick all the same, a deliberate attempt at political misdirection. Sure, our rich guys (and, increasingly, gals) might be buying out their companies just as often as their rich guys/gals are buying out ours, but in the end, the only people that really benefit are the rich guys/gals, and occasionally their shareholders – again, usually rich guys/gals.
The other argument that the deals proponents have made is that, in the end, there’s not a whole lot we can do about it. Foreign investment, capital flows, and free trade, they argue, are faits accompli, parts of our economic ecology that we can no more avoid or resist than the use of paper currency. This kind of Fukayama-esque end-of-history triumphalism, though, obscures the fact that the last twenty-five years, the period in which these negotiable economic realities supposedly became fixed constants, haven’t been very good for most of us. According to the 2006 census, middle class workers in Canada experience no real growth (adjusted for inflation) in earnings between 1980 and 2005. The poorest fifth of the population had it even worse, as their earnings fell 20.6 per cent over the same period. Who benefitted, then? The richest fifth, of course, who saw their earnings increase 16.4 per cent over the same 25-year period.
That this is relatively common knowledge by now shouldn’t make it any less frustrating. What matters – or, at least, what should matter – in the proposed BHP Billiton-Potash deal isn’t Canada’s balance of international mergers and acquisitions, but instead the direct and measurable impact that it will have on the people in Saskatchewan who will be most directly affected by it. After all, capital may well be mobile, but people are far more rooted to their physical surroundings, and it’s the duty of governments to serve people, not capital. Our leaders seem to have forgotten that capital is a means rather than an end, an instrument of prosperity rather than a reflection of it.
In a rather cryptic article in Saturday’s Globe and Mail, John Allemang argues that the days of Canadians getting worked up about foreign takeovers have passed this country by. Previous generations of Canadians, reared in a society in which nationalism was more about economic self-determination and ownership than successful indie bands and other cultural exports, might have objected to the proposed takeover of Potash Corporation. But people my age, the “post-Thatcherite offspring who won’t ever be convinced that governments could successfully mine potash, fly you comfortably to Heathrow and run a kinder, gentler chain of gas stations,” could care less.
But blaming our government’s fealty to the global corporate constitution on one generation’s apathy seems terribly unfair. In the end, it’s up to our government to do its job, and the people to vote them out if they refuse to do it. They ought to be asking BHP Billiton whether the good jobs the Potash Corporation currently provides residents will remain good jobs, or whether it will simply become yet another Canadian branch plant, a hollowed-out husk that only employs people at the lowest ends of the corporate food chain. They ought to be asking whether the local suppliers who have built their business around Potash’s success will continue to receive fair and equal treatment, or whether they will get squeezed out in favour of BHP’s existing partners. If the answers they get aren’t satisfactory, they ought to say no to the deal. That we already know that they won’t is a sad commentary on the state of our government and its decision to abdicate one of its most fundamental responsibilities. We, as Canadians, deserve better.
Max Fawcett is an Edmonton-based journalist and the managing editor of Alberta Venture Magazine. His work has been published in the Globe and Mail, the National Post, the Vancouver Sun, the Toronto Star, THIS Magazine, and Corporate Knights Magazine. He also served as the editor of the Chetwynd Echo, the community newspaper serving the small northern community of Chetwynd, British Columbia, and is a past editor of Dooneyscafe.com. He can also be read at MaxFawcett.com.
Tags: BHP Billiton Ltd. > Foreign Takeover > Investment Canada Act > Max Fawcett > Pierre Trudeau > Potash > Saskatchewan
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4 Responses to “The Big Takeover: Trudeau’s Legacy Gone to Pot(ash)”
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August 30th, 2010 @ 12:57 pm
[...] a comment » The good people at The Commons have posted my quasi-rant about the impending takeover of Potash Corporation and what it means [...]
August 31st, 2010 @ 10:23 am
Who do you think owns PotashCorp now?
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August 31st, 2010 @ 3:47 pm
Umm, its shareholders? It’s not a question of ownership but one of regulation. The Canadian government isn’t limited to regulating companies in which it has an equity stake, after all.
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August 31st, 2010 @ 7:20 pm
Yeah, the shareholders, who are primarily not Canadian. Same as BHP. I’m confused as to what you think the difference is.
I happen to think that there *is* a difference in that PotashCorp has a better business model for potash production, resulting in higher prices and better royalties.
Is this the “Canadian interest” at stake that you’re referring too?
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