<strong>Harper, and the federal Liberal Party that preceded him, has allowed Canada's energy sector to become nothing more than a branch plant of foreign multinationals. Even worse, Harper's pledge to draft strict new rules to strengthen the “net benefit” test still sits in limbo</strong>
Prime Minister Stephen Harper is deeply conflicted. His laissez-faire belief system – the one that lets him justify everything from cold-hearted fiscal austerity to hands-off regulation of financial markets – is being confronted by the reality that a majority of Canadians see massive foreign takeovers as a step in the wrong direction.
Some of that opposition is based on the legitimate fear that every new takeover bid means a loss of autonomy, a loss that further limits our ability to use Canadian resources and expertise to maximize benefits for Canada.
In the most current example, Harper's decision to green light the takeover bids by Chinese National Oil Company (CNOC) and Petronas, the conflict is intense.
Many in the Conservative caucus are uncomfortable about the prospect of approving major takeover bids by state-owned companies, a move that raises serious questions about how resource development in Canada would proceed and who ultimately is calling the shots in that development.
It was no coincidence that Harper chose to make his decision public late on a Friday afternoon, hoping that the worst of the backlash would be muted by weekend distractions.
The tactic never worked.
A majority of Canadians still see the approval as a bad move for Canada and for good reason.
Harper has tried to suggest that without the approval of these takeover bids, Canada would be losing out on much-needed "foreign investment."
The implication in Harper's rationale is that somehow there simply isn't enough capital or know-how in Canada to fully develop the resources that Nexen or Progress Energy had on their drawing boards.
That simply isn't true.
Over the last four years, using foreign direct investment as a yardstick, Canada has been exporting capital to the tune of about $75 billion, hardly an indication that we are capital deprived in this country.
Or consider former Bank of Canada Governor Mark Carney's "dead money" yardstick, the $600 billion that Canadian non-financial businesses have in their corporate treasuries.
The $20 billion for Nexen or the $5 billion for Progress would have barely made a dent in the dead money pile.
Had Harper taken the time to check his facts, he would have been forced to acknowledge that after-tax corporate cash flows in Canada exceed new capital spending, a point that makes Harper's argument about much-needed foreign investment downright vacant.
Moreover, in the case of Nexen, one of that company's major assets is its energy development expertise.
CNOC wants to exploit that expertise and the takeover approval gives it a lot of latitude to do just that without having to worry about how that expertise could be used to maximize benefits for Canada.
It's painfully ironic that the takeovers by these state-owned companies are targeting a sector of the Canadian economy – the energy sector – that once had a Canadian version of a state-owned enterprise.
It was called Petro-Canada. It provided us with more than just a window on the energy sector; it also was a way to ensure that energy development was done in ways that made good sense for Canada. Petro Canada, however, was vilified by Harper's base in the Reform/Alliance days and is now a relic of the past.
In its place, Harper, and the federal Liberal Party that preceded him, has allowed Canada's energy sector to become nothing more than a branch plant of foreign multinationals. Even worse, Harper's pledge to draft strict new rules to strengthen the "net benefit" test – a pledge he made more than a year ago when the controversy surrounding the takeover of Potash Corp. was reined in not by the prime minister but by Saskatchewan's premier – still sits in limbo, a reality that says more about the prime minister's addiction to laissez-faire economics than anything else.
Canada needs to stand on its own two feet when it comes to charting its economic future.
Harper's concessions to foreign takeovers show little interest in that approach, and, as a result, we're all getting the short end of this stick. •