On the Issue of National Champions

“Viterra could have been the foundation of a Canadian Glencore or Cargill. Now it’s a piece of someone else’s global vision.”

  • Eric Reguly, Viterra another example of Canadian short-sightedness, Globe and Mail.com, Friday, Mar. 23, 2012

I must admit small “c” Conservatives and Market Proponents drive me up the wall. Their inconsistency on the issue of National Competitiveness is mind boggling. In Eric Reguly’s piece, he both laments the loss of Viterra, a potential “National Champion”; while, at the same time saying that the Federal Government and Investors are just doing what is logical in an open market system. Mr. Reguly notes that the ever-savvy Ivan Glasenberg pounced because he saw a good deal. Furthermore, Mr. Reguly notes that “if he (Ivan Glasenberg) didn’t nail Viterra, he knew it would have disappeared into the maw of Archer-Daniel-Midlands, Cargill, Bunge, Louis Dreyfus or any of the other agribusiness heavyweights who know that food isn’t going out of style and that feeding another 2 billion people by 2050 just might translate into compelling growth story”.  

What was particularly perplexing was the following quote: “What a shame. Canada needs global corporate champions. It has, perhaps, three: Bombardier, the world’s third-largest aerospace company, Barrick, the top gold player, and Potash Corp. of Saskatchewan. Potash Corp., the global fertilizer leader, would have disappeared too had the federal government not blocked its sale to Australian mining colossus BHP Billiton in 2010”.

Just think about this for a second. Since 1990, we have lost many national champions. Stelco, Alcan, Inco and Falconbridge are just a couple that were bought by foreign interests. While, Nortel went bankrupt; its treasure trove of assets and patents were sold for billions of dollars.  To get an idea of the volume of foreign transactions in Canada one needs only look at another article in the Globe: 

“Since June 30, 1985, there have been 13,602 foreign acquisitions in Canada, according to Industry Canada. Of those, 1,631 were reviewed under the Act and 11,971 only required notice. If the NDP proposal had been in place, that would have averaged out at about 110 public hearings per year – or roughly two per week, every single week, no break for Christmas.” (Investment Canada Act reform, the sexiest topic of 2010, Robert Silver, November 4, 2010)

So this tells us two things. Firstly, many market proponents do not understand the complexities of public policy. Mr. Reguly, for example, says that “when the federal government decided to strip the Canadian Wheat Board of its monopoly on export grain sales”, Viterra should of come up with a game plan. Instead, “its strategy was to sell an essentially irreplaceable business without a fuss. ” Or put differently, Viterra is being criticized for not thinking about the “National Interest”. This is a terribly mistaken way of thinking about “National Interest”. For taking care of our “National Interest” is the job of our Members of Parliament and our Senators.  

Business people are only interested in their self-interest. That is their job in our country. They follow the laws as set forth by our Members of Parliament and our Senators. Entrepreneurs, Investors and Business People hope to make money but know that as long as they are following the law, they are doing no wrong. Our law, as set forth by our Members of Parliament and our Senators, is supposed to be an expression of our society’s interest. So if an open border is our desire, lamenting the loss of “National Champions” is either foolish, illogical or non-productive.

And let us not forget that nothing is lost forever. Tim Hortons, a Canadian icon, was bought by American Interests in the 1990`s. It has found itself back to Canadian Shareholders and is increasingly displaying its distinctly Canadian History. Purchases go both ways, so we should not lament when we are on the “losing end of a trade.” 

Secondly, let us not forget that other National Champions evolved here. RIM, our much maligned domestic smartphone maker, started here with nothing more than a hope and a dream. So did Syncrude, Suncor, Cenovus, ManuLife, SunLife and the Big Six Banks. All of these firms do business here and aboard; all working for the betterment of their domestic shareholders.

With this being said, if we are going to have an open economy, our government has not done enough to produce and protect the emergence of new players or from having other national players come to Canada. For those who might call this form of thought delusionary or worse, let me remind everyone that HSBC moved its headquarters from Hong Kong to London in the lead up to Hong Kong`s transition to Chinese Rule. This action led to some ruffled feathers in 1993, but HSBC continue on and is still easily one of the biggest players in China. So Canada should be ready for such moves. 

The only question is what our policy approach should be. I have noted in the past that a new way of looking at intellectual property would be one ideal feature. Intellectual Property, as the Irish have shown in present legislation, should be easily accessible but paid for. In the past, I have argued that the Crown should hold and pay for much of it. Consequently, private companies could just pay the crown back – plus interest and fee – for access to its intellectual property. This type of system would allow businesses to access what they needed. If this is not the approach that should be taken, we should consider another that will allow for growth, innovation and prosperity.

By considering the “Other” – stakeholders like unions, labour, investors, entrepreneurs and other business people – one could talk about the creation of research centres which are not-for-profit or public-private partnerships. All of the knowledge developed could be shared or sold. Upgrading our telecommunications technology and our infrastructure could also bring companies our way. Either way, we need a plan. Having an open economy could mean that we could attract foreign capital that does not want to be stuck or burdened by European, American, Chinese, Japanese or Russian regulation or bureaucratic attitudes. However, to do this our government needs to have a strategy that moves beyond tax cuts. As we have seen, since 1993, tax cuts alone do not build economies. Or put differently, corporations have received many tax cut; however, we have not seen significant improvements in the efficiency or productivity of corporations. Tax cuts have just gone to the bottom line without improving saving rates or the country as a whole. Therefore, Canadians need more and we need to have a conversation about our future. We need a business strategy. 

So where does this leave a Liberal? Simply up, we need to fight for the “Other”. I do not agree with opening up the Canadian Wheat Market to competition. For, food production is a vital industry that protects our health in times of peace and war. However, if, as a country, we agree that we are going to open up the Wheat Market, we need to have financial bridges and government strategies to ensure that we can be competitive. We should not whine about the sale of Viterra, our energy should go to laying the ground work so that we can build next Research in Motion, Bombardier and Brookfield Asset Management Inc.

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