Stephen Harper is now powered by the ideas of Pierre Trudeau

 “Under the new guidelines, the acquisition of oil sands companies by foreign state-owned enterprises will only be found to constitute a new benefit for Canada in “exceptional circumstances.” And, despite today’s decision on Nexen, the prime minister seemed eager to draw a line on such investments, saying these decisions marked “not the beginning of a trend, but rather the end of a trend.”

“To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead. That was never the purpose of the Investment Canada Act. It is not an outcome that Canadians would ever support. It is not an outcome any responsible government of Canada could ever allow to happen,” the Prime Minister explained.

  • Harper government approves CNOOC and Petronas deals, by Aaron Wherry on Friday, December 7, 2012, Maclean’s

Canadian Trade Policy has always been a fuzzy land for political parties. For both Parties have been both Protectionists and Free Traders. John A. MacDonald was a Protectionist. His government created the National Policy – a set of tariffs and taxes which protected Central Canadian Industry. In that same vein, Pierre Trudeau created the Foreign Investment Review Agency (FIRA). While, George Brown would have been very comfortable with Mulroney’s two major trade treaties: FTA and NAFTA. I would be foolish if I argued anything but.

Therefore, it is sort of impossible to argue that there is a historical or present Liberal Tradition on trade. However, it would also be as foolish for me not to test my thoughts on Liberalism in terms of trade. It would be wrong headed to say that we could not ask a set of questions. For example, do the deals themselves hurt any of our compatriots or friends? Do the deals hurt our governance of environmental standards or corporate conduct? The tools that I have used over the last couple of months – ‘Caring for Others’, ‘the Greatest Good to the Greatest Number’ and ‘Civic Responsibility’ – would all indicate that this deal should have been approved months ago.

Think about it. One could make three arguments against the deal. Firstly, shareholders are not getting a fair deal. If one understands that the price paid will give Nexen’s common shares more than a 60% premium on the NYSE July 20, 2012 closing price and a premium of 66% to Nexen’s 20 trading-day volume-weighted average share price, one cannot say that Nexen Shareholders are being taken advantage of.

Secondly, one could argue that government revenues will be diminished. However, that argument is equally false. For most of Nexen properties were held overseas. To be clear, while they had some assets in Western Canada, they had even greater assets in various offshore locations. This includes assets in the Gulf of Mexico, Western Africa and the North Sea in the UK. Since Canadian Governments receive no royalties on foreign claims, then the royalty revenue will not change. Furthermore, the deal is very clear in that, it will not affect any Canadian laws. Therefore, Provincial and Federal Royalty rates will also not change.

Furthermore, given that Calgary will become one of CNOOC Limited’s international headquarters – managing Nexen’s global operations and CNOOC Limited’s existing operations for North and Central America – one could say that the corporate income tax revenues provided by the new merged entity will also not change. The benefit to Canada is clear, so far.

However, there is a third argument against the deal, the loss of corporate control. An issue of sovereignty some would say. I would not be one of those making that argument. For, as was noted above, Calgary will become the hub for much of CNOOC’s international activities. Additionally, there seems to be nothing indicating that CNOOC works as an arm of the Chinese Government. It is listed the Stock Exchange of Hong Kong Limited – like a number of other Western Companies – and has acted in a profit oriented manner since its inception. While, it is owned by the Chinese Government, it acts like Suncor, Imperial Oil and Royal Dutch Shell.

What is most interesting is the fact that China seems to be taking a page out of the Canadian and Norwegian Policy Handbooks. In the 70’s, both Canada and Norway developed state-oil companies. They were called Petro-Canada and Den Norske Stats Oljeselskap A/S. Both were created to due to political motivation. They were created to allow the domestic countries to develop domestic competency within the petroleum industry. In Canada’s case, Petro-Canada was pivotal in the development of Hibernia and the Alberta Oil Sands. While, in Norway’s case, Den Norske Stats Oljeselskap became Statoil. Statoil is now the world’s 13th largest oil and gas company. So if anything, CNOOC is likely China’s leap into developing a local petroleum industry. Given that CNOOC has made a clear profit for years, there is nothing to question that assumption. So arguing that Canada is losing out in this bid is a mistaken point of view. While, I am an admitted free trader, one can see that the net benefit from a corporate and governance stand point are clearly in Canada’s favour.

With this being said, one has to question the statement of the Harper Government. Or put differently, if foreign governments kept making the same type of deals, Canadians would not suffer. In fact, we might be able to enhance our world position. For given that all the petroleum assets produced – either in Canada, China, India, the US or Europe – all end up on the world market, one has to wonder why we are worried about who owns a patch of dirt in Northern Alberta, Northern Saskatchewan or the North Sea. My only explanation is that Stephen Harper and Pierre Elliot Trudeau agree on a Protectionist Economic Policy.

Just think about it. Australian mining company BHP Billiton Ltd failed in its bid to take over Saskatchewan based Potash Corp. The deal was very similar to the now approved CNOOC deal. In fact, what was remarkable was after that deal the Harper Government was supposed to fix the Net Benefit Rule: The rule that supposedly made it very difficult for the Harper Government to make up its mind. Two years later, there has been no rule change. The truth of the matter is that unlike the Mulroney, Chrétien or Martin Governments, this new Harper Government – like the Trudeau Government – seems to want to coddle their key constituents from competition. The ironies are rich. Trudeau and MacDonald had protectionist policies that benefited Central Canada and now Harper has shown that his preference is a protectionist policy that benefits Western Canada.

This type of Protectionism, in my mind, tends to back fire. Andrea Mandel-Campbell, in her book Why Mexicans Don’t Drink Molson, talked a bit about this. The failure in many ways to be able to compete at home, leads us into a situation where we cannot compete abroad. Our lack of innovation is the simple result. Therefore, Government should set policy and laws and change them where necessary. However, Governments should not stop takeovers because of a sense of patriotism. As Research in Motion has proven, it is possible to start a Global Brand or Global Company in Canada. If Canadian Governments provide a solid regulatory environment and encourage businesses through grants, programmes and tax incentives, innovation can result. Business will take root to take advantage of those benefits and our economy will grow stronger. If foreign government agencies want to buy into Canada let them, as long as it does not touch our national security infrastructure. Our Oil Sands is not a National Security Manner for all of our production goes to the World Market anyways. That is what we pay at the pumps and that is how our economy works. Let us innovate through crown corporations, private labs or through the public markets. That should be our approach; that should be the approach of Our Party.

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