Chinese bid for Nexen raises big questions about Canada’s future

All these foreign takeovers are eroding Canada’a ability to ensure its resources are exploited based on Canadian priorities.

Gus van Harten, Guest Columnist

The Chinese state company CNOOC’s $15-billion bid for Nexen, a major Canadian oil and gas company, raises major issues about the future of Canada’s economy.

Whether or not the government approves the bid — it is currently being reviewed under the Investment Canada Act — there are many questions that should be asked about the deal, including:

Should the government allow our resources to be owned by whoever pays the highest price to shareholders of a Canadian company?

By extension, do we want stock markets to decide how best to protect Canadian interests?

The issues become especially important because the Harper government has put most of Canada’s economic eggs in the resource sector instead of manufactured exports.

Some commentators have maintained that the criteria for review — whether it is deemed a ‘net benefit’ to Canada — are too vague, but by using a broad test the government does retain flexibility when seeking conditions for a takeover or blocking it outright.

Under this laissez-faire approach, favoured by the government, Canada should be wide open to foreign investment. We should not care about country-of-origin or about whether the buyer is state-owned or private. Let the bidding begin, all offers welcome. Maximize the benefits for shareholders.

But do we want to ensure that our resources are exploited according to Canadian priorities? And do we expect governments to play a role? If so, the government needs to ensure a minimum threshold of Canadian ownership in key sectors. With ownership comes control; with Canadian ownership comes a range of options to ensure Canadian interests are protected.

Chinese ownership, on the other hand, gives China an ability to frustrate policies in Canada. The issue could be jobs or value-added business. It could be environmental protection or aboriginal rights. It could be foreign affairs or national security. The point is, governments in Canada, and by extension all of us, will have less of a say.

Those who ask government to regulate foreign investment are often demeaned, including by the Prime Minister, as ‘protectionist’. Yet governments of other major countries take a more active role in protecting nationally-owned firms. In contrast, the Harper government has thrown open the doors to foreign takeovers and foreign influence.

All sorts of foreign takeovers (including, we can assume, by Chinese companies) are no longer subject to the usual review process under the Investment Canada Act because the Harper government raised dramatically the threshold for review of proposed takeovers. It ceded its powers to review bids for any Canadian company worth less than $1 billion.

As a result, many foreign takeovers of Canadian firms fly under the radar of the government and the public. The economic ramifications will emerge gradually and be very difficult to reverse.

Reviews under the Investment Canada Act are limited in other ways. For example, they apply only to takeovers of existing Canadian companies. Foreign investment in new businesses — so-called greenfield investment, which Canadians support and prefer in opinion polls — are not subject to review.

Second, the Prime Minister recently raised the stakes of Chinese ownership in Canada. By inking an investment deal with China last month, his government laid a footing for Chinese companies to sue Canada for any law or regulation that we introduce. The lawsuits would be decided, not by Canadian courts, but by international arbitrators who often operate in private and lack the independence of a judicial process. U.S. companies have sued Canada more than 30 times under a similar NAFTA process. The U.S. and Canadian governments at least took steps to make the arbitrations public.

The terms of the Canada-China investment deal are not public. But the government’s announcement that a deal was struck should heighten concerns about Chinese ownership in Canada’s resource sector.

The CNOOC bid poses a conundrum for the government. Its laissez-faire approach, and its allegiances to shareholders in the oil patch, are pitted squarely against the risks of putting Canada’s economic future in foreign hands. Undoubtedly, the takeover would enrich Nexen’s shareholders. But is it good for Canada?

Most importantly, are all of these foreign takeovers eroding our ability to ensure that Canada’s resources are exploited based on Canadian priorities? It is not protectionist to ask this question.

Gus Van Harten is a professor at Osgoode Hall Law School. He specializes in international investment law. (www.troymedia.com)

Just Posted

Giving Tree back in Sylvan Lake for its eighth year

The Friends of Bethany will be putting the tree up on Nov. 21

Sylvan Lake’s Remembrance Day is more than just one day

Sylvan Lakers honour Remembrance Day, and the 100th anniversary of armistice

Rural crime task force results released at Agri-Trade luncheon

Report cites problems with police not being able to keep up with crime and justice system issues

Sylvan Lake students prepare for ‘Almost, Maine’ production

H.J. Cody presents ‘Almost, Maine’ from Nov. 21 to Dec. 1

Yuletide Festival returning to Sylvan Lake to kick of the holiday season

The fun filled festival will be held at the NexSource Centre, Nov. 30 and Dec. 1.

WATCH: Remembrance Day in Lacombe fills LMC

2018 marked 100 years since the end of First World War

Canada Post no longer guarantees delivery times amid more rotating strikes

The Canadian Union of Postal Workers closed two major processing centres in Ontario and B.C.

McGill students vote overwhelmingly to change Redmen team nickname

Student union held a referendum after a campaign by Indigenous students

Calgarians head to the polls to declare ‘yea’ or ‘nay’ on Winter Games

The question “are you for or are you against hosting the 2026 Olympic and Paralympic Winter Games?” was to be posed to them Tuesday in a plebiscite to help determine whether the city should move ahead with a bid.

Heir’s big birthday: 70 candles lined up for Prince Charles

Prince Charles turns 70 Wednesday, Nov. 14, 2018, still serving in the heir to the throne role he has filled since he was a young child.

Trudeau lays down challenge to companies in bid to boost trade with Asia

“Building the relationships, building the connections, building the facility and also changing mindsets — getting Canadian companies to see the opportunities we have around the world to partner and invest.”

CNN sues Trump, demanding return of Acosta to White House

CNN is asking for an immediate restraining order to return Acosta to the White House.

US trial to tell epic tale of Mexican drug lord “El Chapo”

Guzman’s long-awaited U.S. trial begins Tuesday in New York

Northern California wildfire is deadliest in state history

Holding out slim hope as crews search for more fire dead; 42 already killed in blaze

Most Read