Compete To Win (Giving Canada Away)

Foreign takeovers welcomed by self-serving panel on competition

Corporate ringers told Harper what he wanted to hear - from an interview with Mel Watkins.

OTTAWA, June 26, 2008: - A panel of top Canadian business executives appointed by Stephen Harper last year to take the heat off the government in the wake of a wave of foreign business takeovers, has recommended more of the same.

The Competition Policy Review Panel has recommended that the federal government water down most foreign investment controls and allow the mergers of major banks.

The report says Canada needs to reduce barriers to economic competition and embrace globalization. "The panel believes that Canada needs to be more open to competition," said panel chair L.R. "Red" Wilson, Chairman of the Board of CAE Inc. and former president and CEO of Bell Canada Enterprises.

One of Canada's leading experts in foreign ownership believes the report is the work of business "ringers" who told Harper what he wanted to hear and believed in the first place.

Economist Mel Watkins told HarperIndex.ca in a telephone interview, "My biggest fear [when the panel was set up] was that they would produce a report that was utterly self-serving for the business community. That's precisely what they've done." He says the report is "a wish list for business."

The report proposes to make it easier for Canadian companies to be taken over, says Watkins, in every case except for cultural institutions. It recommends allowing any acquisition of a company worth less than a billion dollars to go ahead without government review. Current takeovers of companies are examined at the $250 million level.

Another recommendation aimed at making takeovers easier is to put the onus on government to prove the takeover could threaten national interests. Currently, companies involved must prove it does not.

"Nearly 16,000 acquisitions have taken place, and they haven't turned down one until recently," says Watkins, pointing to the rejected sale of aerospace manufacturer MDA Canada as the sole exception. He calls the policy switch pretty preposterous.

The language of the report, entitled "Compete to Win", speaks to its political nature, says Watkins. "It sounds like a book by Don Cherry, full of sports and hockey analogies like 'A good defence is a good offence' and 'We have to play more at the other end of the rink'. It's as if the future of this country depends on Sports Canada."

He finds the most interesting aspect of the report is its repeated focus on the "insufficiency of entrepreneurial ambition in Canada", a notion with which he agrees. However, he attributes this insufficiency to the kind of colonial thinking and practices encouraged by the report.

"We've always thought of ourselves as part of another empire," says Watkins. "So we have a Canadian business class that has no sense of itself. If you want to create a stronger business class in this country, it has to be encouraged to think of itself as separate from the US. The solutions offered by this report don't speak to any kind of strategy like that."

He is critical of the lack of attention the report plays to the resource sector in improving Canada's competitiveness. "If your fate is to be well endowed with resources, why don't you make it a central part of your business plan to strengthen that sector. We just let them [resources] go. Canada doesn't have any strategy in the resources sector, and this report fails to produce any. Instead they just mumble the usual cliches about working smarter and all that."

The report, Watkins says, has no recommendations on how to make more effective use of Canada's energy resources in the face of crisis or how to increase Canada's energy security. He says the report is written "in a kind of curious vacuum" without any reference to "what is going on in the world, where quite a few crises are taking place." Instead of opening up the banking sector in the midst of serious financial crises, "I think we should be looking at how to protect it."

"The other big crisis is ecological and climate change," says Watkins. "These words never appear in the report. The attitude is "Globalization! Let's have more of it! [The report] doesn't seem to understand that we have a number of problems happening due to the amount of globalization we have [already] introduced. If we have more, it will worsen."

http://www.harperindex.ca/ViewArticle.cfm?Ref=00154

Specific policy recommendations to the federal government include:

• Amending the Investment Canada Act to reduce barriers to foreign investment by increasing review thresholds; reversing the onus to require the government to demonstrate that an investment would be contrary to the national interest before disallowing a transaction; increasing transparency and predictability; and preserving a distinct approach for the cultural sector while also initiating a broad review of Canada’s cultural policies;
• Liberalizing investment restrictions in the Canadian air transport, uranium mining, and telecommunications and broadcasting sectors, and removing the de facto ban on mergers in the financial services sector;
• Updating and modernizing the Competition Act in line with best practices internationally;
• Creating a Canadian Competitiveness Council to give voice to and advocate for competition in Canada, and ensure sustained attention by governments on national competitiveness.

The report is available here…

http://www.ic.gc.ca/epic/site/cprp-gepmc.nsf/en/h_00040e.html