The Truth About Canada (28 page)

Nor does the writer seem to understand that, in the first half of this decade, there was already a record number of foreign takeovers, to be easily topped in 2006, even with no further tax reductions. And 2007 seems to have been yet another disaster year for Canadian economic sovereignty.

But true to form, as the
Financial Post
has told us, “Canadian business leaders want the federal government to cut business taxes to keep Canadian companies from selling operations to foreigners a new survey done for the
Financial Post
reveals.”
⁵

Yet another poll, reported this time in the book
What Canadians Think
, by Darrell Bricker and John Wright of Ipsos Reid, some 70 percent of Canadians agreed that the “Federal Government should have the power to stop an American company from purchasing a Canadian company,” and six in ten said that they were “angry that the Federal Government is not doing more to stop U.S. and other foreign ownership from buying Canadian-owned companies.”

Unfortunately, the Mulroney government paid zero attention to many similar polls, and neither did the Chrétien or Martin government. As for the Harper government, you’ve already read what I think is happening and what I think will happen in the future. In October 2007, Stephen Harper, true to form, said that the fear of foreign takeovers was unwarranted. Welcome to the branch-plant colony of Canada. One week after
Harper dismissed any concerns about growing foreign ownership and control, a new study confirmed that Canadians were “losing corporate control to outside investors.”
⁶

Among the Canadian companies taken over since the long depressing list I put together in
The Vanishing Country
in 2002 are the Hudson’s Bay Company, Inco, Alcan, Stelco, Placer Dome, Falconbridge, mountain resort operator Intrawest Corp., Newbridge Networks, Dofasco, Geac Computer Corp., Leitch Technology Corp., Creo, Vincor International, Sleeman Breweries, Gale Force Energy, EnCana’s holdings in the Mackenzie Delta and Canadian Arctic, AIM PowerGen Corp., BCE’s Telesat Holding, the lingerie retailer La Senza Corp., Calgary’s Centurion Energy International, the Toronto-based luxury hotel operator Four Seasons Hotels & Resorts, Ontario auto parts maker Meridian Technologies, THINKFilm, Harris Steel Group, Fanny Bay Oysters, Petro-Kazakhstan, Domtar, ATI Technologies, Ipso, Liton Ore International Mining, Prudential Steel, Co-Steel, Arcelor, Algoma Steel, Voxcom Income Fund, UE Waterheater Income Fund, Nelson Resources, LionOre Mining, Standard Aero Holdings, Vancouver Wharves, TIR Systems, Halterm Income Fund, Lakeport Brewing Income Fund, Norcast Income Fund, Entertainment One Income Fund, Great Lakes Carbon Income Fund, KCP Income Fund, Gateway Casinos, Calpine Power Income Fund, ATI Technologies, BioChem Pharma, ID Biomedical Corp., the film distributor MPD, jam and sauce maker E.D. Smith & Sons, the refrigeration company Versacold, the Winnipeg Commodity Exchange, the high-tech icon Alias Systems, Limocar, Air Canada Technical Services, Steeplejack Industrial Group, Aspreva Pharmaceuticals, Western Oil Sands, Prime West Energy Trust, Vitibev Farms, Westwind Partners, Cognos, and Miramar Mining, with potentially the largest gold mining area in Canadian history, Axcan Pharma and MacDonald Dettwiler and Associates.

After the U.S. giants Cargill and Tyson arrived in Canada, most of our meat packers disappeared. Canadian agrologist Wendy Holm says that the two U.S. firms controlled 65 percent of feed cattle slaughter in Canada, and with the 2005 takeover of Better Beef in Guelph, Ontario,
they now control over 80 percent. Gone, too, are most of our big mining companies, all of our steel companies, and even our big breweries.

Yet Finance Minister Jim Flaherty proclaimed in 2007 that in the future he wants much more of the same. And according to the
Globe and Mail
, “Industry Minister Maxime Bernier is laying out a welcome mat for foreign companies to acquire Canada’s telecommunications companies.”
⁷

The
Globe
’s Eric Reguly asks,

Why is Canada apparently happy to have industries owned by companies and people who don’t live here?

Canada is one of the few western countries to have never stopped a foreign takeover. The Americans stop them all the time.
⁸

Dominic D’Alessandro, chief executive officer of Manulife Financial Corp., is one of only a few senior Canadian business executives who have spoken out about the fire sale of our country.

We just assume that anybody should be allowed to buy our assets, buy our companies.…

There are even professors now preparing papers saying we haven’t really lost anything, that a change of ownership doesn’t matter.… I think it matters a lot.

I don’t think we should be embarrassed as a population to say that there are certain sectors that we should reserve for ourselves.

And, soon after:

I sometimes worry that we may all wake up one day and find that as a nation, we have lost control of our affairs.

I find it particularly bothersome that so many of our natural resource companies are now owned elsewhere.

What if we were to consider adopting ownership restrictions for certain sensitive sections of our economy that would be similar to those that now apply to our financial institutions?
⁹

In 2006, before another buyout binge in 2007, almost one fifth of Canadian stock market capitalization had been taken over by foreign corporations. Yet the very unhappy law firms, insurance firms, telecommunications firms, etc., etc., that are affected by all this behave as if their mouths were bound with tape.

Early in 2007, I became increasingly dismayed by how few of our corporate elite were speaking out about what was happening. I called four very prominent Torontonians, one at the Rotman School of Management at the University of Toronto, another a much-admired and very prominent Canadian executive, another a well-known business writer, and the fourth one of Canada’s most famous entrepreneurs, and I asked them if there was
anyone
speaking out about the foreign takeover of our country. The response was both sad and significant. Here is the e-mail I sent to Royal Bank CEO Gordon Nixon after talking to all four:

Mr. Nixon:

In recent talks with Red Wilson, Roger Martin, John Evans and Dominic D’Alessandro I asked them why there are not more people from corporate Canada speaking out about the rapidly increasing foreign ownership and foreign control in Canada. (Aside from Dominic that is.) I asked them if they could name anyone who was. All four named you.

I would welcome having a copy of your remarks on this subject.

Mel Hurtig, O.C.
¹⁰

Nixon responded by sending copies of some of his recent remarks, which included this: “We have not only seen the disappearance of major
Canadian household names, but the loss of Canadian presence in industries where we have long had traditional strengths. Their loss does not bode well for Canada’s future performance.”

This response was gratifying, but it also made me curious. I wrote back to Mr. Nixon, congratulating him for his comments, but also asking, given his expressed concerns and the congratulations he has received for making them, several questions.

1. Are you now prepared to see to it that the Royal Bank stops its long-term practice of helping to fund the foreign takeover of Canadian companies?

2. Since the Royal Bank was probably the most enthusiastic and significant single corporate supporter of both the FTA and NAFTA, were you not aware of the investment clauses in both agreements which make it much more difficult to block American takeovers of Canadian companies?

3. You are now the head of the Canadian Council of Chief Executives. When you accepted this premier big-business position, did you not know that both the CCCE and its predecessor the BCNI have been and are the most rabid and enthusiastic supporters of unrestricted foreign direct investment?

4. How can you reconcile your public concerns about increasing levels of foreign ownership and foreign control with these three questions?

Gordon Nixon has not replied to my questions. But, remarkably, in an interview he has said we should not go as far as actually putting restrictions on foreign ownership.
¹¹
How bizarre! And this is the man corporate Canada points to as a protector of Canadian ownership and Canadian control. But then again, since he’s the head of the CCCE, what else could we expect? In November 2007, the
Financial Post
named Gordon Nixon “Canada’s Outstanding CEO of the Year.”

I suspect that after this book is published we may not be hearing much on the subject from Mr. Nixon. But if any of you attend any of his speeches, you may wish to ask him some of the above questions during the Q & A session, particularly the first question.

For well-known and widely respected petroleum industry executive Dick Haskayne, the Canadian culprits are “ego-driven executives and directors, fee-grabbing investment bankers, loose-pursed lenders and the governments whose policies foster such transactions.”
¹²

For Peter Munk of Barrick Gold Corp., the deficiencies of our business leaders are obvious: “Now look what they’ve got. It requires balls, it requires guts, it requires vision. And those are not qualities that come to our senior corporate managers.”
¹³

Should Canadians be concerned about the current surge of takeovers? Even the traditionally continentalist editorial page of the
Globe and Mail
, which for decades has strongly decried any barriers to more foreign direct investment, has called the rate of takeovers “alarming” and in a truly astonishing out-of-character editorial actually criticized the Harper government for having

no coherent plan to safeguard Canada’s strategic industries. Indeed, it has yet to signal whether it considers any industries vital to this country’s future and hence essential to keep under Canadian control.

Consolidation in the resource sector means job losses, and the reduction of head offices means less demand for talent in a wide range of financial, legal and technical services.

The real decisions will inevitably be made elsewhere by managers who own no allegiance to Canada or its strategic interests. The promise that head offices will stay in Canada is as hollow as the offices themselves will soon be.
¹⁴

Wow! Amazing! What a sharp contrast to the
Globe
’s long-standing position. And how very timely and welcome.

But Peter C. Newman rightly remains pessimistic: “There’s no popular outcry, there’s no popular whimper. When those leading companies disappear, we lose our membership card in the global economy. We’re becoming a kind of Manchuria, supplying raw materials to the more mature world.”
¹⁵

Eric Reguly says, “Canada is a G8 country that acts like a colony, circa 1900, waiting to be plundered by the Americans, the Europeans, even the Latin Americans.” And why is this happening? According to Reguly, “Feckless CEOs are the main problem.”
¹⁶

The following letter appeared in the
Globe and Mail
, May 5, 2007:

Memo to Dominic D’Alessandro, CEO of Manulife (CEO Urges Action on Takeover Frenzy—Report on Business, May 4):

Your concerns about Canadian ownership reflect a deeper question, namely the level of ability and leadership (or lack thereof) among the ranks of our business leaders.

The recent actions of a number of CEOs seem to suggest it is easier for them to sell and run (with pensions in hand), rather than lead. “If they were on a battlefield,” as my grandfather, a First World War veteran, would have said, “they’d all be shot!”

Leo J. Deveau, Wolfville, N.S.

26

CANADIAN INVESTMENT ABROAD

NOT EXACTLY WHAT WE WERE PROMISED

C
anadians were solemnly promised that the Canada-U.S. free-trade agreement (FTA) would result in massive increases in new foreign firms locating in Canada, since our country now had “guaranteed access” to the giant U.S. market. Also, much new domestic Canadian investment would be stimulated to take advantage of this “privileged” position.

It didn’t exactly work out that way. Instead, big business in Canada, led by our “Big Five” banks and our other financial institutions, began pouring huge quantities of money out of the country, mostly into the United States, while over $53.9-billion went into tax havens in Barbados and Bermuda. By the end of 2006, over 44 percent of Canadian direct investment abroad (CDIA) was by our finance and insurance sector.

It’s very revealing to compare CDIA during the first 13 years (from 1994 to 2006) of the North American free-trade agreement (NAFTA) with the preceding 13 years (1981 to 1993). In the NAFTA years, CDIA totalled an enormous $499.9-billion. This compares with an outflow of only $75.6-billion during the previous 13 years.

So much for the con artists who promised that NAFTA would encourage Canadian corporations to invest here. It was the biggest, most enthusiastic NAFTA promoters (think of our Big Five banks again) who began pipelining money out of the country as fast as they could,
beginning in 1994. Prior to NAFTA, the record year for CDIA was in 1987, when outflow amounted to $9.44-billion. During the NAFTA years, the outflow has exceeded $50-billion in five different years.