Foreign control creates economic chaos
Canadians undertook a timely debate in the final months of 2010 about foreign control of our major corporations and the potential costs and benefits, which led to the federal government’s decision to block the proposed takeover of Potash Corp.
Foreign control is an issue that’s not going away. Indeed, soon after the Potash decision, two other foreign corporations demonstrated through their actions exactly why Canada needs a very different approach to regulating foreign investment. US Steel (formerly Stelco) locked out its workers in Hamilton, continuing a ruthless drive to suppress compensation and pensions in Canada. And the Brazilian mining giant Vale dealt a body blow to Thomson, Man. by announcing the closure of the former Inco smelter there.
Incoming foreign direct investment in Canada has been growing dramatically, rising from 20% of our GDP in 1994 to 36% today. That’s the highest level of foreign control since World War II.
Over the past decade, $300 billion of foreign investment surged into Canada like an economic tsunami, with more than half of it concentrated in our mining, oil and gas, and primary metals sectors. Canada lost corporate icons such as Stelco, Dofasco, Inco, Falconbridge and Alcan, all of them so central to our historical development.
If foreign takeovers actually resulted in new productive capital we would benefit from new equipment, technology and marketing opportunities. But the actions of US Steel and Vale put the lie to that hope. They’ve been shuttering or idling strategic Canadian capacity in many communities – all in the interests of reducing excess capacity, selling assets to pay down debt and intimidating Canadian workers.
Canada also incurs many costs when key productive assets are sold off to foreign giants. There’s long-term liability for the payment of interest and profits to the foreign owner, which drags down our balance of payments (about $40 billion in 2010). We lose head office jobs and sustain visible deindustrialization, since foreign owners are interested only in our resources and bulk commodities. And takeovers reposition productive Canadian assets, reducing them to mere cogs in a bigger global machine. Key productive jewels such as Stelco or Inco once stood on their own feet. Now they are vulnerable to the bean counting of foreign financial engineers.
Of the many takeovers we’ve allowed in the past decade, the US Steel case may be the most infuriating. It flaunted sombre commitments to preserve Canadian jobs and production before the ink was dry. Workers were threatened – first in Lake Erie, then in Hamilton – with the loss of their livelihoods for refusing to accept corporate extortion. And the humiliating failure of our federal government to enforce the original net benefit deal with US Steel proves backroom arrangements, cooked up between foreign tycoons and Ottawa bureaucrats, are not worth the paper they’re printed on.
Investment Canada regulations must be scrapped and replaced with a law that allows us to put the right conditions, backed by meaningful sanctions, on foreign investments that genuinely enhance Canada’s economic interests.
If US Steel won’t use its Canadian facilities to produce the steel and jobs we need, those assets should be given to someone who will use them. Newfoundland’s Premier Danny Williams proved, in his showdown with AbitibiBowater (when it shuttered its operations in Grand Falls), that a government has both the responsibility and the ability to stand up to corporations that shirk their responsibility to the communities where they do business. Canada’s government should do the same with US Steel.
Ken Lewenza is the president of the Canadian Auto Workers Union, which represents 225,000 workers across the country in 17 different sectors of the economy. E-mail firstname.lastname@example.org.
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