Liberal Leader expresses concern over the U.S. take-over of Canadian companies

Stéphane Dion Calls for Immediate Review of Investment Canada

Edited by John Stokes

OTTAWA - The Conservative government should immediately review the rules governing foreign takeovers to better promote both global champions and the fair treatment of Canadian companies, Liberal Leader Stéphane Dion says.

"Canada must take account of the rules followed by our competitors. The Investment Canada Act has not been reviewed for 20 years, and recent developments suggest that in some areas the Act may be tilted against both Canadian companies and the national interest to create global champions," said Mr. Dion.

Liberal Finance Critic John McCallum said Canada's approach to foreign ownership has failed to keep up with the practices of our competitors in global markets.

"In some respects we may be becoming the 'boy scouts' of the world in this area, and this is not serving the national interest," said Mr. McCallum.

"Canadians want to keep the Canada in Bell Canada," said Industry Critic Scott Brison. "It is shocking that while American private equity firms are bidding for BCE, Minister Bernier muses publicly in New York about loosening foreign ownership rules for Canadian telecommunications firms."

In view of this, the Liberal Opposition is calling on the government and other Opposition parties to immediately launch a two-pronged review as follows:

.The government should immediately appoint a blue ribbon panel of experts to review the issues and make recommendations on changes to the Investment Canada Act within three months. The government should hold back decisions on major foreign acquisitions and any changes to foreign ownership rules until after this process has been completed.

Parallel to the work of this panel, a special sub-committee of the Finance Committee and the Industry Committee of the House of Commons should hold hearings on these matters over the summer.

Mr. Brison said a review would be in the national interest.

"The best way to strengthen economic sovereignty is through policies that create economic growth and prosperity by helping build competitive advantage. The government's wrongheaded policies on income trusts and interest deductibility have actually hurt the ability of Canadian firms to compete and grow globally," said Mr. Brison.

Mr. Dion outlined a number of areas where Canada's market-based rules should be examined and possibly improved.

He pointed to Alcoa's recent takeover bid for Alcan, which raises the question of whether reciprocity should be a factor governing takeovers in Canada. Alcoa's home state of Pennsylvania has rules that would make it extremely difficult for Alcan to take over Alcoa. Since Alcoa comes from a jurisdiction that protects it from takeover, it must be determined whether Alcoa should face tougher rules in Canada when it seeks to take over Alcan.

As well, Investment Canada makes decisions based on whether it judges a takeover to confer "net economic benefit" on Canada, said Mr. Dion.

Apart from the point that not a single takeover has been blocked in many years, there are concerns that Investment Canada's one-at-a-time approach fails to provide a proper test of net economic benefit. For example, while the takeovers of Inco and Falconbridge by foreign companies were judged to confer net economic benefit, many would argue that the net economic benefit for Canada would have been greater if Inco and Falconbridge had achieved a made-in-Canada merger, or if, for example, a three-way merger of Alcan, Inco and Falconbridge had been contemplated. Yet such possibilities cannot be considered under the current one-at-a-time approach adopted by Investment Canada.

In addition, several American states have rules that, unlike Canada, allow corporate boards to consider the impact of a takeover on stakeholders other than shareholders. Our government has a responsibility to look at whether Canada should consider the adoption of such rules.

Finally, some business leaders, pointing to the example of the United States, have suggested that certain resource industries should be viewed as of strategic importance.

Mr. Dion said all of these concerns and others have surfaced at a time when Canadians are becoming concerned at the disappearance of a disturbing number of Canada's best known companies.

While it is clear that Canadian companies have been active international investors and that foreign direct investment provides important benefits to Canada, it's also clear that head offices matter a great deal for high-paying direct and indirect jobs, research and community support.

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