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Canadians just undertook a high-profile and timely national debate about the costs and benefits of foreign control of our major corporations, culminating in the federal government’s decision to block the proposed takeover of Potash Corp. But the issue of foreign control is not going away.
Indeed, in the weeks since the Potash decision, two other foreign corporations have demonstrated through their actions exactly why Canada needs a very different approach to regulating foreign investment. U.S. Steel locked out its workers in Hamilton, continuing a ruthless drive to suppress compensation and pensions here in Canada. And the Brazilian mining giant Vale dealt a body blow to Thomson, Man., by announcing closure of the former Inco smelter there — destroying the lives of hundreds of families.
Those are concrete manifestations of exactly why so many Canadians, myself included, are concerned about the foreign conquest of our major businesses.
Incoming foreign direct investment has grown dramatically in Canada in recent years, rising from 20 per cent of our GDP in 1994 to 36 per cent today. That’s the highest level of foreign control since the Second World War. Three hundred billion dollars of foreign investment surged into Canada in the last decade, like an economic tsunami. Over half was concentrated in our mining, oil and gas, and primary metals sectors. Canada lost corporate icons — such as Stelco, Dofasco, Inco, Falconbridge and Alcan — whose presence was so central to our historical development.
If foreign takeovers actually resulted in the installation of new productive capital in Canadian workplaces, that would be one thing. We could then benefit from new equipment, technology or marketing opportunities. But the actions of U.S. Steel and Vale give the lie to that hope. They’ve been shuttering or idling strategic Canadian capacity in many communities, including Hamilton — all in the interests of reducing excess capacity, selling assets to pay down debt and intimidating Canadian workers.
Canada incurs many costs when key productive assets are sold off to foreign giants. We incur a long-run liability for the payment of interest and profits to the foreign owner; dragging down our balance of payments (by around $40 billion this year). We lose the jobs that result from the presence of head offices. Takeovers have also contributed to Canada’s visible deindustrialization, since foreign owners are interested only in our resources and bulk commodities — not in developing Canada as a diversified, sophisticated nation.
Another key consequence of takeovers is that they reposition productive Canadian assets, reducing them to mere cogs in a bigger global machine. Key productive jewels such as Stelco or Inco, which once stood on their own feet, are suddenly vulnerable to the bean-counting of foreign financial engineers. Sure, we had our ups and downs in the Canadian steel and resources industries over the decades, but the Canadian facilities always maintained a critical mass — and we always knew they would still be there at the end of the next roller-coaster cycle. Now we can no longer have that confidence. Foreign parents have no qualms about shutting Canada right out of the picture, if cost calculations or head-office political concerns push them that way.
Of the many failed takeovers we’ve allowed in the past decade, the U.S. Steel case may be the most infuriating of all. It flaunted sombre commitments to preserve Canadian jobs and production, before the ink was dry on the deal. It threatened workers — first at Lake Erie, now in Hamilton — with the loss of their livelihoods, for refusing to accept corporate extortion.
The humiliating failure of our federal government to enforce the original net-benefit deal with U.S. Steel proves that those backroom arrangements, cooked up between foreign tycoons and Ottawa bureaucrats, are not worth the paper they are printed on.
What’s happening in Hamilton today is nothing less than an affront to Canada’s national status as a serious, developed country. It’s not just the members of Local 1005 that are being bullied; it’s our whole country. The Investment Canada regulations must be scrapped, and replaced with a genuine law that allows us to put the right conditions, backed up by meaningful sanctions, on those foreign investments which genuinely enhance Canada’s economic interests.
And if U.S. Steel won’t use its Canadian facilities to produce the output and jobs we need, then those assets should be given to someone else who will. Newfoundland’s Premier Danny Williams proved, in his showdown with Abitibi-Price (when it shuttered the community of Grand Falls), that a government has both the responsibility and the ability to stand up to corporations which disrespect their responsibility to the communities where they do business. Let’s see our government do the same thing with U.S. Steel.
Ken Lewenza is National President of the Canadian Auto Workers union.
Shannon Devine Communications Director CAW-TCA Canada