CALGARY — Canada has been a net exporter of capital in world markets, as foreign direct investment by Canadian companies has outpaced the inflow of foreign capital, according to a new report.
Jack Mintz, director of the School of Public Policy at the University of Calgary, said since the mid-1990s Canada has not been a significant attractor of foreign investment.
“Rather than being hollowed out, we are hollowing out other countries,” Mintz said.
“As a general policy, Canada should reduce barriers to foreign direct investment and welcome our growing role in international markets.”
The reported argues only in limited circumstances, such as national security, should Canada block foreign takeovers of Canadian companies.
Industry Canada is reviewing BHP Billiton’s US$38.6-billion takeover bid for PotashCorp, Saskatchewan’s largest company and the world’s biggest fertilizer producer.
One of the major hurdles BHP will have to overcome is persuading Ottawa that the takeover is of net benefit to Canada — a key provision under the Investment Canada Act, which governs foreign companies that operate here.
Under the Investment Canada Act, a federal review is required when a Canadian company with assets of more than C$299 million is bought by a foreign entity, although the government has passed regulations to gradually increase that to $1 billion over several years.
Ottawa blocked an attempt by MDA to try to sell its space division to American firm Alliant Techsystems Inc. in 2008, the first and only time the federal government rejected a foreign takeover outright under the act.
However, the government has come under fire for its handling of recent foreign acquisitions. It is in the midst of a lengthy court case with U.S. Steel Corp. (NYSE:X) which acquired the former Stelco for more than $1 billion in 2007. U.S. Steel admits it broke employment and production promises it made under the act, but says it had no choice because of the global recession.
Brazilian mining giant Vale’s takeover of the former Inco for $19 billion in 2006 also came under fire recently during a year-long strike involving about 3,000 employees at the company’s operations in Sudbury, Ont. Vale employees in Voisey’s Bay, N.L., are still on strike after nearly 14 months.