Most foreign acquisitions not a national security threat: report

OTTAWA — The vast majority of foreign takeovers from China — but not all — pose no national security threat to Canada, says a new report that proposes Ottawa apply a three-step test to determine what is in the country’s interest.

OTTAWA — The vast majority of foreign takeovers from China — but not all — pose no national security threat to Canada, says a new report that proposes Ottawa apply a three-step test to determine what is in the country’s interest.

The report by Theodore Moran, a professor of international business at Washington’s Georgetown University, to be released Monday by the Canadian Council of Chief Executives, comes at a time of growing Chinese interest in Canada’s resource riches.

In a recent visit to China, Prime Minister Stephen Harper was expansive about broadening the economic ties between the two countries and said the government was anxious to build a pipeline through British Columbia that would ship Alberta oilsands crude to the country.

Moran’s report does not advocate selling off resources to foreign interests, but does say that national security considerations should not be an impediment in most cases.

“The predominant impact of Chinese procurement arrangements does not support popular concerns about Chinese ’lock up’ of world resources,” the report states.

It said its review of the record shows most Chinese foreign acquisitions have been for an equity, not controlling, stake, and of 35 investments examined, 23 helped diversify supply and increase competition.

That is not always the case, however, citing the recent controversy of China’s self-serving policies over “rare earth” minerals.

Moran proposes Ottawa set a standardized test of three threats to determine when a foreign acquisition, whether from China or any other country, jeopardizes Canadian national security.

— Would the proposed takeover make Canada dependent on a foreign supplier that might delay, deny or place restrictions upon a provision of goods or services crucial to the economy?

— Would the acquisition transfer technology or expertise that could prove harmful to Canadian interests?

— And would the presence of a foreign company in Canada pose a risk of infiltration, surveillance or sabotage?

Moran said codifying the test would lead to a principled determination of the true national interest and help take politics from influencing the decision.

Earlier this year, PetroChina became the first Chinese company to have full ownership of an oilsands project, when it bought out Athabasca Oil Sands Corp.’s (TSX:ATH) remaining stake in the MacKay River project.

The agreement followed a list of deals last year that included Sinopec’s purchase of conventional oil and gas-focused Daylight Energy Ltd. and CNOOC’s takeover of struggling oilsands junior Opti Canada.

China Investment Corp. also holds a roughly 20 per cent stake in Vancouver-based Teck Resources Ltd. (TSX:TCK.B), Canada’s largest publicly traded miner and a key supplier of copper and coal used for making steel.

Surprisingly, Moran said using his framework would have given Ottawa justifiable reasons to block two foreign takeovers that were indeed halted, but nevertheless elicited accusations the government was bowing to pressure.

The report argues that Ottawa was justified in blocking BHP Billiton’s hostile bid for PotashCorp (TSX:POT) because it would have “transferred control of a major world source of supply to foreign hands rather than helping to expand, diversify and make more competitive the world supplier base.”

Blocking U.S. Alliant Techsystems’ acquisition of Vancouver-based MacDonald, Dettwiler and Associates (MDA) might also have been justified, said Moran, because it would have transferred control of Radarsat-2, a high-resolution satellite with an unusual polar orbit.

“Alliant could not promise that the U.S. government would refrain from imposing controls on information-sharing in the event of a dispute between the United States and Canada focused on Arctic sovereignty,” Moran said.

Ottawa formally added “national security” to the Investment Canada Act in 2009, but has yet to spell out what standards it is using in applying the test.

“Application of this framework in Canada could — as elsewhere — help to discourage politicization of individual cases, and lead to swift and confident approval of those acquisitions where genuine national security threats are absent,” said Moran.

The council of chief executives, which represents 150 of Canada’s largest corporations, commissioned the report as part of its review on possible impacts of Asia’s emerging economic power.

Although council head John Manley advocates strengthening economic links with China, the council said in an accompanying news release that the report does not “necessarily” reflect its own position.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

A nurse gets a swab ready at a temporary COVID-19 test clinic in Montreal, on Friday, May 15, 2020. Health Canada has reversed course on home test kits for COVID-19, saying it will now review applications for such devices. THE CANADIAN PRESS/Paul Chiasson
Alberta declines Ontario’s request to send health-care workers

Alberta is “not in a position” to send health-care workers out of… Continue reading

Meghan Huizing has been selected by Red Deer Catholic Regional Schools as a finalist for the Alberta School Boards Association (ASBA) 2021 Edwin Parr Award. (Photo courtesy of Red Deer Regional Catholic Schools)
Red Deer Catholic names finalist for Edwin Parr Award

Meghan Huizing from St. Gregory the Great Catholic School in Blackfalds has… Continue reading

GrammaLink-Africa members are participating in the Stride to Turn the Tide campaign until June 30. (Contributed photo)
Red Deer group walking to raise money for African grandmothers

A group of central Albertans will be walking every day until the… Continue reading

Westerner Days could be in line to have patrons in attendance this summer as the province teased reducing COVID-19 capacity limits on outdoor events. File photo by ADVOCATE staff
Province provides hope for attendance at summer events

The province has given a positive update to organizations that hold summer… Continue reading

Red Deer Public Schools will not pilot the new draft curriculum at its elementary schools. (File photo contributed by Red Deer Public Schools)
UPDATED: Red Deer Public Schools says no to piloting new curriculum

Alberta Teachers’ Association support school boards

In this May 26, 2018, file photo, people listen to Michael Franti perform at the BottleRock Napa Valley music festival in Napa, Calif. Canadian music festival organizers hoped this summer would mark a return to concerts, but as COVID-19 cases rage on many have already dropped off the calendar. THE CANADIAN PRESS/AP/Eric Risberg
Facing the music: Summer concert festival organizers see no path ahead in pandemic

Facing the music: Summer concert festival organizers see no path ahead in pandemic

FILE - Ali Stroker accepts the award for best performance by an actress in a featured role in a musical for her performance in "Rodgers & Hammerstein's Oklahoma!" at the 73rd annual Tony Awards in New York on June 9, 2019. Stroker teamed up with middle grade author Stacy Davidowitz for a new children's book "The Chance to Fly," published this week. (Photo by Charles Sykes/Invision/AP, File)
Singer with disability shines in Ali Stroker’s new kids book

Singer with disability shines in Ali Stroker’s new kids book

Retired Ohio sheriff and tiny K-9 partner die the same day

Retired Ohio sheriff and tiny K-9 partner die the same day

Musicians play Sikh hymns during Vaisakhi celebrations at Guru Nanak Darbar of Long Island, Tuesday, April 13, 2021 in Hicksville, N.Y. Sikhs across the United States are holding toned-down Vaisakhi celebrations this week, joining people of other faiths in observing major holidays cautiously this spring as COVID-19 keeps an uneven hold on the country. (AP Photo/Jason DeCrow)
Sikhs mark toned-down holiday amid continuing virus concerns

Sikhs mark toned-down holiday amid continuing virus concerns

Have an opinion you'd like to share? Submit letters to the editor through our website, via email or the postal service. (Heather Colpitts/Black Press Media)
Letter: MLAs who are against tougher restrictions have no plan for consequences

The group of UCP MLAs pushing to end lockdowns are exacerbating what… Continue reading

Former Parti Quebecois leader Andre Boisclair leaves the police station after being charged with two counts of sexual assault dating back to 2014, Friday, May 29, 2020, in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Preliminary inquiry in September for ex-PQ leader Boisclair charged with sex assault

MONTREAL — Former Parti Quebecois leader Andre Boisclair will have a preliminary… Continue reading

Three vials of the Moderna COVID-19 Vaccine are pictured in a new coronavirus, COVID-19, vaccination center at the Velodrome-Stadium in Berlin, Germany, Wednesday, Feb. 17, 2021. THE CANADIAN PRESS/AP/Michael Sohn, pool
Trudeau sending help to Ontario as Pfizer vaccine supply bolstered by 8 million doses

Prime Minister Justin Trudeau says more doses of COVID-19 vaccines are coming… Continue reading

Teachers demonstrate outside a school during a morning walk out in Longueuil, Que., Wednesday, April 14, 2021. Around 73,000 Quebec teachers say they will walk off the job for several hours on April 27. THE CANADIAN PRESS/Paul Chiasson
73,000 Quebec teachers plan to walk off the job for more than two hours April 27

MONTREAL — Around 73,000 Quebec teachers say they will walk off the… Continue reading

Most Read