Politics Trumps Principle on Potash

Canada is open for business! Well, most of the time...

 

Ottawa has rejected a nearly US$40-billion takeover bid by BHP Billiton to buy PotashCorp.
Industry Minister Tony Clement made the decision after reviewing the blockbuster deal to see if it would be of ``net benefit'' to Canada under the Investment Canada Act.    He says the takeover offer would not benefit the country.
Potash Corp. of Saskatchewan  is the world's biggest producer of potash, a key component used in fertilizer.
BHP has attempted to woo Saskatchewan, saying that it would make the province the headquarters of its global potash operations and ensure the provincial government coffers aren't hurt by the takeover.

We spoke with Maclean's magazine national editor Andrew Coyne about this decision - you can listen via the audio player at right. As you can tell from this column, Andrew has some strong views on the subject:

 

...Someone else, then, will have to make the real argument: that foreign investment—yes, even in mining—is a good thing, something to be encouraged, not punished, in the name of, among other things, Canadian ownership. One of the principal attributes of ownership, after all, is the right to sell. It seems an odd defence of our sovereignty that would deprive Canadians of that right.
Why would they want to sell? One, if the price offered is worth at least as much as the discounted stream of future returns they might otherwise expect to earn on the shares. And two, if there is some other use to which they can put the capital thus liberated that pays at least as high a return. So to forbid the sale is not only to deprive the Canadian owners of these firms from obtaining the best price for their shares, but to deprive other Canadian companies of the new investment they might otherwise hope to receive from the proceeds.
(...)
Well yes, you may say, but surely it’s sensible to attach some conditions to the sale. To what end? It isn’t just that such undertakings are routinely violated: it’s why they are that should give us pause. The jobs and investments that last, the kind we should want, are not the ones companies yield up grudgingly, under duress, but the ones they take on willingly, because they make sense on their own terms.
Indeed, the new owners’ ability to run the operation with fewer jobs rather than more ought to be a point in their favour. The prosperity we now enjoy did not come about because employers hired more workers than they needed, but because of their ruthless determination to hire as few as they could get away with—and because by and large governments have acquiesced in this. If instead they had insisted on protecting every existing job, we would still have 80 per cent of the workforce in agriculture, as we did a century ago.
We get that when it comes to domestic owners. Why should it be any different for foreigners?

For what it's worth, here's my own editorial comment on the matter:

 

Once again, unfortunately,  politics trumps priniciple, as Ottawa has has rejected a 40-billion-dollar takeover bid by BHP Billiton to buy Potash Corp.

 

Industry Minister Tony Clement made the decision after concluding that the takeover would not offer a, quote, "net benefit" to the country. But what does that even mean?

 

It seems abundantly clear that foreign investment is a net benefit to Canada, so it's plausible to wonder whether this decision might mean the precise opposite of whatever a net benefit might happen to be.

 

A recent study (PDF) from Jack Mintz at the U of C confirmed just how important foreign investment is to our economy.

 

As Mintz says, "Rather than being hollowed out, we are hollowing out other countries."
In other words, we are a major player in the global economy, to it is critically important that we stand up for free and open international trade.
 Of course, we like to talk a good game when it comes to global markets and international trade. We're quick to scold other countries who might be tempted to throw up protectionist barriers.
 Yet here we are doing the same. When folks get wrapped up in nationalism, it seems easy to forget our principles.
Fact is, there doesn't seem to be any legitimate reason to reject this deal.  The Saskatchewan government owns the resource and would continue to own the resource.
And for all the nationalist arguments we;ve been hearing, it's worth noting that Potash Corp is 51% foreign-owned and its American CEO is based in Chicago.
We need to be sending a message to the world that we're open for business. Instead, Ottawa's decision sends a very confusing and potentially damaging signal to the rest of the world.
How disappointing.

More from Mintz here on why the Potash Corp deal should go ahead.