The Investment Canada Act’s Ad-Hoc Nature Will Continue
By Jim Stanford *
I was invited to appear before the House of Commons Industry Committee last week on the subject of Bill C-60, this year’s omnibus budget bill. 18 paragraphs of that long bill describe proposed amendments to the Investment Canada Act, aimed at codifying the policy changes announced by Prime Minister Stephen Harper late last year (in the wake of his government’s approval of the Nexen and Progress Energy takeovers).
It is odd that a matter this important would be dealt with in the context of an omnibus budget bill. There is little immediate connection, after all, between the working of the ICA and the government’s annual fiscal affairs.
The Industry Committee held only this one public hearing on the matter (it also interviewed Industry Canada officials in a previous session), and apparently is not empowered (since Bill C-60 is a budget bill) to recommend amendments to the legislation. So the hearing that I participated in was very much a symbolic exercise. Other witnesses (including two forceful presenters appearing on behalf of the Canadian Bar Association, Brian Facey and Joshua Crane) raised major concerns about the hurried, ad-hoc nature of these proposed changes, and called both for more time to deliberate the measures and for important amendments to the draft legislation.
But this ad-hockery, in retrospect, should not be surprising. After all, the ICA has been implemented in a completely ad-hoc manner since its inception. The effective decision rule that describes the effect of the ICA is as follows: “All foreign takeovers of Canadian companies shall be approved, unless they become too politically controversial for the government of the day, in which case the Industry Minister is empowered to reject it on any grounds he or she desires.”
As noted in my presentation, over 15,000 Canadian firms were acquired by foreign companies since 1985 when the ICA came into effect. Barely 10% of those takeovers were reviewed by Investment Canada, and all but 2 of those were approved. The two that were rejected were political hot potatoes (MDA and Potash). And the current revisions to the ICA similarly reflect an effort to manage political pressure, rather than an effort to make more effective policy. The takeover of major oil sands properties by Asian state companies became extremely controversial among Conservative supporters last year – many wondering aloud why Canada was selling off its birthright to Asian Communists. Prime Minister Harper’s odd, ad-hoc response to that controversy (approving the 2 takeovers, but announcing that none like them would be approved in the future) similarly reflected the predominance of political damage-control over deliberate economic policy-making.
We should have learned by now that designing and implementing important “foundational” policies through multi-dimensional budget implementation bills is not the best way to develop policy. We tried it once before with the ICA, through changes (including a new “national security test”) buried in the 2009 budget bill. And that’s how the temporary foreign worker program was expanded last year – and we now know how harmful and badly-thought-out that move was.
The federal government should be seriously challenged over the proposed ICA changes: not only over the nature of those amendments, but over the process by which they are being made.
* Jim Stanford is an economist with the Canadian Auto Workers union, Canada's largest private-sector trade union.