If the opposition of five provincial governments to the BHP Billiton Ltd. bid for Potash Corp. of Saskatchewan Inc. were to prevail, that will amount to a defeat for a principled approach to foreign investment and a victory for interest-group accommodation.
The coalition of Saskatchewan, Quebec, Alberta, Manitoba and New Brunswick is a combination quite similar to the group of provinces that is either against or lukewarm toward the Canadian Securities Regulatory Authority - although they would be free to opt out of it.
Tony Clement, the federal Minister of Industry, is expected to announce this week his decision whether a BHP takeover - which in any case would be ultimately up to the shareholders - would be of net benefit to Canada, in the terms of the Investment Canada Act. It would be surprising if this politician with a lifelong history of economic liberalism were to decide against it, siding with economic nationalists; he would invite inferences that he and his cabinet colleagues had been swayed by political factors.
The provinces have the underlying ownership of natural resources, such as potash, under the Constitution Act, 1867, and legislative power over them, too. But the proposed takeover is a purchase of shares of Potash Corp., not of the underlying mineral rights. Moreover, the provinces' powers enable them to increase the royalties they charge; the government of Saskatchewan's income-tax revenues might well be reduced by a change of control of the company, but it has the means to make up the difference through royalties.
The federal Conservative Party has a heritage of respect for provincial rights, but those rights are not in danger from BHP. It also has a legacy of adherence to the principle of economic freedom. The Harper government should not raise up barriers to foreign investment without a very compelling reason. Let the Potash Corp. shareholders decide whether to hold on to their shares or to sell them.
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