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John Manley

Potash: a political calculation that will do more harm than good Add to ...

Canadians, through Parliament, decided long ago that foreign investment is good for our country. This position has been held by successive governments stretching back to the 1980s, and has resulted in an Investment Canada Act that, on the whole, welcomes investments in Canadian companies.

Under the act, the federal government must approve a proposed investment if it determines that the transaction would be of net benefit to Canada. This usually means ensuring that jobs are protected, that Canadians take leading roles in the governance and management of the business, and that capital expenditures and research and development continue to occur in Canada.

While there is a duty to consult affected provinces, it is the federal industry minister who must make the decision. This is as it should be, and in fact mirrors similar processes around the world.

All of which brings me to the proposed acquisition of Potash Corp. of Saskatchewan by Australia's BHP Billiton. While I am not privy to all the facts in the transaction, I regret that the debate has become so overtly politicized. The "net benefit" test is meant to be an impartial calculation, not a political one.

In a speech on Oct. 21, in which he announced his government's opposition to a takeover of Potash Corp., Saskatchewan Premier Brad Wall detailed his concerns around "net benefit" - specifically with respect to jobs and provincial government revenues. These are matters for BHP Billiton to address. I have no doubt that Industry Minister Tony Clement will weigh these concerns. In addition, the minister may wish to seek assurances that BHP Billiton is prepared to stand by its commitments in coming years.

However, Mr. Wall also said that potash is a "strategic resource" and that it is not in Saskatchewan's interest to allow Potash Corp. to be acquired by a foreign company. This creates an impossible hurdle for any investor to surmount, and essentially tells Potash Corp. investors that they cannot sell their shares to the highest bidder under any circumstances.

The Premier's "strategic resource" rationale is a political calculation - one that he is entitled to make if he feels he can justify it to his citizens. But the Investment Canada Act exists to derive benefits for Canadians from foreign investors, not to protect resource companies designated as "strategic" at the 11th hour by provincial governments.

If Canada, at the urging of one of its provinces, wishes to block the sale of a resource company, we must be prepared to accept reciprocal treatment in other countries where Canadian firms operate. No one believes that this would benefit Canada. Nor would it benefit Saskatchewan-based potash companies that do business in other jurisdictions.

Our Constitution gives the provinces control over natural resources. Regardless of who owns Potash Corp., that will not change.

In my view, the issue before the federal government is whether it is in the national interest to continue to abide by open, fair and transparent investment rules.

The federal government has been consistent on the need to attract foreign investment. Our leading institutions have confirmed that this is the proper course for a relatively small, trade-dependent economy. So whether in the case of Potash or any other proposed investment, I earnestly hope that the federal government will continue to seek the best possible outcome for Canadians and then apply the rules passed by Parliament. This, more than anything else, will benefit Canada.

John Manley is president and chief executive officer of the Canadian Council of Chief Executives.


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