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Editorial Cartoon by Anthony Jenkins (Anthony Jenkins/The Globe and Mail)
Editorial Cartoon by Anthony Jenkins (Anthony Jenkins/The Globe and Mail)

Win-win Potash politics Add to ...

Don Martin has an interesting column today about the Conservative's "no-win" options on whether to approve the BHP-Potash deal. One quote in his column jumped out at me in particular, from Liberal Deputy Leader Ralph Goodale:

"This transaction would effectively amount to the sale of the entire industry, not just a single ordinary company, but in fact the entire industry which is largely located in the province of Saskatchewan. ... That raises the stakes here to something more profound than just a normal commercial transaction."

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The "sale of an entire industry" that is "largely located in the province of Saskatchewan" raises the stakes here to make it different from every other deal that has been approved under the Investment Canada Act, save the only other transaction blocked under the legislation, also by the Harper government.

Of course, the actual physical assets involved in the deal aren't moving - they will still be extracted in Saskatchewan, presumably by the locals. Additionally, this isn't a privatization by the government so it's impossible to say that today, "Canada" or "Saskatchewan" runs the company. Quick, who's the largest shareholder of Potash as of the last public disclosure? An investment firm called Capital World Investors that you've never heard of before. Second biggest? Royal Bank of Canada, you've probably heard of them. Third? PRIMECAP MANAGEMENT COMPANY - a firm that I have no doubt has deep roots in Saskatchewan and has the province's best interest at heart at all times. I searched the entire material shareholder list and the "people of Saskatchewan," why, I couldn't find them anywhere.

So while it is true that as of today, one of the two head offices of Potash is located in Saskatchewan (the other is in Chicago where the CEO and most senior executives are located), the government of Saskatchewan and/or Canada have nothing to do with how the "industry" is managed other than regulatory oversight of the resource extraction - such oversight would of course remain in place after any deal.

So what changed yesterday? Premier of Saskatchewan Brad Wall came out and said he's not convinced the deal is in the best interest of Saskatchewan. Ok, fine. Free speech and all, certainly within the Premier's right to give his opinion. A few things:

1. This is just the latest example of the one-way street that is now Canadian federalism. If a Canadian prime minister has anything to say about what any province is doing in provincial jurisdiction, he is a centralizer who doesn't understand the Constitution and is jeopardizing national unity - all really bad things. A Canadian premier interferes in federal jurisdiction - and I have never heard an argument that approving foreign investment is anything other than federal responsibility - and said premier is just standing up for his province. A hero, perfectly within his job description. His opinions are welcomed by all sides.

2. I may have missed something but can anyone explain to me what process Premier Wall undertook to determine the "net benefit" to Saskatchewan of the deal? That's not to suggest that the ICA is perfect or even good in the framework it sets up but at least there is some attempt at some due process, there are written rules. If Premiers are now doing their own "reviews," shouldn't the same be in place? Or are we really just looking for a gut and a feel here, in making multi-billion dollar decisions? (Though to be fair, at the end of the day if Harper blocks the deal, it will also largely be based on his gut and his feel so why not use the same standard for premiers?)

3. If Wall had come out yesterday and said he thought the Potash deal was great for Saskatchewan, would that have ended this thing? In other words, are we actually devolving this responsibility down to premiers entirely? Should we?

Don Martin also delves into the business aspects of the deal: "Brighter minds than my own can assess the $40-billion sale on its raw business merits, although the low price for the resource would suggest that now is precisely the wrong time to sell the mine unless shareholders like fire sale pricing."

Boy... who should make that decision? Is the BHP offer reasonable or unreasonable? Who has sufficient wisdom to make that call? Oh, I don't know - here's a crazy policy idea this Liberal just came up with - how about the owners of the company? That's right, under the "Silver model" the shareholders can decide whether to tender their shares - or not. If they don't, the takeover bid will, under my plan, "fail." Let this radical new idea sink in before reacting.

On the politics of Harper's decision, I disagree with Martin that this is a no-win decision for the Prime Minister. I see it as the opposite, it is a win-win for the man. Under the current political context he has set up for himself, there is no wrong decision he can make. I have already drafted two sets of speaking points that work regardless of how they decide to proceed.

If they reject the deal, the Conservatives will say: "The Harper government is the only government that has ever invoked the Investment Canada Act to protect Canada's interest. The Liberals never did it when they were in power and that's why the separatist-socialist coalition can't be trusted - they will never stand up for Canada and Canadians (it may have something to do with the separatists)".

If they approve the deal, the Conservatives will say "The separatist-socialist coalition wanted us to block a legitimate business deal that benefits Canada and Canadians. That is why they can't possibly be trusted in power (you know, this is what happens when you put socialists in power)."

Yes, this is your Conservative Party. So principled that two diametrically opposing positions are both (a) eminently foreseeable; and (b) would be justified using the exact same frame - that has nothing to do with the substance of the decision - in either case.

If I was a Vegas odds maker, I would set it as roughly even money at this point which way Harper will go on the deal. His incorrect comments in Question Period yesterday that Potash is an "American controlled company to be taken over by an Australian controlled company" suggests he is preparing the groundwork to approve the deal (because if they are controlled by Americans then who really cares about the company, right?) and you would imagine that Harper's incoming chief of staff would give advice to let the deal go forward . The close relationship between Premier Wall's government and the Harperites, however, suggests he will do the opposite.

The fact that foreign investment decisions are being made on such arbitrary, ad-hoc basis says all you need to know why our foreign investment laws need to be reformed.

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