The story of potash is a microcosm of the wild ride that is Canadian economic history.
Discovery. Exploitation. Nationalization. Privatization. And now, perhaps, strategic selection.
The blocking of Anglo-Australian miner BHP Billiton's $38.6-billion (U.S.) bid for Potash Corp. of Saskatchewan Inc., is forcing a reckoning for the Harper government on its stance toward foreign investment, and the quarter-century-old rules governing policy in that area.
Until Potash Corp. came along, Ottawa largely judged foreign takeovers with the keen eye of an accountant. Add jobs here, boost production there, and keep the head office in Canada. Who really cares who the owner is? Indeed, that was the design of the Investment Canada Act. Tally up the benefits, and then let's make a deal.
But the furor over fertilizer has forced Ottawa into an uncomfortable place where it must consider a less tangible question, one that isn't calculated in dollars or jobs, and isn't even mentioned in the Investment Canada Act: What is a strategic asset?
The Harper government appears to have bought into Saskatchewan's argument that potash is too strategic a commodity to just let anyone waltz in and buy the world's largest producer. But since no one has ever defined what makes an asset strategic, the decision sets a precedent - a new line in the sand - that could have sweeping implications for the next Canadian champion that goes on the block.
Think Suncor, Research in Motion, Bombardier or Magna.
"The potash thing is a bit of a gut check," says economist William Robson, president of the Toronto-based C.D. Howe Institute and an avowed proponent of open borders. "Something like this comes along and you find yourself taken aback and re-evaluating. Do I really believe what I think I believe?"
Policy-makers are now facing the challenge of engineering a strategy that leverages the natural assets so in demand around the world - water, energy, food and minerals - to everyone's maximum benefit, from farmers in Saskatchewan to investors in Toronto, London and Beijing.
To do that, they will need to seek a Third Way - one that shields Canada's most precious resources, and companies in a world of scarcity, while still promoting foreign investment in these very sectors - investment that is needed if companies are to become more competitive internationally.
And in crafting those new rules, the Harper government will finally have to go beyond the so-called "net benefit" test and address the question that took centre stage this week: Which assets are too strategic too sell?
It goes both ways
Canada has what everyone wants: water, energy, food, and minerals. The world's appetite for these resources has driven the country's recovery from the Great Recession, and has also spurred a string of high-profile takeovers of Canadian resource companies in recent years.
But investment flows both ways, and any policy on foreign investment in Canada needs to recognize the importance of that two-way flow. While the world was gobbling up iconic Canadian companies like Stelco, Inco, Alcan, Dofasco and Falconbridge, Canadian companies have been greedily expanding abroad, capitalizing on the suddenly muscular loonie to scoop up foreign assets.
"The bottom line is that we own more of the world than foreigners own of us," explained Stephen Gordon, an economics professor at Laval University in Quebec City.
Since the 1990s, Canadian companies have been net exporters of capital - meaning we've invested more abroad than foreigners have invested here. And there's no evidence that Canada is being gobbled up and hollowed out by foreigners. Between 2004 and 2008, Canada ranked 46th among 90-plus countries in per capita foreign direct investment, and 23rd in outbound investment. Roughly 20 per cent of Canadian business assets are in the hands of foreigners.
But capital is one thing, stuff in the ground is another. Natural resources strike a chord with many Canadians. Our forests, minerals and farm fields are what built the country, and to a large extent, they continue to sustain us today.
Ottawa is clearly tapping into that feeling and signalling that potash is too strategic a resource to let fall into foreign hands. In a world of food shortages, a resource like potash - a key fertilizer ingredient - might be the New Age gold. Potash is vital for producing more food for a swelling global population on a planet with dwindling arable land. And Canada happens to be the Saudi Arabia of the pink-hued mineral, home to nearly 40 per cent of global potash production and an even larger share of reserves still in the ground.