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Potash Corp underground production supervisor Dave Esslinger displays a sample of potash 1000 metres (3280 feet) below surface at the potash mine in Rocanville, Saskatchewan in a September 30, 2010 file photo. (DAVID STOBBE/REUTERS)
Potash Corp underground production supervisor Dave Esslinger displays a sample of potash 1000 metres (3280 feet) below surface at the potash mine in Rocanville, Saskatchewan in a September 30, 2010 file photo. (DAVID STOBBE/REUTERS)

WALID HEJAZI

Remember that other Potash bid? ‘Net benefit’ remains unresolved Add to ...

Walid Hejazi is associate professor of international business at the University of Toronto’s Rotman School of Management.

Remember 2010, when the Canadian government blocked BHP Billiton’s proposed takeover of Potash Corp., ruling that the deal would not provide a net benefit for Canada?

This week’s news of a proposed merger between Agrium Inc. and Potash Corp. reminds us that Ottawa still hasn’t resolved its approach to foreign takeovers. Since any Agrium-Potash deal will be between Canadian firms, it won’t be looked at through the net-benefit lens.

But while there will be benefits in a merger, there will no doubt be job losses. One of the two head offices will be closed or downsized in addition to the potential loss of mining jobs.

So why would this merger be met with less opposition than the proposed BHP Billiton takeover? It’s our flawed attitude to foreign takeovers.

With exceptions for national security concerns, the worst public-policy approach is to protect Canadian companies from foreign competition. By exposing Canadian companies and industries to foreign competition, these companies are forced to compete and to adopt the newest and most innovative techniques. We must have faith that our companies can compete on a global scale – there is enormous evidence that the Canadian industries that are most open to foreign investment are also the most competitive and productive.

The fear of foreign investment, which is part of our history, must be overcome. This fear has hurt Canada’s attractiveness to foreign investment, and with it the prosperity in the Canadian economy. Today, Canada has just over $1-trillion dollars invested abroad, but only $768-billion invested in Canada.

There is enormous evidence demonstrating the benefits associated with inward foreign investment, including investment, employment and access to advanced foreign technologies. Canada has significant needs for infrastructure investment and the development of natural resource assets taking advantage of new sustainable technology in places such as the oil sands or the Ring of Fire in Northern Ontario.

For example, there has been interest by Chinese investors in developing a $2-billion rail line that would create thousands of jobs in Northern Ontario and serve as a catalyst for further development of the region. This is exactly the kind of foreign investment that will benefit Canada.

There is similar need for investment in our telecom sector. The rates Canadians pay for telecom services are among the highest in the developed world. It must not be left to the industry to determine the number of players that operate in each sector; this is a decision that must be made by the market.

There is significant evidence that when a sector is protected from foreign competition, it has a magnified effect over the entire economy. Since every firm in the country must interact with this sector, it is absolutely essential for the government policy to ensure that it operates to a global standard.

Canada has gone through many cycles in terms of how foreign investment is viewed. We seem to be back at a point where many fear it. Preventing a foreign takeover or a domestic merger to protect jobs in a province or city is the absolutely wrong approach. The right approach is to create an environment where the local environment is competitive, innovative and a location where head office and other functions would naturally wish to be located.

Only with that mindset can Canada’s prosperity continue to rise. The government would do well by Canadians if it signalled that Canada is open to foreign investment.

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