Stephen Harper has cemented his vision of Canada. The decisions the Prime Minister took Friday approved two takeovers of western Canadian energy companies by foreign government-controlled corporations, but virtually slammed the door shut on any future, similar deals.
More profoundly than that, Mr. Harper's populist and ideological decision to draw a line in the oil sands could be one of the most influential rulings by Canada on world economic affairs in decades, as the global economy continues its seismic reordering in the era of emerging superpowers led by China. It's a safe bet that continued access to Canada's "unconventional" oil sands will be so vitally important to foreign interests that they will do one of two things: Either willingly go to greater lengths than have ever been expected to show that – regardless of who nominally owns them – that their decisions are driven by market forces, and not a murky, state-controlled agenda; or else, limit their investments in the oil sands to minority stakes in developers or in joint ventures.
The risk is that the world sees Canada as closed for business, though Mr. Harper portrayed the government's set of decisions as the same ones that any other country would have made in similar circumstances.
But the government's actions Friday clearly define Canada as a country whose economic heart, and most important strategic asset, is the Alberta oil sands. The message is that these new regulations – which will make it difficult for state-owned enterprises to buy control of Canadian companies – apply to the oil sands only, not other industries. Those are still subject to the old "net benefit" test that is part of the Investment Canada Act .
Mr. Harper has also defined his Canada as the kind of country where governments don't belong in the realm of private enterprise. "Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead," Mr. Harper told journalists Friday.
It's an important move by Canada, particularly if it proves to be an influence on governments in similarly resource-rich nations. It sends a message to powerhouse emerging countries, for example, that their state-owned companies are welcome to invest here, but they must meet a higher standard than they have in the past for regulators to trust them enough to hand over the keys – or remain content in the back seat (That is, after the approved takeovers by China's state-owned CNOOC of Calgary-based Nexen and of Progress Energy by Malaysian state-owned Petronas under the old rules, a parting gift that should console the Chinese somewhat.). If other countries were to go as far as Canada, the ensuing shift would prod China to reform its own policies, in order to ensure that it can continue its foreign expansion in a way that makes everyone else more comfortable.
The downside risk of such decisions, though, are significant. Clearly, some state-owned oil companies, such as Norway's Statoil, will be more welcome based on the new regulations than others, such as Petronas, in future deals. That could create a hazardous situation for Canada on the diplomatic front (although Mr. Harper expressed confidence in Canada's evolving relationship China). It's not likely to make it any easier for Canadian companies to invest in some emerging economies either, but let's not forget that Canadian firms are already limited in terms of what they can buy in countries like China - and they're not even state-owned enterprises.