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You can’t have our oil and potash – or our farms, or our gold

There was a time, not so very long ago, when the federal Conservatives' trade and investment agenda was clear, predictable and not cynically political, at least not obviously so. The best markets were free and open. In came NAFTA. Investment Canada became a rubber-stamp agency for almost anything short of purchases attempted by the Cosa Nostra or the Medellin drug cartel. By the start of the last decade, the Canadian economy was open and unrestricted by global standards, even if some industries, notably banking, remained protected.

Then the Conservatives snapped. In 2010, Prime Minister Stephen Harper sent the world's biggest mining company, Australia's BHP Billiton, packing when it came courting PotashCorp. It happened again last year, when Harper erected a barrier around the oil sands. CNOOC, the Chinese oil giant, would be allowed to buy oil sands player Nexen, but after that, no more state companies need apply. Having bucked the global trend toward resource nationalism for decades, the Conservatives have now joined it. Harper is no Hugo Chavez, but they are no longer light-years apart on the economics spectrum.

Which industry is next for the ring-fence treatment?

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Harper's government has reserved the right to make it up as it goes along, which makes some sense. Things change: An industry that is "strategic" today may not be tomorrow. But Canada's erratic approach is also pushing foreign investors into a swamp, at night, without a flashlight. Harper will have to make some tough decisions. If oil is protected, why not Prairie farmland? Or gold?

Indeed, compelling arguments can be made to protect both. What could be more vital to the nation's interest than its farmland? Alberta, Saskatchewan and Manitoba are home to most of Canada's agriculture industry. This is Canada's breadbasket, and it is likely to become the world's breadbasket too. Soaring values – Saskatchewan farmland prices have almost doubled over the past five years – tell you that Canadian farmers and the new breed of farmland investment funds have already figured this out. What isn't known is how much land foreign investors, of the state or private variety, have gobbled up.

Alberta, Saskatchewan and Manitoba have ownership restrictions that have, allegedly, kept foreign investors out of the land-grab game. In practice, everyone suspects that they are quietly – and often secretly – piling in.

As The Globe and Mail's Paul Waldie recently reported, Saskatchewan's government doesn't even track the number of non-residents who buy land, and the Saskatchewan Farmland Security Board has admitted its checks have rarely gone beyond the name listed on the land title. In 2011, the Western Canadian law firm MacPherson Leslie & Tyerman said that, "despite the restrictions on land holdings, there are some narrow avenues that, with careful planning, may allow foreign investors to obtain [an] interest in Saskatchewan farmland."

One loophole is land "held by way of security for a debt or other obligation." Under Saskatchewan law, property of this status can escape foreign-investment scrutiny. Elderly farmers are keen to trigger international bidding wars for their land, and Chinese or Indian companies would be delighted to lock up vast tracts of Prairie farmland, as they've done with tens of millions of acres in Africa and elsewhere. Those offshore farms ship food directly back to the investor's home country.

In Canada, there is no federal review of land sales to foreigners. There should be. Among the provinces, British Columbia, Ontario, New Brunswick, Nova Scotia and Newfoundland have no restrictions on purchases by foreigners.

While we're at it, what about gold? Designating it strategic may seem absurd. Gold is useless in many respects – you can't turn it into rifles or tanks. But would you want state-owned companies owning Canada's biggest gold mining companies? For head office preservation alone, keeping Barrick and Goldcorp, the global gold industry's top two players, makes sense. Remember that Harper blocked the sale of PotashCorp largely because it was an industry leader.

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Protecting Canada's gold giants may also make strategic financial sense. China is obsessed with gold. It is the world's biggest producer and is buying every ounce it can. Its demand is now second only to India's, much of it to hedge Beijing's U.S. dollar exposure.

At last count, China held about $1.2-trillion worth of U.S. public debt. At recent share prices, China could buy Barrick and Goldcorp for a mere $63-billion and take their production off the market. Would that be in Canada's best interest?

Harper's government has yet to define "strategic." But even if the definition is evolving on a case-by-case basis, it would be negligent and capricious for Harper to protect oil, but not food and gold, as he tries to shut down the great Canadian resource warehouse sale.

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About the Author
European Columnist

Eric Reguly is the European columnist for The Globe and Mail and is based in Rome. Since 2007, when he moved to Europe, he has primarily covered economic and financial stories, ranging from the euro zone crisis and the bank bailouts to the rise and fall of Russia's oligarchs and the merger of Fiat and Chrysler. More


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