Finance Minister Jim Flaherty said he is not aware of direct discussions with China about financial-institution to the CNOOC-Nexen CNOOC’s bid.BLAIR GABLE/Reuters
A clue to what the federal government might be considering when it comes to reciprocity with China on investment deals can be found in a report government officials pored over earlier this year as Ottawa embarked on a study of investment by state-owned enterprises.
Documents obtained through an Access to Information request to Industry Canada show that the report, released by the Canadian Council of Chief Executives and the Canadian International Council in February, has been studied by government officials as they contemplate how to deal with SOEs.
The report urged Ottawa to make public the reasons for its decisions and to prevent decisions from being tainted by political considerations. But it also addressed the reciprocity issue, and pointed to the need to obtain equal treatment for the domestic mining sector, noting that "Canadian juniors have been repeatedly stymied" in China.
Takeover rules have been a major talking point on Bay Street in the wake of Ottawa's unexpected decision to block Malaysian state-owned oil firm Petronas's $5.2-billion bid for Calgary-based Progress Energy Resources Corp. last week.
The government said the deal did not provide a "net benefit" for Canada. The net benefit test is at the heart of the Investment Canada Act, which outlines criteria for approving or rejecting large takeovers by foreign firms. But it remains largely subjective and gives Ottawa considerable leeway.
The government has been promising to clarify the act for years, and is expected to do so when it makes its decision on whether to approve CNOOC's bid for Calgary-based energy company Nexen Inc., the next major test of the act.
Prime Minister Stephen Harper has indicated that reciprocal treatment from China is something Ottawa will consider in weighing China National Offshore Oil Corp.'s bid. Most observers have focused on obtaining reciprocity for banks and insurers in the financial services sector, which have struggled to have some investments approved.
Bank of Nova Scotia, for example, is still waiting on a green light from Chinese officials for a long-ago announced investment in that country. On Wednesday, Finance Minister Jim Flaherty told reporters he is not aware of direct discussions with China about making acceptance of financial-institution deals a requirement for approval of CNOOC's bid.
But, if the February report holds sway, it is possible the government's broader concern is long-term reciprocity for the mining sector.
Government briefing notes obtained under the information request also illustrate the Conservatives' switch from wanting the all-party House of Commons industry committee to do a thorough review of the act, to deciding to concentrate on an internal study of SOEs.
In November, 2010, then-industry minister Tony Clement said he and Mr. Harper had decided to refer the act to the industry committee for a thorough review, with input from each of the political parties. But Mr. Clement was replaced by Christian Paradis in 2011, and the panel was not given the go-ahead to do the review.
A review of the act finally made it to the committee's list of items to study earlier this year. But a thorough committee review is unlikely before the government issues its official thinking on the act, which is expected when the CNOOC decision is made.
Liberal MP Geoff Regan, a member of the panel, hopes the act will be reviewed, but noted: "That's still in the hands of the Conservatives who decide really what the committee does." Lately, the panel has been studying the intellectual property regime. "The Conservatives actually have to want to do this next – if they don't they'll find something else."