by Mel Hurtig, Edmonton
Toronto Globe and Mail, Thursday February 5, 1998
In all the abundant rhetoric about the proposed Multilateral Agreement
on Investment, the global investment treaty being negotiated in Paris,
some important facts and questions have been missing.
The Chretien government (Ottawa), led by Industry Minister John Manley,
has been one of the strongest advocates of the MAI. In the words of
University of Toronto economist Alan Rugman, "The untold story is that
we're the real heroes getting it going."
For years Mr. Manley has wanted a relaxation of rules on foreign
investment in Canada. With this in mind, his Industry Department
commissioned an economic consulting company to produce a study
showing the benefit of foreign investment. According to the finished
document, $1-billion in foreign direct investment will create 45,000
jobs in Canada over five years. These 45,000 jobs have become a mantra
for virtually every federal cabinet minister and the Prime Minister,
and are cited by business columnists and editorial-writers.
Let's set aside the fact that few Canadians have seen the study, and
that a first-year economics student would have little difficulty
listing the important negative-impact considerations the document
failed to assess. Instead, let's look at some brand new numbers from
the Investment Review Division of Industry Canada, the successor to
Investment Canada, which in turn succeeded the Foreign Investment
In 1997, the total of new foreign investment in Canada monitored by the
review division was second highest on record, some $21.2-billion. Now
here's a quick one-question quiz. Take a guess what percentage of the
$21.2-billion in foreign investment was for new business investment,
and what percentage was for the takeover of corporations in Canada.
In 1997, 97.5 per cent of the $21.2-billion went for acquisitions, and
a meagre 2.5 per cent constituted new foreign business investment.
But surely this is some strange anomaly, an abnormal year. After all,
we've constantly been told by Jean Chretien and Mr. Manley (and by Brian
Mulroney before them) that foreign investment builds new factories,
creates new jobs and is highly beneficial.
An anomaly? Dead wrong.
Mr. Mulroney set up Investement Canada in mid-1985. Since then, to the
end of 1997, 7,074 corporations in Canada have been taken over by
foreign companies. In the entire 12 1/2 year period, of the $183.6
billion in total investment recorded by Ottawa, 93.4 per cent was for
takeovers and only 6.6 per cent was for new business investment.
But wait a minute: Takeovers usually reduce employment rather than
create new jobs. Moreover, it has been well documented that, as a ratio
to sales, foreign companies import (mostly from their parent companies)
on average three times as many parts, components and services as
Canadian companies. Jobs are created outside the country, not here in
For years we were able to look at the annual special issue of Report on
Business Magazine to see how many employees foreign companies had in
Canada per millions of dollars in sales or profits, and then compare
figures to see hust how much better Canadian-based corporations
performed in job creation. No longer. John Manley inexplicably
changed the rules so that foreign corporations no longer have to
disclose key financial figures to the public. So, the CEO of General
Motors of Canada Ltd. declines to tell us the amount of her company's
record-breaking 1997 profit ($2-billion?), though she has no hesitation
in bluntly warning us, "Make no mistake... taxes in Canada are too high."
Let's review Ottawa's current policy. The government wants as much
foreign direct investment as it can get. But we know that means many
more takeovers, with only a modest amount thrown in for new business
investment. Among the companies taken over in 1997 were ones in
resources, manufacturing, health, social services, accommodation, food,
beverages, construction, transportation, communications, finance,
insurance and real estate.
About half the takeovers were financed in Canada by our obligning
Canadian banks and by other Canadaian financial institutions. Isn't it
splendid that the Bank of Montreal is helping with the $3.7-billion
Union Pacific Reources (of Fort Worth, Texas) take over of Calgary-based
Norcen Energry Resources? From 1985 to 1996, some 65 per cent of
foreign takeovers here were financed in Canada.
How does Industry Canada feel about this? Not shy at all, Mr. Manley's
department cites the following reasons that non-Canadians give for
investing in Canada: "local financing... ease of financing... tax
treatment and subsidies."
In recent years, the foreign-controlled share of corporate operating
revenues in Canada has increased rapidly, and the figures for 1996 and
1997 will accelerate the trend.
So here's a question people might want to ask Mr. Chretien and Mr.
Manley and (Finance Minister) Paul Martin, too. Just what percentage
of corporate revenues do you want foreign corporations to have? How
much of Canada are you prepared to sell?
Here's another question. About 40 per cent of the top 500 corporations
in Canada are already foreign-controlled. What is the government's
target? 50 percent? 60? 90?
The argument is made by advocates of unfettered foreign ownership and
control that, after all, Canadian direct investment in the United States
has been increasing and is approaching the level in absolute dollars of
direct U.S. investment in Canada. The argument is specious for several
reasons. Here's one: American corporations dominate more than 25
industrial groups (rubber, auto, chemicals etc.) in Canada. In the U.S.
few if any industries are dominated by any foreigners, let alone by
So, to sum up: The next time you hear someone advocating more foreign
investment, or read an editorial or business columnist supporting the
MAI, remember that these people are not talking about foreign
"investment." The figures above are clear. What they are talking about
is much more foreign ownerhip and foreign control of Canada. We should
ask them to spell out just how much of our country they are prepared to
sell off, and exactly what they expect will be left for future
generations of Canadians.
By the way, Mr. Manley chose an American consulting firm to prepare the
study referred to above.
Former publisher Mel Hurtig is the founder of the Council of Canadians
and the Canadian Encyclopedia.