Hon. Martin P. O'Connell (Minister of Labour):

Mr. Speaker, I have not had the opportunity of meeting the provincial Ministers of Labour. I might say in addition that the question of minimum wages is under continuous consideration by the government.

Mr. Alexander:

Arising out of the answer of the minister, may I ask whether it is his intention to take a new approach with his provincial counterparts in order that he can come to the House with legislation making the minimum wage more equitable? Is this his intention in the very near future?

Mr. O'Connell:

Mr. Speaker, it is not my present intention to seek meetings with the provincial Ministers of Labour on this subject.

Mr. Speaker:

Order, please. With that last supplementary question we have give beyond the end of the question period. Perhaps further supplementaries might be kept until tomorrow. Orders of the day.

Hon. lean-Luc Pepin (Minister of Industry. Trade and Commerce) moved

that Bill C-201, to provide for the review and assessment of acquisitions of control of Canadian business enterprises by certain persons, be read the second time and referred to the Standing Committee on Finance, Trade and Economic Affairs.

He said: Mr. Speaker, the objective of the bill we are studying today is to ensure that foreign takeovers of Canadian corporations take place only when such takeovers will bring appreciable benefits to Canada. This bill is also designed to increase such benefits as much as possible.

In fact, Bill C-201 provides that all proposed takeovers in excess of a certain amount, will have to be drawn to the government's attention, after this bill is passed. The gov-

Foreign Takeovers Review Act

ernment will be empowered to assess these takeovers and determine how they contribute to the welfare of Canadians. It would also empower the government to negotiate changes liable to increase the benefits that might be derived from those takeovers.

Mr. Speaker:

Order. I hesitate to interrupt the hon. minister but with the discussions which are taking place in the rear of the House it is difficult to follow the hon. minister's remarks. I would suggest to the hon. members who want to proceed with these conversations to do so behind the curtains.

Mr. Pepin:

Mr. Speaker, I was saying that this bill empowers the government to negotiate changes which might increase the benefits that might be derived from these takeovers. Finally, the bill empowers the government to reject any takeover which would not bring appreciable benefits to Canada.

In other words, this bill gives the government the right to know of, to assess, to negotiate, to allow or to stop takeovers above a certain level.

This measure, Mr. Speaker, is complementary to that already taken by previous governments in order to stimulate Canada's economic development and independence. I deeply regret that some commentators have not placed the new measure in its wider context, which I will of course attempt to do today.

Previous governments have, indeed, created a group of corporations: the Canadian National, Air Canada, the Polymer Corporation, Eldorado Nuclear Limited, the Northern Transportation Corporation Limited, the Northern Canada Power Commission, Panarctic Oils Limited, Telesat, the Canada Development Corporation.

Those same governments have limited foreign investment in some major financial sectors: banks, insurance companies, loan companies, and finance companies.

Some of our major cultural industries-radio, newspapers, magazines-are also subject to regulations which oppose foreign control, successfully in most cases.

The tax system, reinforced by last year's fiscal reform, also contains provisions to encourage Canadians to invest more in Canada than abroad.

However, Mr. Speaker, until now some of the most important sectors of our economy-manufacturing, raw materials, and many service industries-have depended on ad hoc decisions or have quite simply been ignored.

Bill C-201 is therefore designed to facilitate-I emphasize "facilitate", for it is not going to solve everything-the lessening of some of the problems created by foreign investment, and also the improvement of the advantages, the positive aspects, of foreign investment in those important sectors.

Mr. Speaker, the major aspects of this bill have already been announced to the public as well as to the House by the hon. Minister of National Revenue (Mr. Gray) in his statement of May 2 last. I shall therefore confine myself to answering some very important questions which have already been raised both in this House and by the public at large.

May 29, 1972

Foreign Takeovers Review Act

For instance, why does Bill C-201 apply only to acquisitions of control? Why not implement a policy to extend and enlarge general restrictions in key sectors, all questions that are dear to the hon. Leader of the Opposition (Mr. Stanfield)? Why a reviewing or screening process and other similar questions?

I find it difficult to answer the first question which has been raised. Some people have asked: why not exclude all foreign investment? I think no modern country can afford to deprive itself of the benefits associated with foreign investment in terms of capital inflow, in terms of technology, in terms of markets and in terms of employment. No country today can afford to join an economic nunnery. Markets, technology and capital move around the world these days very rapidly with foreign investments. It seems to me it would not be particularly intelligent to deprive ourselves of these contributions. The technologically richest and most advanced country of the world, the United States, takes more and more foreign investment. I was looking at the statistics a moment ago and found that the United States in 1970, has experienced an increase of 11.8 per cent in foreign investment over the previous year compared to an increase of 8 per cent in Canada. This would indicate that the greatest and most powerful country in the world in terms of material wealth, is also taking a lot of foreign investment because of the technology and other advantages which come with foreign investment. So, the question to me is not one of should we or should we not. To me, it is a question of how, what are the acceptable means and methods.

The second question which has been raised in recent days, and which has been bothering many people I must admit, is the following: why include only takeovers in Bill C-201? Why not include other forms of direct foreign investment such as new investment, re-investment of earnings, for example. There are three or four good reasons for this. I think they are good. The first is that of all the various forms of foreign direct investment, Canadians have been most concerned mostly about takeovers, and rightly so, because they do not necessarily-there are exceptions of course-add much to the Canadian productive capacity. Another argument concerns the economic consequences of foreign investments. What would have been the economic consequences of including more than has been included in Bill C-201?

The extension of the review process to other forms of foreign direct investment could slow down the creation of new industry, partly through reduced business confidence at home and abroad and partly through the disruptive effects such a major intervention could cause, resulting in fewer jobs being created. On the subject of business confidence I find the opposition is divided, as is not too uncommon.

So is the government sometimes.

Mr. Pepin:

I meant as between parties. Perhaps it is true also within parties. We will find that out later in this debate. Some members complain that the government does things which contribute to economic uncertainty, even if those things should be in the interest of the greater objective of justice, national unity or independence of the

country. Strangely enough, in this particular instance, some people such as the hon. member for Prince Edward-Hastings (Mr. Hees)-and I regret his temporary absence, because I like to speak at him when I speak of him-seem to be saying things rather different from the usual line taken.

In this particular instance, the hon. member for Prince Edward-Hastings seemed to be saying that the government had not taken a sufficiently dynamic or aggressive line. He seemed to regret that we did not go any further. At least that is what I heard him say over the CBC on the night of May 2. I tried very hard to obtain a copy of his remarks because I like to be fair in reporting opinions heard. My hon. friend was flying very high that night. He might have been on a Concorde or a rocket. He said, in his usual subdued, non-emphatic tone, that the government had not been very energetic on that particular day. I would appreciate it if he would let me have a copy of what he said on that occasion.

Some other Members of Parliament openly do not give a hoot about the business community. They love to antagonize it. They think that uncertainty is fabricated to influence the government and used by politicians to justify their cowardice. This was the word which was used recently by the hon. member for York South (Mr. Lewis), and which he addressed to me. Such is the comfort of opposition benches. I am not complaining, I am just observing. Each time the opposition has been accused of irresponsibility I have heard the answer thrown at us, usually the hon. member for Peace River (Mr. Baldwin) is leading the attack, that governing is our responsibility and that they are not here to do our work. I say to that: fair enough.

In this particular instance, so far as Bill C-201 is concerned, we are governing in the interest of all Canadians, labour, management, owners, white collar and blue collar workers, hard collar, soft collars, too, striped pants, blue pants, hot pants and whatever you want. We did take into account public opinion. I must say that the polls, which will probably be quoted here, indicate quite clearly that Canadians are in favour of more Canadian control over their economy; there is no doubt about that. But at the same time we see Canadians-and I do not blame them- wanting a better standard of living, more security, more industrial growth, more and better jobs, better pensions, etc. If public opinion wants a responsive government, I suggest that public opinion also wants a responsible government and that is what we are providing in this bill.

The government had to consider how much intervention would be practical and workable. On these grounds, it chose to limit the review process to that part of foreign direct investment where, in the broad public view, there exists a genuine and clear consensus. We also took into account, when deciding on our policy, the views of the provinces, the theories of some of the provincial leaders and the practices of others. I must say that it is not easy to interpret all this. In a few cases, and I am not generalizing, there are slight differences between the theories and the practices of the same provincial leaders. Some who are generally favourable to foreign investment take restrictive action against it, and some who are generally

May 29, 1972

unfavourable to foreign investment travel extensively abroad to attract it in one form or another.

Be that as it may, I think everybody here will at least agree that there was a division between provincial leaders on the degree of acceptable control in Canada, and the federal government had to bear this in mind. We had been cautioned to do so, and to illustrate this point I can find no more useful a source than the Leader of the Opposition (Mr. Stanfield) himself. In a speech to the Progressive Conservative Association in Nova Scotia, written in his own hand, which he gave on February 5 of this year he said:

I want to warn the government that, as far as we are concerned, any policy that pins its faith exclusively on the restriction of investment in Canada in order to protect our identity as Canadians is bad for this country and would be disastrous in terms of national unity.

Frowning heavily, I presume, he added:

I want to warn this government that any such policy, far from protecting our identity, would turn region against region, province against province, and Canadian against Canadian.

I want to warn this government that we in the Progressive Conservative party shall fight hard against any policy that would have the effect of cutting off sources of investment to the provinces that are still in need of capital.

Frowning even more, I presume, he said:

I want to warn this government that we shall fight to the end any policy that would hamper the fight against unemployment and weaken the Canadian economy.

After saying that, the Leader of the Opposition has no speech to make. I think he can hardly disagree with this bill. I anticipate that he will not. I am quite sure that he will be talking about other things that we might have failed to do. But I am talking about this bill. If he wants to talk about other things, that will be his choice.

So much for some hon. members in the House who normally fear uncertainty. Others, both inside and outside the House, say that Bill C-201 does not go far enough. Presumably, in their view, the government has paid too much attention to public opinion, to provincial leaders, business leaders, etc. They are taking an absolutist line. I have heard their statements on the radio: full steam ahead, damn the torpedo, damn the economic torpedoes, damn the regional torpedoes, damn the constitutional torpedoes. These gentlemen say they are the true democrats. They know what is best for the Canadian people. They will force Canadians to be free. I was listening to one this morning and, in my view, that is aristocratic government, possibly even foolish government. Good government is progressive government-Liberal progressive of course; good government is evolutionary government. As has often been said, the best revolutions are evolutions. Let me put it in a nutshell, Mr. Speaker. This is why we included only take-overs in the screening process.

The next question which was raised was, why screening? Why not the general restriction approach, 50 per cent of this, this being ownership, and 75 per cent of that, that being the number of Canadians on boards? Some ask why the general restriction approach was not taken, why not add to the key sector, new areas where foreign investments would be either excluded or regulated. As I said at the beginning of my remarks, these methods have been used in the past in Canada, I mean the general restriction

Foreign Takeovers Review Act

method and the key sector approach. In my view that was the right approach in areas of unqualified national importance. I want to emphasize that. This approach might still be used in the future, but in the particular areas about which I am talking now, particularly manufacturing and resources, it was felt that using the key sector approach, so dear to the Leader of the Opposition, was too blunt and too automatic a means.

Why is that so? Because foreign participation in these areas in general brings clear benefits as well as obvious costs. Things were clear, one-sided, in some of the cultural areas that were singled out for the key sector approach. There was no great interest in having foreign investment and control. But I repeat that it is not so clear in the areas of manufacturing and resources. Here a more flexible and a more selective approach is needed. To use a useful cliche, we need in these areas not necessarily to exclude but to exclude only if necessary. I am not ashamed of using Mackenzie King's style. Those were wise words. He was trusted by the Canadian population for 23 years. To use a useful cliche again, Mr. Speaker, in these areas it is necessary to maximize the benefits while minimizing the disadvantages. That is the very purpose of the screening process.

Let me insist. To use the expression of the main character in Fiddler on the Roof, on the one hand a takeover can reduce Canadian participation in Canadian industry and provide nothing in the way of new activity in the economy; it may even result later in the closing up of Canadian business and the consequent loss of jobs. But then, on the other hand, a takeover may provide the means to rejuvenate a declining business or provide expansion to an already viable enterprise through the infusion of new capital, new technology, improved management and expanded market opportunities at home and abroad. It can also bring lower prices to Canadian consumers. The first, on the one hand, should be blocked, should be excluded; the second, on the other hand, should be allowed, and improved if at all possible. So much for key sectors, Mr. Speaker.

Then the next question is why not-

Mr. Crouse:

Would the minister entertain a question at this point? Is he not aware that the key man in "Fiddler on the Roof" also held his hands up to heaven and cried, "Good Lord, why must you visit all this on me!"

Mr. Pepin:

Mr. Speaker, I only have one daughter to marry off, so I don't have to worry as much as Topal seemed to worry.

Oh, oh!

Mr. Pepin:

I was trying to answer the question, why not more key sectors? I hope the Leader of the Opposition will take account of the remarks I have made.

The next question is: why not have general rules of Canadian participation? Why not a 51 per cent ownership formula? Why not a 75 per cent of directors formula? Why not the 90 per cent of management formula, and so on? These have been recommended by a good many people.

2634

May 29, 1972

Foreign Takeovers Review Act Mr. Speaker, the main purpose of this bill, and I will admit it, is not to increase Canadian participation, and I underline that, although, and I underline the "although" also, participation will be a factor in the screening of takeovers. It is one of the five factors that will have to be borne in mind. I refer to participation by Canadians both within the particular enterprise being subjected to takeover, and participation in the industrial sector where that enterprise is located. I believe that an increase in Canadian participation will come mainly through other policies, some of them presently existing and some others to be added in the future. Those now in existence are the tax system, the Canadian Development Corporation, and that sort of thing. And, as the Minister of National Revenue (Mr. Gray) said in his statement of May 2, the government is looking at other possibilities to enhance the Canadian interest, such as better use of Canadian capital markets, increased development of indigenous technology, and management development. On the latter subject my department, has recently created two modest programs for the improvement of Canadian management. I hope hon. members opposite have noticed this. Reference to these programs is to be found in communique No. 33/72, but I will not read it now.

Mr. Speaker, might I suggest that a policy that would focus primarily on Canadian participation without considering performance first could bring about rather strange results. A simple, automatic, general requirement of 51 per cent ownership, 75 per cent of directors, and 90 per cent of management would not necessarily produce the results we are all seeking. Having seven Canadian directors out of nine on the board does not give you much if the seven are treated like figureheads. And 90 per cent Canadian management does not mean much if all the decisions are in fact made abroad. Having 51 per cent Canadian ownership does not give you much if, in that particular enterprise control can be exercised with 10 per cent ownership. I am just saying here that one should not be fooled by appearances. These are not black and white situations to be solved once and for all by legislative action. There is a brief passage in Montesquieu-I am sure everybody has read it-where he calls at least for some countries, for the primacy of mores, customs and conventions over laws. This is where he says that very often changes in realities are more important than changes in law.

What is the importance of this bill, of this screening of takeovers? The leader of the NDP, the hon. member for York South (Mr. Lewis) says, "One big zero." I disagree of course.

Mr. Lewis:

You can make it two.

Oh, oh!

Mr. Pepin:

We are establishing here a new principle, the principle that future takeovers will be screened and that, to be approved, there must be significant benefit to Canada. Incidentally, Mr. Speaker, I am told that takeovers represent 5 per cent to 20 per cent, depending on the year, of foreign investment in Canada.

By monitoring the forward plans of individual enterprises in this way the government is breaking new

[Mr. Pepin.)

ground. It is in effect inserting its influence in an area of business planning reserved until now to private decision making. Not only will allowed takeovers be more beneficial to the Canadian economy, but the objectives and criteria imbedded in this bill will influence the nature and direction of other forms of direct foreign investment in Canada. This will be done in an orderly, evolutionary, rational way.

As the screening process gains experience and builds up a history of negotiations and decisions, foreign investors will be able to see the kinds of goals that Canadian authorities are striving for on behalf of the Canadian public and, in a typical, practical business-like way they will adjust to them. I might also add that in any such process major administrative problems arise, and unless they are carefully and systematically worked out they could well create disruption. So much for the philosophy, Mr. Speaker. I do not want to go into too many of the details of the administrative end of the bill, as this can best be done in committee, but I would like to outline some of the major administrative concepts.

A central feature of the new measure is the concept of significant benefit, how is this to be determined? Hon. members are already aware of the five factors set forth in the bill. First, there is the effect of the takeover being screened on the level of activity as reflected in production and employment. If, for example, a takeover sustains the life of a declining enterprise which would otherwise close down, the promise of continued production and jobs would constitute an important positive benefit. Similarly, high marks would be given to a takeover which held genuine promise of expanded operations and job creation.

A second factor is the effect on productivity, innovation, technological development, and other such factors resulting in the more effective use of productive resources. Higher productivity may give rise to higher returns to producers in the form of higher salaries and higher profits, better value to consumers in the form of lower prices or better quality, and spin-off benefits to the economy at large, such as the dissemination of new technology and management techniques.

A third factor is the favourable effect upon competition in Canada. The takeover may have a very favourable effect through more vigorous and productive operations.

The fourth factor does not necessarily involve an identifiable economic benefit. This is the matter of participation by Canadians, and I have already dealt with that.

A fifth factor to be considered is, of course, the need for a takeover to be compatible generally with established policies, national, industrial and economic policies, for example; the existing program for rationalization within the textile industry, within the footwear industry, the need for wider markets in the chemical industry, the aerospace industries, etc.

Mr. Stanfield:

Before the minister gets off that subject, and in connection with the competitive aspect, the minister has mentioned that an increase or decrease in competition would be a factor to be considered. Is it intended that this will be the sole finding on this matter, or is it contemplated that the takeover would also have to be classed, perhaps by a tribunal established under the Competition

May 29, 1972

Act? Would the minister clarify the confusion that seems to exist there?

Mr. Pepin:

Mr. Speaker, I prefer to go into that in committee because any short sentence or two that I give now might not be clear enough, but the general philosophy is that the two considerations will have to be reconciled. We will look at that in committee, supported by experts on that point.