May 29, 1972

PC

Robert Gordon Lee Fairweather

Progressive Conservative

Mr. Fairweather:

This is great.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

That kind of approach to this problem is in part the approach of the Conservative party and, as well, reflects the fears and concerns of many Canadians. They want to approach this problem in a positive and even dramatic fashion, but on studying it carefully they see it must be approached with caution unless we are to do considerable violence to our economic system and body politic. I would point in passing that one of the questioning left unanswered this afternoon by the hon. member for Fundy-Royal was, what does moral suasion mean? Implicit in that question was the question, what relevance does it have in a debate like this?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Robert Gordon Lee Fairweather

Progressive Conservative

Mr. Fairweather:

The leader of the hon. member's party used that term. He might not have been relevant, but I think I was.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

Mr. Speaker, I suggested that the question asked by the hon. member was, what relevance does it have? Having been caught making an esoteric utterance this afternoon, perhaps he will bear with me while I explain. I think moral suasion is an important ingredient in our parliamentary and legal systems. Really, it is the appeal which ideas have for reasonable men to act decently and in the public interest. Unless that kind of spirit motivates our laws we cannot function satisfactorily, and I do not think anyone on either side of the House will quarrel with that assertion.

I regret that the hon. member for York South (Mr. Lewis) is not here, because he delivered a flag-waving speech which deserves comment. I imagine he wishes to occupy the shoes of those in our history who in 1878, 1891 and 1911 took the stand that we must damn the Americans forever and a day. I suspect that behind the furious rhetoric of the hon. member for York South is an unpleasant reality that he would not like to see exposed in this chamber. After all, he speaks here in order to paper over the great split in his party on this subject and his rather immoderate language does not in any way match the immoderate policies of the Waffle group in his party. Indeed, one wonders who is the "waffler" when one hears

May 29, 1972

Foreign Takeovers Review Act the hon. member for York South speak, as he did today, and try to play down that determined group of people in his party who are trying to take it over from him.

It remains a matter of wonder that a person could speak for 40 minutes in condemnation of all things American and of American intrusions in our economy without mentioning once the subject of American control of many important trade unions in Canada. I must say that the speech of the hon. member for York South did not contribute much to the debate on this important measure. He brought forward his tired recitation of eight points which on other occasions have been six points or five points. His is a sure-fire way of attracting applause from a partisan audience: take away the tax privileges of the mining and oil companies and expose them to export tax!

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
NDP

David Orlikow

New Democratic Party

Mr. Orlikow:

You do not believe in that?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

There was no concern about the effects these measures would have on the operation of those companies. There was no concern about the jobs which they provide. There was no suggestion as to how these activities might be transferred elsewhere in the community. There was simply a flat, out and out assertion that these things should be done, can be done and must be done- irresponsibly and in defiance of the best interests of this country.

Over and above that, the hon. member talked about high finance and how interest could be lowered, without referring to inflation which looms before us always. He talked without showing concern as to how this action might encourage foreign equity owners to do even better in our capital markets than they do at present. He did not say how foreign exchange reserves might be used, by whom or in what fashion to buy back the Canadian economy.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Cyril Lloyd Francis (Parliamentary Secretary to the Minister of Veterans Affairs)

Liberal

Mr. Francis:

Five billion dollars worth is involved.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

As my friend from Ottawa West (Mr. Francis) mentions, $5 billion could be devoted to that purpose. It is pie in the sky, as hon. members sitting behind the Leader of the Official Opposition (Mr. Stanfield) well know. However, it serves the purpose of obscuring from our view the fact that there is serious division in the party of the hon. member for York South which really attacks the credibility of any assertion which he may make in the House on this important problem at the present time.

We are talking about one of the most abrasive problems in our history. It is a problem, which, if not properly handled by this Parliament, could set province against province in Canada. It could set poor areas against wealthy areas. All this was foretold in the remarkably clairvoyant address of the Leader of the Opposition from which the minister quoted earlier this afternoon.

From time to time in Canada we have been prone to fall before the determined drive of patriotic talk. We had a high tariff imposed in this country in its early days. On a famous occasion in 1911, the opportunity to modify that tariff was lost. These discussions were carried on and all these economic issues were settled on the basis of emotionalism, appeals to patriotism and appeals to national loyalty. We must all face the fact that one of the reasons we have the problem of foreign ownership in our country is that the economy, which was created pursuant to these other economic policies, was one which became vulnerable to foreign ownership. It was an economy which consisted of enterprises which were structurally weak, which were not as efficient as they should have been and which in one way or another lacked the resilience to stand up against takeover bids and other incursions from abroad.

We developed an economy in this country which was not overly venturesome. No one knows this better than people like myself who come from western Canada and can remember when the great oil boom started in Alberta just after the war. Albertans had to go outside of Canada to find the money and people who had the confidence to invest in Canada's future. I see the hon. member for Palliser (Mr. Schumacher) nodding his head in agreement. This marks an historic occasion in this House.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
?

Some hon. Members:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Steve Eugene Paproski

Progressive Conservative

Mr. Paproski:

And Edmonton Centre.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

I am almost overcome by the hon. member for Edmonton Centre (Mr. Paproski) agreeing. The "Eskimos" may win this year.

Let us face the fact in this chamber that in many parts of Canada there are people who have a deep resentment about what the financial and industrial interests centred in Montreal and Toronto did to and for this country. When I was a boy in Saskatchewan we did not waste our time worrying about foreign owners; we talked about those awful people who inhabited Bay Street and St. James Street. I do not think a case can be made that the domestic proprietors of our economy, then or now, have always performed in a fashion satisfactory from the standpoint of Canada as a whole. Therefore I have always felt that discussion on foreign ownership as it has emerged is one which is to a degree false and misleading.

There is much evidence to show that whether or not enterprises have been owned in Canada is irrelevant to their performance in the interests of Canada. In fact, there have been many studies, starting with that of Professor Safarian in 1966, going through the Watkins report and the Gray report, as we call it, and other documents of this kind.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Donald Craig Stewart

Progressive Conservative

Mr. Stewart (Marquette):

Tell us about when you left the Conservatives?

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

I will come to that. All these documents show conclusively that if there is any difference in the performance of enterprises in Canada, it is that perhaps the foreign-owned ones have performed rather better, taking into account all the criteria by which we measure that performance. However, we are now faced with a situation where there is a growing consensus that we have to look, not at the ownership of our economy but the way in which it is controlled and the performance it delivers in our society.

I repeat that it is impossible to argue that foreign ownership by itself is all bad or all good. The question which increasingly engages Canadians is, what are the effects of

|Mr. Blair.]

May 29, 1972

foreign ownership? I think we have to look at these effects industry by industry and company by company.

As Canadians, we now have priorities which are quite plain for all to see. We want an economy which will provide employment. We want an economy which will be directed as much as possible to using Canadian sources of supply for its factories, and Canadian experts as its advisers. We want an economy which will promote research and which will lay the ground-work for our participation in the technologically developing age of the future. We want an economy which will develop in this country management skills of a high order which can be used all over Canada for the advantage of everyone.

When we consider the kind of tangled nature of our industrial society in Canada, whether the companies are owned domestically or from outside the country, we can conclude that there are deficiencies. We do not really derive from our economy all the advantages which we think we should derive.

Having said this, Mr. Speaker, the question arises whether or not the steps which we are now being asked to consider will make a solid contribution to our future. Everyone who speaks on this subject comments on the fact that we are being asked to direct our law against only one aspect of the extension of foreign ownership in our economy. That is the aspect which is described as a takeover bid from outside Canada.

I do not intend to go over all the ground which was so well covered by the minister this afternoon. However, clearly in terms of our recent history and our understanding of this matter, the takeover of an existing Canadian company by a foreign corporation appears as a most dramatic and unwelcome incursion into our economy. I think it is quite proper to enact as a law that from now on that kind of activity coming from outside should be one which would become us only where it is justified in all aspects of our national interests. Having said this, I should point out that already during the lifetime of this Parliament we have seen two vital industrial concerns protected from foreign takeover. The cases of Dennison Mines and Home Oil are fresh in the minds of many people. The noteworthy success of the actions of the Canadian government in both these cases should encourage us to believe that this law is one which can work satisfactorily for the benefit of Canada.

The question most often raised is, why should we stop here; why should we not go further and enact a law which would contain other aspects of foreign expansion in our economy whether by direct investment, by joint ventures, by expanding existing subsidiaries or in other ways? It is my opinion that the step we are now being invited to take is one which by all the standards of our history is an epic one. It is a departure from the previous policy of laissez faire toward investment in the industrial and resource sectors. It is one which, in itself, will be digested not without difficulty. It is also one which is least likely to attract attack on constitutional grounds. One must recognize that these are areas which trench upon fields of economic activity which the provinces have traditionally believed to be their own.

Foreign Takeovers Review Act

I was not impressed by the assertion of the hon. member for York South that the government habitually runs away from these difficult problems by suggesting there are constitutional difficulties. That they do exist, and that they are real no one can deny. If we were to go further at this stage and seek to embark upon a complicated regulatory scheme such as would have to be operated were an attempt made to deal with direct investment, joint venturing, the expansion of subsidiaries, and so on, we should be creating not only a big bureaucratic machine of doubtful efficacy but we should be risking constitutional challenges which might defeat a detailed attempt to regulate the economy in the national interest.

It seems to me that it is far better to proceed prudently along lines which have been well marked out and to go on, in the best Canadian tradition, to explore with the provinces areas which invite further regulation while considering the effect of this new law upon our industrial economy. Only after we have done this ought we to determine whether further steps should be taken.

In the interim, it is wrong to think that no protection exists for the Canadian economy against foreign intrusion. In areas where the federal Parliament has been paramount, protection has been provided for many years. The minister said something about this today. In areas where the federal government has undoubted jurisdiction, such as banking, finance, transportation, communications, and so on, laws and regulations have preserved the integrity of these essential parts of our economy.

In addition, we have created, as a federal Parliament, the Canadian Development Corporation which is likely to play a significant role in the re-ordering of our industry and commerce. The tax policies approved by this Parliament and its predecessors have encouraged investment in Canadian companies. Last December, for example, changes which were made in the tax laws provided, among other things, for the deductibility of interest on loans used to acquire other corporations; the limitation at 10 per cent of the amount of the portfolio of savings in pension funds which could be invested in foreign corporations; the provision that the lower tax rate for small businesses should apply only to Canadian corporations; the continuing provision that the dividend tax credit should apply only to dividends from Canadian corporations all of which will have a significant effect in encouraging Canadian enterprise.-

I do not think there are many in any quarter of this House who would quarrel with the general proposition that we could accomplish much more to the benefit of our country for the extension of Canadian control, for the prevention of harmful foreign interference in our economy by positive, constructive measures rather than by more negative prohibitions.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Robert Lorne Stanfield (Leader of the Official Opposition)

Progressive Conservative

Mr. Stanfield:

Hear, hear!

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Duncan Gordon Blair

Liberal

Mr. Blair:

I therefore believe we should move forward to refer this important bill to the committee without delay. Knowing the committee, I am sure it will give the measure very careful study. As a member of the committee, there are details upon which I shall seek further information and, possibly, recommend changes. I believe this is forward-looking legislation and the kind of bill we should

May 29, 1972

Foreign Takeovers Review Act

pass as quickly as possible in order to enable it to operate for the benefit of our country.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Hon. Marcel Lambert (Edmonton West):

Mr. Speaker, we are beginning today in this House a debate which has been raging for years, with varying degrees of intensity, outside this chamber-in universities, in high schools, in newspaper columns, on television. From time to time we have heard certain strident, shrill voices describe this problem of foreign ownership as though it were peculiarly Canadian-la plaie Canadienne. Not a bit of it. Look at what has happened in Britain since the Second World War. One has only to read the book by Serven Schriever to understand the problems presented by foreign ownership in France.

One sees that each of these countries has adopted various methods to try to keep a reasonable grip on things. I find it rather ludicrous that many people make shrill cries about improper behaviour and the improper or almost immoral nature of foreign ownership, while on the other hand they want Canadian firms to go abroad and do business. What is there about Canadians going abroad? Are they like St. George, pure of heart? Let somebody from Great Britain, a German, a Frenchman or an American come to Canada and he is accused of being a conniving, scheming individual about to depose Canadians. This is ludicrous.

The Minister of Finance (Mr. Turner) was hopeful when putting forward his mistaken tax bill. We have not yet reached this point because as a good deal has to be done in the way of amending the international, industrial part of the bill. But hopefully the Minister of Finance will be successful in getting Canadian firms to move abroad and compete. How will they compete? By standing offshore and firing long-distance cannons? Of course they cannot do that. They must go ashore, into foreign countries and establish subsidiaries, partnerships or some other form of business enterprise.

One is almost tempted to say that what is sauce for the goose is sauce for the gander. If we as Canadians want to get out and carry on what is vital to our economy-that is, our export business-we must go to other countries and establish connections. I am sure the Minister of Industry, Trade and Commerce (Mr. Pepin) during his almost quarterly peregrinations to Japan has been urging the Japanese to open up opportunities for Canadian investment in that country.

I am sure he has been asking them to relax the long list of conditions in respect of industries in Japan which have been closed over the years to all foreign participation. He is not doing this just for the pleasure of doing it but so that Canadian businessmen can establish healthy working relationships for trade with the Japanese and other Pacific countries. All this is an attempt to guarantee Canadian jobs. Where do all these people around la plaie Canadienne, with their shrill cries about foreign ownership, think jobs will come from if firms have to close down and Canadian industry is dormant?

It was highly amusing this afternoon to listen to the hon. member for York South (Mr. Lewis) go through the litany

of hamstringing operations that Canadian industry encounters, each one of which adds more and more to the cost of production so that even in the domestic market they cannot compete unless one imposes controls and rationing or so-called economic reduction. Let us consider the doctrinaire strait jacket imposed on Britain after the war. I experienced three years of it, and I assure you it was sheer hell and agony. I have in mind the economic reduction imposed by Sir Stafford Cripps. There were rules, regulations and restrictions, with everything directed by him.

With democracy in Canada-and I will not refer to individuals-many people say the proportion of people employed by government is far too high. But if we had to follow even half the suggestions put forward by the NDP this afternoon, the size of the national civil service would be more than doubled. There would be no problems of unemployment, I suppose, but everybody would become an official shuffling papers. Everybody would be engaged in so-called economic reduction. That is one aspect of the problem. Of course, the NDP has its Waffle wing.

Mr. Paproskie Stanley Knowles!

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert (Edmonton West):

No, I will not accuse the hon. member for Winnipeg North Centre (Mr. Knowles) of being a member of the Waffle group, because that is not possible.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
NDP

Stanley Howard Knowles (N.D.P. House Leader; Whip of the N.D.P.)

New Democratic Party

Mr. Knowles (Winnipeg North Centre):

The hon.

member may think I am awful, but I am not "a-waffle."

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
PC

Marcel Joseph Aimé Lambert

Progressive Conservative

Mr. Lambert (Edmonton West):

I will accuse the hon. member of all sorts of things, but not of that. We have another organization composed of sincere people, I suppose. I refer to the Committee for an Independent Canada. They are all good and well intentioned people. They have members from the NDP, members who are pseudo-Liberals and a former Liberal who I suppose could be referred to as the financial Moses of the Liberal party, Walter Gordon. That former hon. member for Dan-forth, when he was minister of finance ten years ago brought us a great deal of trouble with his 30 per cent takeover tax. If we look at the problems of today and consider some of their historical aspects, we will see that a good deal of foreign ownership in this country started in those days.

I do not want to go too far back in the memories of hon. members, but the institution of the British preferential tariff wall within the Commonwealth formed one of the earlier trading blocs. Our United States friends established French subsidiaries in Canada in order to get within that British preferential tariff wall. That was perhaps good business at the time. But has anyone been studying what is happening in France and in Germany? Does anyone know what is going to happen in Britain and elsewhere within the common market? Canadians and Americans have been establishing plants in these countries in order to get within that high common market tariff wall.

Why did Polymer go over to France years ago? I use that as an example of only one industry, but each one that went to France did so because of foreign ownership. They are having troubles in France because of foreign owner-

May 29, 1972

ship and the common market. We have inherited that position. It started in the early 1930s but it has its roots in the establishment of a great deal of Canadian industry and other business in this manner, particularly in those halcyon days when we had hundreds of millions of dollars annually in deficits on commodity account and hundreds of millions of dollars on non-commodity account.

The money that was owed abroad was encouraged to remain here, to be invested in Canada. It was loose money available for investment in Canada. And how it was invested! The government of the day boasted about it. Canadians benefited by, shall we say, changing the nature of our economy from basically a resource and agricultural based economy to one of manufacturing and secondary industry. There has been a complete revolution in the Canadian economy since the end of World War II. This was accomplished by the use of much of the foreign money which Canada should have been paying out. But no, we invested it, allowed it to be invested or induced it to be invested here in Canada. So every dollar that was then invested became a dollar of foreign ownership.

If one tabulated all or even a proportion of the commodity account deficit from 1945 through to 1958-59, one would see why the United States was able to invest so much here in Canada. Why is there always United States money around here for takeovers? Our ludicrous, stupid estate taxes and the high level of succession duties-here I do not excuse any provincial or federal administration- have contributed to fire sales of Canadian businesses. The money was there, available to take over businesses. I never saw anything that was so penny wise and pound foolish. It was a case of selling one's birthright for a few measly million dollars of succession duties.

There may be some social justification for the estate and succession duties, but let us see what the consequences are from an economic point of view. We will see who the people are who are around to pick up a business that is about to be sold because it has an estate tax or succession tax problem, or which is about to be sold because someone who was the dominant or principal shareholder in the family business suddenly died and millions of dollars must be found to settle the estate because there is a succession duty problem.

How many businesses have been driven into the arms of foreigners? Each of us who engaged in the practice of law during those years is well aware of this fact, yet for a certain stated social reason this was the price one had to pay for foreign ownership. Of course, the party to my left would drive it all to a low level; there would be no buyers of companies because of the confiscatory levels of taxation, or if there were no restrictions on foreigners they would be around picking them up like kiddies picking up pennies at a penny-throw. That is how long-headed they are. They are very, very shortsighted.

There is another point, however, which must be considered along with the degree of foreign ownership in this country. There are many statistics emanating from Statistics Canada which are bandied about freely in the press and in this House to the extent that it would seem that the whole of our industry is owned by foreigners. But that is

Foreign Takeovers Review Act

not the case. In many industries only 75 per cent or 65 per cent of the shares of a company are owned outside the country, and yet this appears as a 100 per cent foreign-owned company.

The Canadian taxpayer has been placed in a position of inferiority vis-a-vis the chief competitor, the United States taxpayer. We know about the principal occupation rule and how the Canadian petroleum industry has suffered as a result of it. When the situation was ripe for individuals to move in, the United States citizen, on an individual basis had the advantage over the Canadian operator principally because of the principal occupation rule. There has been partial relief in this respect, but the minister might give some throught to the fact that the principal occupation rule exists to the extent of 80 per cent: one can write-off only 20 per cent. It is still an albatross around the neck of the Canadian investor.

If we are to do something concrete and positive about the problem of foreign ownership, the Canadian investor must be placed in a position of equality or even priority. I would discriminate in favour of a bona fide Canadian taxpayer when it comes to, say, resource development or whatever formula is adopted among incentives for Canadians to own their businesses. There is no question about buying back: even if we let the Creditistes loose for a year we could not print enough money to attempt to buy back Canadian industry. Nor would the New Democrats, with all their Wafflers, try to force people to invest. To invest in what? Would they invest in government bonds? Nothing has been suggested there as a practical solution.

Certainly there can be an improvement in the situation. One classic example is the moving of the headquarters of the Hudson's Bay Company from London to Winnipeg. In a matter of three years this has resulted in an increase of shareholdings by Canadians from 6 per cent to 47 per cent. It is under Canadian management. Canadians have been prepared to buy and now have an opportunity to buy stocks here in Canada.

Why do Canadians not buy stocks in Canada? Why is it Canadians have $3 per capita more invested in the United States than is invested by United States citizens in Canada? People are shocked by that thought. In fact, per capita Canadians have three times as much money invested in the United States as their American counterparts have invested in Canada. Of course, by reason of the fact that we have only 22 million people, the totality of the Canadian investment in the United States, in that whole big economic machine, is only a small corner. On the other hand, the impact of United States ownership in Canada provides quite an economic crunch and they have that much more leverage. I will tell you where they have more leverage; and this is the point Servan Schriever makes in his book with regard to American ownership in Europe.

It is not the degree of ownership, but managerial skill that counts. This means a great deal and it is something that has not existed so far in Canada. It is improving, but what is necessary is really competent managerial skill, which can be learned only by experience and by training; it is not something that one develops from the seat of

May 29, 1972

Foreign Takeovers Review Act one's trousers. They have it in a much higher proportion than we. As I said, it is a matter of tax laws, a matter of managerial skill.

What is the answer to all of this? Well, it was to be in the so-called Gray report which was leaked in a Canadian publication last November. Let us look at the objectives of the memorandum, which read in part as follows:

1. To set up the alternatives available to the government in presenting its foreign investment policy to parliament and public;

2. To consider what should be done about foreign takeovers of Canadian firms in the period between the day of the policy announcement and the enactment of the necessary legislation;

3. In the light of the first two objectives, to consider the advantages and disadvantages of early legislation to screen foreign takeover; and

4. To consider what should be done about certain other issues- the status of the criteria which will guide the review agencies, the sanctions for non compliance-either with decisions of the review agency or with the terms of deals made with it, the definition of foreign takeover and control, and details of the administrative machinery, including the question of thresholds for registration and screening.

At that time, also, there were strong suggestions that foreign investment would be controlled, that there would be restrictions on foreign personnel acting in Canada. It was going to be a real "made in Canada" operation. But all that has come out of it, outside of a great deal of uncertainty and unhappiness with Canada among our friends in foreign lands, has been Bill C-201 which is to create an agency to screen takeovers.

I am not yet satisfied as to the constitutional jurisdiction of the government of Canada in this respect. How will it block, disallow or somehow negate the transfer of shares from one provincial company to another provincial company all of whose operations are within the confines of one province? I will be very interested to hear the minister tell us how they propose to do that. Or are some of these suggestions made in the bill of the same nature as those that were incorporated in the Canada Corporations Act which are pure window-dressing? They are non-effective for the purposes that were given as an explanation of their inclusion in the amending bill. Page after page of them has served no useful purpose except to add more red tape and a lot more expense for people in business. They affect only a very small segment of Canadian corporations.

If the minister will say that this will affect only those companies under the Canada Corporations Act, then that is one thing. But if he says this will operate to limit the takeover of a privately-owned cement company in British Columbia by another company operating in British Columbia where the degree of foreign ownership is sought by the mathematical formula in this bill, that is another thing. Will the minister tell us whether that is the intention? Is there any means whereby the Parliament of Canada can legislate to do anything in that regard? Will the review board be able to do anything about that, and will the minister, as the minister responsible under this bill, be able to report a yea or a nay to his colleagues so that an order in council may be issued dealing with the company or companies which are entirely Nova Scotian in their aspects?

In any event, I join other hon. members who have said something about what will happen in committee. We will

see. Perhaps we will get some very illuminating explanations. I have a suspicion that this bill is a tiny field mouse that has been produced after eight years' gestation and was simply brought forward because there had been a leak and the government had to explain that documents did exist and that something was being done.

I want to speak about an industry that is much quoted as being one of those that is very much under foreign domination, that is, the Canadian mining industry. I will quote a paragraph from the address of the president of Noranda Mines at its annual meeting in April of this year. It must be remembered that 92 per cent of Noranda's 34,000 shareholders are Canadians owning a similar percentage of the outstanding stocks, so this is not the president of an American-dominated or foreign-dominated corporation reporting to his foreign shareholders. This is what Mr. Powis said:

The last point to consider is the question of foreign ownership of the Canadian mining industry. A great deal is made of the figures produced by Statistics Canada which purport to show, for example, that 80 per cent of our smelting and refining capacity is foreign-controlled. However, as indicated previously, these figures are fragmented and highly misleading. The fact is that Canadians control 67 per cent of our copper refining capacity, 70 per cent of zinc capacity and 100 per cent of lead capacity. It is only in aluminum and nickel that so-called foreign control is predominant, and this is because Alcan and International Nickel are considered to be foreign companies because somewhat less than half of their shares have been owned in Canada. However, if the trend of increasing Canadian ownership of these two companies continues, a majority of their shares will soon be held in Canada and the statistics will then show that all major sectors of the smelting and refining industry are overwhelmingly controlled in this country.

You see what a little encouragement, from the tax point of view, for the Canadian investor will do? If Canadians investing in International Nickel tip the scale to 50 per cent plus one, then those industries would be dominated by Canadian-controlled companies. This is how and why the statistics that are so often quoted are misleading. They leave out the most pertinent parts of the information that would affect us.

I have no time to put on the record a quotation from an excellent publication entitled "Performance of Foreign-Owned Firms in Canada." I will do so at another time. This is a study taken under the sponsorship of the Canadi-an-American Committee headed by Professor A. E. Safarian of the University of Toronto. I commend this little book to hon. members. It contains some very illuminating conclusions with regard to the performance of foreign-owned firms in Canada.

Dealing with solutions, Mr. Speaker, the hon. member for Grenville-Carleton (Mr. Blair) complained about a lack of counter-proposals. There is an over-all problem of foreign ownership and it has many facets. I did not hear the minister this afternoon, but to be strictly relevant to the bill he should have talked about foreign takeovers only and about reviewing them. I have already spoken about one of the solutions which I think the majority, if not all, of my colleagues in the official opposition advance. It is that the Canadian taxpayer must be given the proper incentives. He must not be placed in any position of inferiority under our tax law when compared with

May 29, 1972

other taxpayers with whom he is competing. This is solution No. 1.

Secondly, Mr. Speaker, we must have an integration of succession duty and capital gains tax. Then I think it is possible for the federal government and the governments of the provinces to act on a pro-Canadian basis. I can give you an example, and I am sure there are many others. The most recent one that comes to mind was when Syncrude, in my own province, obtained an enlargement of its permit and the administration imposed a number of conditions which were pro-Canadian in their thrust. Everybody recognizes their purport. It did not require lengthy statutes to say this or that must be done. This was action taken by government in regard to a particular industry.

My colleague from Fundy-Royal this afternoon dealt at some length with a partial solution dealing with the key sector. That is now in existence. As I say, Mr. Speaker, I do not think there is one complete solution to the problem. I am concerned that this bill is being put forward as a very brave answer to the problem even though it may deal with only a very tiny segment of it. I am very uneasy about a lot of the takeovers and about the ease with which they are undertaken. But, Mr. Speaker, I say that we Canadians have created the climate for them. We have created the conditions that led to these takeovers.

One solution tried in the past was a restriction on the sale of shares. I remember the case of Alberta Gas Trunk Pipe Line whose shares were to be sold in limited amounts first to Albertans. That sale was really oversubscribed. But, Mr. Speaker, the general public has not yet been educated to hang on to its investments. This was a good investment, but many of the people who had never held shares before sold them as soon as they rose $10 or $15. The shares were placed immediately on the market. The company is still controlled in Canada but I suggest a significant number of the shares are held by investors abroad.

I also remember when Rainbow Pipe Line was being incorporated here. All the companies involved were foreign-owned or foreign-controlled and in fact the dominant interest in one of them, Aquataine, was held by the French government. I suggested that the shares in Rainbow Pipe Line be placed on the market with the same kind of restriction as applied to Alberta Gas Trunk Pipe Line. That is a solution to that particular type of monopoly.

I see no hope for the Canadian Development Corporation in this field, not one iota. I do not want to traverse old ground, but the Canadian Development Corporation so far as I am concerned is a dead duck. It was ruptured the day it was born. It will never operate for the Canadianiza-tion or preservation of Canadianization of industry.

So, Mr. Speaker, we will examine this bill in committee. I am opposed in principle to the screening of takeovers. I am uneasy about them, as I have said. I do not think this bill will go very far, but let us see how far it goes and then we can get to the problem. We do not have a monopoly of this problem; it is worldwide. We must remember that if we place restrictions on foreign owners, then similar restrictions may be placed on Canadians operating abroad. We must live and let live, and to that extent the problem becomes more complex.

Foreign Takeovers Review Act

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink
LIB

Norman Augustine Cafik

Liberal

Mr. Norman A. Cafik (Ontario):

Mr. Speaker, I am very pleased tonight to be able to address a few remarks to the chamber on second reading of Bill C-201, the purpose of which is to provide for review of foreign takeovers in Canada. I would like to confess immediately that I class myself as an economic nationalist. I feel quite strongly that we have to take strong steps in order to preserve our national identity and economy and to maximize the economic control that Canadians ought to have over their own affairs; but at the same time I recognize that this is a very complicated problem.

There are many regional influences involved, and provinces within their own jurisdictions are rightly concerned with the amount of foreign investment that they can attract. We live in a federal system, and when we have a federal policy that is too stringent it can have disastrous effects upon the underdeveloped regions of Canada which are much concerned with the problem of attracting foreign investment to their respective areas. We must stimulate the economy to create the maximum number of jobs for the fastest growing labour force in the world. I feel that our policy has to be a responsible one directed to maximizing employment and at the same time seeing to it that there is no further erosion of Canadian ownership. I think this bill is a step in that direction.

Personally, I am not convinced that this legislation is as far as we ought to go, but I would like to say a few words on the subject which the committee after second reading might bear in mind. For a moment I would like to examine the reactions of the various premiers across Canada, to see what they think of this bill. In the province of Newfoundland, to my knowledge the new premier has not really made a definitive statement, but in Prince Edward Island, Premier Campbell has stated quite clearly-

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO CONTROL FOREIGN TAKEOVERS OF CANADIAN COMPANIES
Permalink

May 29, 1972