Mr. David MacDonald (Egmont):

Mr. Speaker, yesterday the Minister of Industry, Trade and Commerce (Mr. Pepin), as well as other government members, joined in a chorus of apologies for the bill which is before us today. Last night the hon. member for Ontario (Mr. Cafik) took us on a global tour of not only the other provinces and their views, but also other countries and other legislation in this field. When one sees what other countries are doing in the field covered by this legislation, one wonders whether it is fair to say there is no place like home. On the problem of development, particularly in areas of regional economic disparity, it is true we face problems of development not only in economically and socially deprived parts of the country but we know that such development in Canada has been spotty, dominated often by one important economic group or foreign group. Surely, the spotty

and somewhat erratic economic development of Canada has occurred because there has never been a coherent set of guidelines for either foreign or domestic investment and development in Canada.

One of the major tragedies, if not the major tragedy, of the legislation we are discussing today is that the bill before us accepts the status quo. It accepts in both complacency and naivete a situation wherein complete sectors of our economy seem destined to remain in the present state. This is something which I do not believe members of this House, or indeed the Canadian people, should be forced to accept. When we deal with something as difficult and complex as corporate behaviour in a modern and complex society, we know that to some extent the corporate structure is parallel to government. It is parallel with the official levels of government. Particularly, it has the force of government. A corporation which employs most of the men of a town or a community within a province indeed controls and influences the lives of those men far more directly than any local, municipal, provincial or even federal government. Indeed, while governments very often deal with what people cannot do, corporations and employers often determine directly or indirectly what people can do.

So, it is not difficult to see why the entire issue of foreign ownership is such a particularly sensitive one. In many ways, those who speak of examining the directorships of corporations for Canadian representation, those who speak of full disclosure, are talking about examining the workings of corporate governments. Yet, despite the ruffled sentiments that this type of proposal causes, I believe we should be committed to these things because they are in the interests of Canadians. It is important for Canadians that the facts about corporate behaviour be known. The composition of directorates should be a matter of public record so that Canadian participation can be determined. I am disturbed by the fact that most recently the government, through the Minister of Industry, Trade and Commerce, has written off so quickly the importance or usefulness of having increased Canadian participation in the board rooms. It has been suggested that just having Canadians as directors would not substantially alter the situation.

Mr. Pepin:

Not necessarily.

Mr. MacDonald (Egmont):

Not necessarily; the minister again indicates that today. However, I believe the minister missed the point, just as this bill has missed the point. What really needs to occur in this country, to use the government's own phrase, is further domesticity in the Canadian economy. We are not speaking of a symbolic increase of directorates to some magic number such as 50 per cent or 75 per cent. We are talking about the whole impact of corporate behaviour today on Canadian participation. In purely legal terms, it may well be true that the increase of Canadian directorships would not substantially alter the character of the industry and economic activity in this country. What we are concerned about is the effect the day-by-day decisions of the board have, on a long-term basis, on the activities of all Canadians. We are concerned about the greater usefulness of Canadian managerial skills. We know from some of the studies which have been made that only recently it has been

May 30, 1972

acknowledged that we had to encourage, through schools of business training and programs of business and commerce, more entrepreneurial skills in this country.

Now, we will know, when we have developed major pools of this talent, that the talent exists and is available for the upper and middle levels of corporate management. I suppose there might be some form of moral suasion if you like for more use by firms in this country, both totally Canadian firms and particularly those which operate as foreign subsidiaries, of Canadian talent in corporation and managerial skills in the economic activity which takes place. While this is accepted in many areas, there is no hint of recognition by the Minister of Industry, Trade and Commerce that this is an important aspect of the problem which requires a solution.

Second, surely there needs to be a facing up to the problems of disclosure. I do not think it can really be argued in detailed terms that corporations, having as they do a tremendous amount of economic and social power, can longer be justified in operating in terms of secret societies. Government cannot for one moment operate as a secret society, although daily we do battle in this House of Commons because of what the government is attempting to do. Surely, if the public believes if it is not in its interest to have a government which operates in secret then it is not in its interest to have large corporations, either wholly domestically owned Canadian corporations or foreign or international corporations, operating in our society in some kind of a secret or medieval manner. There is a sense in which there must be corporate responsibility and accountability. I think, quite frankly, that it is both shocking and an indication of the naivete of the present government that they have in no way attempted to grapple with this important problem.

Third, we must be able to come to grips with those problems that affect our economy and make decisions. I refer to the whole problem of extra-territoriality. In recent years we have known just how important these kinds of decisions can be, whether with regard to wheat sales made by an earlier government or with regard to the present DISC legislation that is being so badly fumbled by the present government. We know that there must be a firm government program to face this whole problem of extra-territoriality.

I could go on in this vein for some time, indicating the weaknesses, the lack of frank recognition of what the real aspects of the problem are, but I do not plan to spend what little time I have remaining dealing only with the negative aspects of the government's performance. I want to make some positive suggestions which I hope will be seriously considered at some stage. I suppose it would be too much to hope for some response from this administration, but I hope the one that will replace it certainly will be able to adopt many of these suggestions and provide us with a national economic and social policy that has some sense of direction, purpose and rationale to it.

It seems to me that the entire area of corporate citizenship, development and foreign acquisition should be dealt with by something more than the negative form of a screening agency. What is necessary, I believe, is a posi-

Foreign Takeovers Review Act

tively oriented national agency that would involve provincial and federal representatives along with industry, the academic community and citizens. The way in which we have arrived at this debate dealing with this bill, shows us just how ludicrous the present position of the government is. First of all, a task force was established under the Minister of National Revenue (Mr. Gray). It operated in some kind of a milieu that was never very clear to anyone. Occasionally there were dispatches that came during the night watches. Finally, we had the report plus this bill. We were told that some consultation with the provinces took place, but one senses that it was nothing more than a perfunctory round-the-table discussion at a meeting last fall of first ministers or first ministers and finance ministers. We have a government whose concepts are of the ivory tower type, a government of "we alone know best". What I am suggesting is that the time has arrived for the establishment of some national, independent review agency on which there can be the broadest kind of representation.

I think that if we are serious about these problems, and it has been shown now by a number of public opinion polls that the whole question of foreign ownership and economic independence is uppermost in the minds of Canadians from coast to coast, I believe we should establish a national institute on economic independence and development. I think this national institute should be established not by one government solely but by the federal government along with the ten provincial governments. Of course, immediately there will be objections that in that kind of situation you will never get the kind of agreement necessary to establish an agency or an institute that can do a really satisfactory job. It is certain that we have never had any worthwhile action yet from this government in this respect. Further to that, since the government has produced its report and tabled this bill a number of provincial premiers have provided more real leadership on a national basis than this government has yet shown.

If we are seriously going to deal with the question in a federal state-and I sometimes wonder whether or not this government is not terribly inconsistent, at one time hiding behind the constitution and at another completely ignoring it-if we believe that we have a viable, workable federal system in this country, then the whole issue of economic independence must be decided within a federal provincial framework. Therefore, I suggest that such an institute on economic independence and development be established by the federal government and the ten provincial governments, and that this institute have statutory responsibilities related to the review of all proposed legislation in the development field in order to see that this legislation meets what might be called the joint criteria of both development and independence.

Let me say here that I think we do have to take seriously the concern that a number of provincial premiers have registered that any restrictions on foreign investment in this country could have a disastrous effect on their own planning and priorities with regard to development. Quite frankly, I think that some of their statements have been naive. I think they really have not looked at what has happened within their own provinces with regard to foreign investment. I do not think they have questioned

May 30, 1972

Foreign Takeovers Review Act whether or not it has been effective for them and for the people to whom they are responsible.

I say that the time has come when we must have a co-ordinated policy that looks to the question of development as well as of economic independence. This institute should and could prepare annual reports on the activities of both provincial and federal governments for public examination. It should and could hold regular meetings, hear witnesses, and generally keep the Canadian public informed as to the true nature of the problem and the various alternatives available. It could, once and for all, force governments and the business community to lay all their cards on the table. In addition to that, a research wing could be established that would provide both short and long-range studies on alternative means of development aside from foreign venture capital. This, tied in with governmentally co-ordinated programs working on a continuous basis, would maintain some real co-ordination between the various activities of the federal government.

We have said nothing here about the way in which government departments and agencies are often working at cross purposes with regard to the whole matter of whether or not the investment and economic activity is in the Canadian public interest. There could be some real independent vehicle which could analyse the over-all policies of the federal government, as well as relate those to the various policies of the increasingly powerful provincial governments. It is a well known fact that a number of provincial governments now have such a large budgetary program of their own, are so heavily involved in assisting the establishment and encouragement of the business community in their own provinces that the only kind of policy must be a co-ordinated one. I think that regardless of whether it is this particular kind of national institute on economic independence and development or a similar agency, there has to be a vehicle which will get us beyond the present situation where we have this kind of ad hoc, instant and somewhat peripheral solution to a very serious and major question facing the Canadian people.

It is strange to note that when we get into discussions of the problem of foreign investment and foreign economic control, we almost inevitably put the cart before the horse. Certainly, that is true with respect to this government. The question is not to have a foreign investment policy and then try to relate it to some kind of development or industrial strategy. Surely, what we need in the first instance is some framework for an industrial policy. What we are really talking about here is a consistent pattern of development to which we would relate a whole series of approaches related to foreign investment and control, and not the other way round. In order to have that we have to have a much greater amount of informed discussion on public goals and on the issues at stake. Without that kind of public discussion, the ability to take action in the Canadian interest will be severely limited on the part of both this government and any provincial governments that seek to deal with this issue.

I have very few minutes remaining, Mr. Speaker, but I want to make four or five additional specific suggestions which must be considered when dealing with this over-all question. The recent changes in the income tax bill, C-259,

should remove some of the disadvantage to Canadian investors with regard to investing in business activity in their own country, but to my knowledge this bill would not provide the necessary incentive so that we might redirect the activity of Canadian investors. Obviously, what we need is a pattern of investing incentives.

Perhaps the suggestion may have already been made, but I put it forward again, that tax credits be given to individuals-not to corporations-who buy Canadian type equity investments, say up to an amount of $5,000 per person per year. In that way there would be a real built-in incentive to put one's money into the kind of development capital that would allow Canadians to participate directly in the development of their own country.

Second, Mr. Speaker, surely we can give greater attention to the use of pools of money that are collected in both pension funds and insurance funds. There are at present real legislative restrictions-this was acknowledged in the report presented by the Minister of National Revenue (Mr. Gray)-that must be dealt with, and surely this is a simple and obvious step that should be taken now.

Third, Mr. Speaker, and of increasing concern to many Canadians, there are the present limitations on and present direction of banking activity in Canada. Our banking institutions have far too often worked to the disadvantage of the development of the Canadian aspect of our economy. What is needed now is a Canadianization of our banking system. Through our banking system more venture capital needs to be released to Canadians for Canadian enterprise. Again, it was suggested in the report tabled by the minister on May 2, that what we need is really a kind of merchant banking in which there can be some real risk taking. Nowhere else would this be more valuable than to those areas suffering great regional economic disparity. Some attempts have been made, but without tangible effect, to extend banking beyond the "Big Eight". Surely, the time has come for this country, and particularly members of this House, to look closely at what kind of advantages the Bank Act and the regulations at present give to our country.

I wish the minister were still here, Mr. Speaker, to hear my fourth suggestion. I am going to speak about a matter that is under his direct responsibility, and that is the Industrial Development and Research Incentives Act. Surely, this can become a more aggressive instrument working to increase our research capacity. We know the tremendous limitations that are placed on increasing the research and development activity that presently goes on in Canada, but since we have legislation that encompasses some aspect of that field I suggest that we work to make it more responsible, more active, more progressive in its support for research activity in business. And related to that there must be parallel legislation that would provide some tax incentive for the implementation of the results of Canadian research in the manufacturing and service sectors. At the present time, there does not seem to be any acknowledgement of the fact that when Canadian research takes place and there is some real pay-out in terms of manufacturing or service activity, there should be some form of tax incentive.

Fifth, Mr. Speaker, we have to acknowledge the fact that we live in an international business community. It is

May 30, 1972

not enough just to talk about what we should do, given our own situation. We are in the very difficult situation where we must direct much of our economic activity beyond our own country. We have frankly to acknowledge the degree to which we are efficient and productive, whether it is technology or management that we are talking about. If we are not able to improve our technology and develop more and better entrepreneurial skills, we will simply not measure up in the international marketplace. Excellence and competence must be increasingly recognized within the legislative framework established both federally and provincially.

Having made these remarks, Mr. Speaker, let me say something else, because I believe it is most critical to any action taken by this or any other government. There must be public participation in and support for what occurs. We have seen instances in recent years when governments sprang suddenly, without warning or understanding, into legislative activity or initiatives. The public are more than willing to get deeply involved in these questions, but so far the government has been reluctant to engage the public in this kind of dialogue. It will be impossible to make the kind of decisions that will be important and effective unless there is a public involvement, a public motivation and public commitment. I hope the minister would not spend over-much on this particular piece of legislation when obviously there are some larger and more central legislative initiatives that must be taken.

Mr. Hubert Badanai (Fort William):

Mr. Speaker, I am very much interested in this particular bill, which is to provide for the review and assessment of acquisitions of control of Canadian business enterprises by certain persons, because it deals with a question of great concern to areas where foreign capital is needed to establish a business or an industry, and which have little or no appeal to Canadian investors, to provide jobs and improve local conditions. After several months of study the Minister of National Revenue (Mr. Gray) made a statement of policy designed to regulate foreign investment in takeovers of Canadian based enterprises. I was rather pleased that his statement did not take the hard line of the supernationalists. Instead, he brought forth a sensible document of policy which the majority of Canadians can and will support.

I express the hope that the minister entrusted with the administration of the act will use discretion and common sense. I have great faith in the present minister. I do not believe he will jeopardize the good that many companies, with shares held by foreign investors, are doing for the communities in which they are located. But suppose another minister were to lean heavily on the ideas of the so-called Action for an Independent Canada, it would then become very difficult for companies, however successful, to expand their businesses in that their shareholders, though a minority, could be classified, at least technically, as foreigners. Of course, I would shudder to think what could happen if, by a fluke of circumstances, the NDP were to win power and form the government some time in the future. That is a very remote possibility, but nevertheless it would be a disaster.

I am therefore concerned, and very much concerned at the possibility, however distant, that virtually any acquisi-

Foreign Takeovers Review Act

tion, even by a minority interest, in any Canadian business, by a non-resident or by virtually any company, will be subject to the almost unlimited discretion of the Minister of Industry, Trade and Commerce (Mr. Pepin). This thought was very well expressed in an article on foreign ownership policy which appeared in the May 22 issue of the Financial Times. On the other hand, I am encouraged to think that after due consideration of all the angles of this very important bill, the final draft of the legislation will allow capital to start new enterprises, or expand existing ones that are foreign-owned or to develop Canadian resources, to continue to enter the country. For those of us who appreciate that this type of investment has stimulated Canada's economy in the past and contributed heavily to the nation's present state of prosperity, this is good news. It will not please those who believe that foreign capital is a threat to our independence.

In the future, Mr. Speaker, Canadians who own enterprises in this country and wish to sell them to Americans will be subject to government scrutiny, and will be permitted to do so if it can be shown to be in the national interest. The policy reflects the expressed views of the new Minister of Finance (Mr. Turner), that given a choice between extreme nationalism as expressed by some members of the Independent Canada Committee and prosperity, Canadians will choose prosperity. Of this, I have not the slightest doubt.

The opposition and the news media expressed impatience, which was not really justified, at the delay in introducing this measure. People will realize that the time spent by the government in reaching these conclusions was time well spent. It remains for Canada to continue to attract foreign investment where it can do the most good and to ensure, in every way we can, that the prime benefits accrue to Canadians in terms of prosperity and jobs. Under the new policy, Canada will continue to offer a hospitable climate for foreign investment. The difference between Canada and so many of the other developed countries is that we have, still, so much left to develop and we can use so much help in doing the job.

It should like to quote from the report of the Minister of National Revenue, which sums up the question in these words:

Important benefits have been and can continue to be obtained from foreign direct investment. The data comparing the performance of Canadian-controlled firms to foreign-controlled firms indicates that Canadian control of a business is not, in itself, a guarantee of sound performance; and is not, therefore, a satisfactory means of achieving Canada's broad national objectives.

For instance, general legislation providing for 50 or 51 per cent Canadian ownership, either in the economy as a whole or in particular industries, can be very costly to the economy.

Professor Melville Watkins of the NDP said that the remedy for foreign ownership in Canada was a system of complete state socialism. Mr. Watkins faced the issue in his "Waffle Manifesto", but that document was too hot for his own New Democratic Party to handle. What we have, in these new proposals, is a traditional Canadian solution designed to give us maximum benefits at minimum cost. Consideration has been given to the fact that the provinces attach high priority to rapid economic development

May 30, 1972

Foreign Takeovers Review Act

and are inclined to feel that Canada will continue to require a substantial volume of foreign investment to achieve this objective. I am referring, particularly, to those provinces which possess large mineral, forest, and energy resources and which have been keen for investment funds. For these provinces, foreign investment means an important source of economic development and jobs.

As an example, Mr. Bourassa, the Premier of Quebec, a strong opponent of economic nationalism, thanked the Canadian government for its prudence in limiting itself to "restrained" controls. He said that his government will not accept further controls in the future which could hamper the inflow of job-creating foreign investment. "We don't want to close the door on any foreign investment which will bring more jobs for more Quebeckers" he said; "We can't afford to refuse."

An economist, Ian MacDonald, offers this answer to the argument that Canada is trading away her independence:

As long as non-residents are behaving as good corporate citizens, there is no danger ... If they are not, the government is free to control them. American capital has not come to this country as part of an imperialist plot and Parliament remains sovereign as the appropriate guardian of the public interest should foreign-owned firms behave in a way which threatens Canadian independence or sovereignty.

Briefly, the benefits which have accrued to Canada from foreign investment have given us, first, an inflow of capital without which Canada could not have developed to the present state of economic stability; second, access to the United States managerial skills which have been considerably more developed than those in Canada; third, the benefits of the most advanced United States technological knowledge in fields which Canadians would have required long years of research to develop on their own; and fourth, direct access to the vast United States market for many of our products.

In a special study prepared for the Royal Commission on Canada's Economic Prospects in 1957, Professor Irving Beecher and Professor S. S. Reisman summarized the advantages in this way:

From the search by foreign investors for profit, Canada has received a supply of capital, enterprising skills, technological know-how, and markets which for magnitude, quality, and stimulus to economic growth, has probably never been surpassed anywhere in the world.

Canadian nationalists have been very active in recent years. Walter Gordon, Mel Watkins, Mel Hurtig, the Committee for an Independent Canada and other spokesmen have made "nationalism" the fashionable wisdom. Mr. Crump, the retiring Chairman of the Canadian Pacific Railway, during the course of an interview recently, said that he has no quarrel with foreign ownership and that money has no nationality.

Shame; look what the CPR did to this country.

Mr. Badanai:

Under the new policy, foreign investment will continue to play that vital role and, notwithstanding Mel Watkins, Walter Gordon, Mel Hurtig and the whole Committee for an Independent Canada, our identity will be as secure as it has ever been. Mr. Alfred Powis, President of Noranda Mines, speaking at the annual meeting of

shareholders of the company held on April 28, 1972, had these significant observations to make:

Canadians are quite rightly concerned about how to provide the additional employment needed to accommodate the fastest growing labour force in the industrialized world. Many proponents of an industrial strategy start from the assumption that primary industry cannot provide the level of employment needed and that we must foster more rapid growth in the manufacturing and service sectors.

In its more extreme form, the argument assumes that Canada has a chronic shortage of capital and surplus of labour. It alleges that past national policies designed to stimulate investment, such as tax incentives, have fostered capital intensive industries such as mining at the expense of other sectors of the economy. It is said that these industries pay very little in taxes, and in addition have not only created too little employment but have also resulted in foreign domination of our economy. Therefore, the conclusion is that we need a national industrial strategy which will divert capital from primary industry to the secondary manufacturing and service sectors where many more jobs will be created per unit of investment. To the extent that this reduces or eliminates the growth of such industries as mining, it is said that nothing will be lost in the long run because our resources are vital to the rest of the industrialized world.

Such arguments have a superficial plausibility, and they are being repeated often enough that there is some danger that they are becoming accepted as conventional wisdom, at least in certain influential circles. They are probably the reason why the mining industry fared so badly in the so-called tax reform exercise. In fact, these arguments are dangerous nonsense and, with respect to the mining industry, they are based on official statistics which are fragmented and highly misleading.

Another point to consider is the extent to which the rest of the world really depends on our natural resources. In some circles, there seems to be an assumption that we have a sort of monopoly on natural resources, and that we can hold the rest of the world to ransom for them and use them as bargaining counters in international trade negotiations. As far as mine products are concerned, this is sheer nonsense. Although we are the world's largest producer of nickel and zinc, 80 per cent of the world's known reserves of these metals are outside Canada, and in all other important metals our share of known reserves is considerably smaller. Moreover, the statement that the rest of the world is running short of mineral reserves so that ours will become increasingly valuable is untrue in the case of mine products. Leaving aside the potential for new discoveries on land, there are almost limitless reserves of most metals on the floors of the oceans which are now close to being within technological reach. Clearly, our mineral resources are only an asset if they are found and developed, and if we fail to do this the rest of the world will simply pass us by.

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. This is not to argue that there is not an important degree of foreign ownership in Canadian mining. There is. But the real point is that there is also a substantial and healthy Canadian component, and its relative importance is growing.

Thus, the arguments raised against continued emphasis on development of our resources simply do not stand up. The best

May 30, 1972

national industrial strategy is to concentrate on the things we do well, where we have a demonstrated record of international success. This is not to deny the importance of the manufacturing and service industries. We obviously need balanced growth, and this is the direction in which any national strategy should point us. However, unless we stimulate the development of primary industry, we are likely to have no growth at all.

The late Ross Thatcher, former premier of Saskatchewan, argued eloquently for many years against any attempt to halt or reduce the flow of much needed foreign capital for the development of Canadian resources and secondary industry. While members of the NDP, of the waffle group as well as others advocated buying back Canada, and they were making loud noises in the province of Ontario especially, Premier Thatcher was heading to the United States to tell American businessmen that, so far as he was concerned and Saskatchewan was concerned, they were welcome in Canada as good corporate citizens.

Mr. Benjamin:

And the people threw him out.

Mr. Badanai:

The ultra nationalists and socialists do not like voices of people like the late Ross Thatcher or of the premier of Quebec.

Mr. Benjamin:

The people do not, either.

Mr. Badanai:

However, those people living in areas where large amounts of capital are needed to provide jobs and improve living standards will be happy. The people of northwestern Ontario, where I come from, need more capital. They do not care where it comes from since it is needed to provide jobs for the people of our province.

Mr. Doug Rowland (Selkirk):

Mr. Speaker, although I have the utmost respect for the hon. member for Fort William (Mr. Badanai), the kind of speech which he has just made is the kind which is calculated to give me heartburn. His is the kind of counsel this country has followed since the death of the great nation builders, the last of whom was Laurier. Since then we have followed that kind of cautious philosophy. We have lacked confidence in ourselves as Canadians and in our abilities to develop this nation ourselves. We have followed the hon. member's kind of advice, with the result that, today, our sovereignty and independence are jeopardized. That is what the hon. member's philosophy has brought about in this country, and that is the kind of philosophy this party rejects out of hand. His is the kind of philosophy which makes the simple-minded assumption that we need foreign capital to help to develop this country, that foreign capital was absolutely necessary for the development of this country, and it ignores the possibility that, if we had mobilized our resources as Canadians, foreign capital would not have been needed in this country because we could have achieved exactly the same growth on our own.

I think it is important to take a moment or two to consider why we are undertaking a debate of this sort, and why this kind of legislation is before the House. This legislation is before this House because there is a growing concern on the part of Canadians that our sovereignty and independence, which are necessary to develop Canada according to the particular genius of the Canadi-

Foreign Takeovers Review Act

an people, stand in jeopardy. Because they stand in jeopardy, our nationhood stands in jeopardy.

We are discussing the idea of foreign ownership because some of us believe that there is a capacity and capability within Canada to develop a unique and highly valuable society, one which can be a model for the world. In attempting to achieve the goal of development in Canada and in assigning goals for ourselves as Canadians in the past we have been very limited. Our goals have been restricted largely to growth and prosperity. In order to achieve those goals, we have sought the aid of others without first examining whether we had the resources ourselves to undertake that kind of development. In seeking the assistance of others, I believe that what we have done has been to actually reduce our capacity to achieve the greatness which is the potential of Canada.

In line with that statement, I would like to draw to the attention of the House some words of a Canadian historian of considerable worth, Professor Donald Creighton. Writing in MacLeans Magazine of November, 1971, he said:

The truth is that Canadians, in accepting American capital, American management and American technology, have unwittingly received the spirit that animates all three. They have not only become subjects of the American continental empire, but they have also become converts to its characteristic philosophy of life, to what might legitimately be called its religion. The central doctrine of this religion is a belief that progress is the only good in life and that progress means a liberation of man for the progressive conquest of nature by technology.. . .

This new doctrine (the doctrine of continual'economic growth) has captured the minds of Canadians, just as it has those of every other people in the western world. To achieve economic growth, they are prepared to sacrifice their independence, pillage their natural resources, contaminate their environment and endure all the hideous evils of modern industrialization and urbanization. The American empire is taking over the birthright of Canadians; and its'imperial religion has taken over their minds.

That is a pretty strong statement, but I think it is accurate in its particulars. It indicates one major way in which foreign ownership limits our capacity to develop as a nation, a way in which it has not assisted, but limited our capacity to develop as a nation and to realize our potential as Canadians. That point is a bit philosophical and because it is philosophical, it may not carry too much weight with members opposite, such as the member for Fort William who spoke before me. However, there are some extremely practical considerations which indicate that foreign capital, in the amounts we have it in Canada, is also very dangerous for the development of this country.

Let me just mention one of hundreds of examples which come to mind. The concern to which I will devote a moment or two is that of unemployment, a phenomenon often brought to the attention to those of us in this House, through public opinion polls, as being one of the major concerns of Canadians. Our inability to provide jobs for our citizens is related in many ways to the question of foreign ownership. Foreign ownership exists in massive proportions in Canada. Our economy has more foreign ownership and control than that of any developed nation in the world. It is dangerous and undesirable. It contributes directly to our inability to create jobs for our people,

May 30, 1972

Foreign Takeovers Review Act in other words, to the amount of unemployment we are suffering at the moment. It does this in a number of ways.

First, foreign ownership means a branch plant economy. That means that key decisions are being made in board rooms outside this country in relation to considerations totally unrelated to economic realities and social needs in Canada. Thus, the American DISC legislation will quite conceivably result in production cutbacks and plant closures in Canada. Canadian workers will be thrown out of jobs, not because their work is unsatisfactory, not because they have not been sufficiently productive or because there is no market potential for the products they manufacture, but simply because the companies concerned can make a greater profit by expanding production in the United States and taking advantage of the tax cut which the DISC program represents. That is one way in which foreign ownership can adversely affect our ability to provide jobs for Canadians.

Foreign ownership contributes to unemployment by the export of jobs. Multinational corporations come to Canada to purchase and exploit our natural resources to supply the needs of their already existing manufacturing facilities elsewhere in the world. Thus our resources are exported in the rawest state possible and along with them thousands of potential jobs in the manufacturing and service industries.

The hon. member for Duvernay (Mr. Kierans), a member of the party opposite, estimates that $1 billion worth of exports of manufactured goods contains about $230 million in salaries and wages, whereas $1 billion in export resources pays only about $68 million in salaries and wages, and that is jobs. If we continue on our present path, the Science Council of Canada warns, and I quote:

Canada's economy in this decade will increasingly become dependent upon the resource and service industries. Resource industries offer limited opportunities for employment; furthermore much of their profit does not remain in Canada. The tunneling of funds out of the country is likely to stunt the growth of our service industries ...

Our participation in international trade will become less and less significant and we will become, once again, mainly suppliers of raw materials to the North American continent.

The Science Council of Canada has argued that our present course can result in the stunting of growth in our service industries, the most labour intensive of all industries in this country. It can produce a declining participation by Canada in international trade, another area in which jobs are produced. What does that do to our prospects for employment? I am not arguing that this whole problem can be attributed to the fact that our resource industries are largely foreign owned, but foreign ownership is certainly one of the most significant factors in the kind of structural employment we have in Canada.

A third way in which foreign control of the economy contributes to the lack of employment opportunities once again relates to the branch plant nature of economic development in such circumstances. Research and development of significant importance, with its attendant employment potential, both directly and through spin-off is almost never assigned to the branch plant, but remains with the parent company. Moreover, the branch plant introduces inefficiencies into production, increasing per

unit cost and decreasing the export potential of our production.

For example, Canada produces for a domestic market of 22 million people almost as many different brand names and model lines of television as does the United States with a domestic market of over 200 million. That is a direct result of branch plant development in Canada. It makes no economic sense at all. Were our economy not branch plant in nature, we would probably produce fewer models and have longer production runs, thereby reducing per unit costs and making our product more competitive within the domestic market and in world markets.

These are some of the ways in which foreign ownership directly contributes to our inability to meet the Canadian peoples' needs for jobs, the way it contributes to the most critical, in human terms, of all Canada's problems, unemployment. That is one of hundreds of examples of the kind of disadvantages which result from the degree of foreign ownership which exists in the Canadian economy.

At its founding convention in 1961, the New Democratic Party sounded a warning to this country about the dangers which the increasing foreign ownership of our economy posed to our independence and sovereignty. When we were not ignored, we were denounced as being antiAmerican, falsely reviled as wishing to cut off the foreign capital which was erroneously believed to be the life blood of our nation, or laughed at as being hopelessly idealistic.

In 1968, the Watkins Report, commissioned by the government, said substantially the same things as we had been saying, and supplied statistical data to back up those assertions. It also warned us that about 15 years were left in which to set our house in order, to attempt to reverse the trend toward increasing foreign ownership, or it would be too late. The government ignored that report. But in the last two or three years, concern among the general public about our future as a nation should we do nothing about foreign ownership, has grown, and economic nationalism has become respectable, as the hon. member for Fort William has said. I do not consider this to be something undesirable, as he seemed to think, though. The Toronto Star backs economic nationalism. MacLean's Magazine backs it. The Committee for an Independent Canada has been formed. Now that the cause is respectable, the Conservative and Liberal parties have embraced it with open arms-or perhaps I should say with open mouths. For the last two years, the government has been promising immediate and effective action on foreign ownership. We have waited impatiently to see this policy revealed.

On Tuesday, May 8, at 5 p.m. the Minister of National Revenue (Mr. Gray) rose in his place in the House of Commons and unveiled the government's policy on foreign ownership. I listened initially with stunned disbelief and then, increasingly, with anger because the policy on foreign takeovers, together with the proposed legislation, was nothing but a sham and a hoax, a cynical effort to defuse the issue of economic nationalism before an election was called-nothing more, and nothing less. What we heard was not a policy to regulate and reduce foreign

May 30, 1972

ownership of our economy. It was, rather, nothing more than a scheme for screening foreign takeovers of Canadian industries, and an unworkable scheme at that.

Boiled down to its essentials, and it doesn't take much boiling down, the legislation provides that each time a foreign-owned corporation wishes to purchase a Canadian firm possessing more than $250,000 in assets and doing more than $3 million in business, that fact must be reported to the Department of Industry, Trade and Commerce. The department is then, on the basis of criteria as yet undisclosed, to determine whether or not a takeover would be in the Canadian interest. If it is deemed to be in the Canadian interest, the deal can go through. If not, it can be stopped, though an appeal procedure is provided. That is the essence of the legislation. The half a loaf brigade, and there are many on the other side of the House, may say: Granted, it does not do much, but it does do something; it will prevent the takeover of Canadian firms by foreign corporations, and that is a gain. Anyone who takes this view is badly mistaken.

First, one should remember that the legislation is not designed to prevent takeovers as such, but only to prevent those which are not considered beneficial to Canada's interests, whatever that may mean. Second, the agency selected to determine whether or not a takeover is in the interest of Canada is not the independent screening agency advocated by the Standing Committee on External Affairs and National Defence in its report on Canadian-United States relations, or by the Watkins Report. It is, rather, the Department of Industry, Trade and Commerce, the department which for the past decade and a half has been the major architect of placing Canada in the position of finding more of its economy foreign-owned than that of any other developed nation. Third, the minister whose responsibility it is to supervise the screening, the Minister of Industry, Trade and Commerce has stated categorically that the purpose of the legislation is not to restrict foreign investment but, rather, to ensure that Canadians derive greater benefit from it.

Mr. Pepin:

I said "mainly"; read my speech again.

Mr. Rowland:

The minister said, in effect, in a very charming way-I am paraphrasing: what I think will happen is that if we examine a deal and it does not seem to offer much to Canada we shall call the principals involved in the takeover together and tell them it does not offer very much, that we do not think highly of the deal. This having happened, rather than have the deal set aside, the principals will pull other cards out of their sleeves, and make additional offers.

Mr. Pepin:

Read page 2634.

Mr. Rowland:

I have done so.

Mr. Pepin:

Well, read it again.

Mr. Rowland:

When you look at the factors I have mentioned, is it any wonder that a United States businessman, informed about the provisions in this legislation, should have made the comment: Now, we can all roll over and go back to sleep.

Foreign Takeovers Review Act

I have dealt with some of the errors of commission in the legislation. The errors of omission are too numerous for them all to be mentioned individually, but it is important to note a few. First, the legislation contains no provision to deal with takeovers which may be arranged between the time the legislation was announced in the House and the time it becomes law. Moreover, spokesmen for the government have revealed in the House through their responses to questions that there is absolutely no intention of employing other means of restricting takeovers until the bill becomes law. So in the next few weeks, or months, however long it takes for this bill to become law, we can expect takeovers to be successfully negotiated at a highly accelerated rate.

Second, the legislation does not provide for the screening of new direct foreign investment in Canada, that is to say the establishment of new companies as opposed to the taking over of existing Canadian ones. Nor does it provide for the screening of projects to expand existing foreign-owned industry in Canada. These weaknesses and shortcomings were outlined in the Canadian Forum version of the Gray Report. The actual statements concerned were quoted by my leader in reply to the minister's statement on this subject. I shall not read the exchange now, but I refer hon. members to page 1831 of Hansard. That same report, as published in the Canadian Forum, said in one sentence what I am arguing in this regard right now. It said that failure to screen projects for expansion into new industries could lead to easy circumvention of the screening process. This is why, if the screening process is to work, it must not only deal with takeovers of existing Canadian firms but with the expansion of foreign corporations already established. Otherwise, the legislation can be easily circumvented. So the legislation before us is entirely useless, or, to put the best construction upon it, of very little use.

The fact is that the policy announced by the minister in this bill has nothing to do with the expansion of existing firms into new areas and new industries. It has nothing to do with direct foreign investment coming to Canada, and it does nothing to increase Canadian ownership in any of the areas with which we are concerned. In short, the legislation will not work even in the narrowly defined areas in which it is designed to operate.

Another error of omission is the government's failure to amend allied legislation to ensure that it complements the pitiful piece we have before us with the object of ensuring that the screening operation will work more effectively. If time permitted I could give a long list of legislation which requires amendment in order to make this bill work more effectively. One statute which requires amendment is the Corporations and Labour Unions Returns Act, in accordance with which certain information is demanded in connected with the financial operations of corporations and unions. If the screening process is to be at all effective, a great deal more information will be needed about the financial operations of corporations involved in takeover deals. But no move has been made to strengthen the CALURA legislation to this end.

Another area of omission relates to the fact that if the screening agency does occasionally say no to a foreign

May 30, 1972

Foreign Takeovers Review Act takeover bid, it is obvious that some alternative purchaser will have to be found by Canadian industry. An obvious candidate for this role is the Canada Development Corporation. However, while the screening process will take into consideration the fate of companies with a mere $250,000 in assets, the Canada Development Corporation can only look at those with $1 million or more in assets. So, there is another little gap there.

When we on this side of the House asked whether legislation was going to be drafted to close this gap between the amount of assets established under the screening legislation and that under the Canada Development Corporation legislation, we were informed by the government that it had no plan to amend the Canada Development Corporation legislation. These kinds of omissions, and the government's failure to amend the legislation complementary to the bill that is now before the House, lead me to suggest that the screen that the government is holding up is so full of holes as to be totally useless. It is a big zero.

What action is needed to regain control of our economy? I think it would be worth while to spend a moment or two to reiterate some of the points made by my leader on December 9 in this House. He spoke about the problem of foreign ownership and referred to the minimal action that is required to be taken immediately to reduce or eliminate the current danger to our sovereignty and independence. The hon. member for York South (Mr. Lewis) put forward a ten point program before this legislation was introduced. First, he suggested the establishment of a screening or control agency with the power to limit takeovers and the further expansion of foreign ownership and control, including both expansion of existing foreign-owned companies in this country, and new direct foreign investment. The hon. member said that unless the agency has the power to limit further foreign expansion in Canada, it will be a toothless exercise. I suggest that is what we have here, a screening agency with no real power to be effective since it excludes so many of the safeguards that are important to a screening process.

Second, the hon. member for York South recommended the revamping of the Canada Development Corporation to meet the need for an alternate source of investment capital. Investment funds could be drawn, he said, from the reserves of financial and other corporations as well as from voluntary investment by individual Canadian citizens. He said that that was one means of obtaining from within Canada the capital which many people argue we must obtain outside the country.

The third point he made was that the Canada Development Corporation should be given a mandate to invest in new industrial development as well as to buy existing multinational corporations. There is a huge gap in Canadian industrial policy. The government has been unable to respond to the need for capitalization by those Canadians who have discovered new technology. Because the government has not had legislation to enable it to respond to such need for development capital, many of these people have been forced to go south of the border to find that capital, and as a result we have lost the technolo-

gy. The Canada Development Corporation is the logical place to find this sort of capital, and therefore the legislation should be amended to ensure that the CDC is capable of supplying it.

The fourth point made by the hon. member was that the Canada Development Corporation should be authorized to engage in heavy expenditure on research and development.

The fifth point my leader made on December 9 was the need for the Canada Development Corporation to expand the public sector of the Canadian economy. It is the public sector, we can be absolutely sure, that will not fall into foreign hands.

He advocated as a sixth point, a program of rationalization and specialization in Canadian manufacturing, both to meet more of Canada's domestic needs and to change trading patterns away from a single, predominant market.

His seventh point was the immediate establishment of a government export agency with power to ensure that all corporations in Canada promote trade in accordance with Canadian law and policies, and that they do not submit to foreign laws and policies. We have had a number of examples of the need for this kind of trading corporation in the past. I recall an order being placed by the Soviet Union in Canada for the purchase of flour destined for Cuba. Some of the milling companies that tendered to supply this flour under contract eventually backed out because they were United States subsidiary plants and were afraid of the effect that their engaging in this contract would have on their parent company under the provisions of the U.S. trading with the enemy act. Another example was when the People's Republic of China attempted to buy Ford trucks and parts from Canada. It was the fear of the effect of the U.S. trading with the enemy act on the parent company which prevented the Canadian subsidiary from meeting that export order.

The hon. member for York South advocated as an eighth measure, which is required immediately to eliminate or reduce the danger to our sovereignty that is inherent in foreign control of our economy, the establishment, in co-operation with the provinces, of standards of resource planning and development, and requiring the processing of raw materials in Canada.

He advocated as his ninth point increasing public investment in resource industries, through public ownership or through joint participation with private corporations, as the most effective way of regaining control of our energy and mineral resources which are now mainly in the hands of multinational corporations and world cartels.

Finally, the hon. member advocated a policy that requires full disclosure of facts before any shutdown of a plant is authorized, so the government could take over plants threatened with shutdowns when their operations are economically sound and socially useful. We all recall what happened at the steel plant at Sydney, Nova Scotia. A multinational corporation decided it was no longer in its interests to keep this plant open and was quite willing to see hundreds of men in Canada thrown out of work. Such an event was of no concern to it. Then, the govern-

May 30, 1972

ment took over the plant and made a profit in the first year of operation.

These are some of the steps that we on this side of the House contend are necessary to regain some modicum of control over our economy, and to guarantee that our sovereignty and independence will no longer be threatened as they are now. I have put forward what is a minimal program. I have recited ten specific points for action. Only one of these has been acted on by the government in its so-called policy of economic nationalization, and this is the establishment of a screening agency to screen transactions that involve only about 20 per cent at most of foreign investment in this country.

What is needed is for the government to take the kind of action that my leader advocated on December 9. This must be done if we are to keep Canada Canadian. But in response to the expressed concern on the part of Canadians over foreign ownership of our economy, the government has brought forward a bill that is inadequate in every sense, one that does not even do what is stated to be its express purpose. Certainly, it does not touch on the problem of expanding the percentage of Canadian ownership of our economy, and this gap in the legislation demonstrates conclusively that this government is derelict in its duty to protect Canada's sovereignty. The protection of Canada's sovereignty does not involve only the use of military forces. It also involves the use of economic policy. In the use of economic policy, the government is derelict in its duty.

Mr. Ian Wahn (St. Paul's):

Mr. Speaker, the purpose of this takeover bill which we are now debating is to make sure that no takeover of a Canadian business by a foreign investor will be permitted unless it can be established that it is clearly in the national interest. In recent years it has been clearly established that the number of takeovers of Canadian businesses by foreign investors has been so large as to arouse legitimate concern on the part of Canadians. There is no clear evidence that the number of such takeovers is decreasing, despite the fact that in recent years Canadians have been accumulating large quantities of investment capital which could be used for investment in Canada. Much of it is going abroad. Some of the takeovers which have taken place no doubt are desirable from the Canadian point of view, but others have not been desirable. As members of this House know, it has been necessary for the government to intervene without the benefit of enabling legislation to stop important takeovers. I refer specifically to the proposed takeover of Denison Mines and the proposed takeover of Home Oil. This method of control has been embarrassing and unfair to the government and to Canadian owners, as well as to the proposed purchasers of the businesses. It therefore makes good sense to have enabling legislation which will prevent takeovers unless they can be clearly established to be in the national interest. It is also probably desirable to make sure that there should not be an outright prohibition of all takeovers but only those takeovers which in fact do not help Canada.

The bill before us seems to be carefully drafted. No doubt there will be questions with regard to details which can be raised in committee, and no doubt there are a

Foreign Takeovers Review Act

number of amendments which usefully could be made. The principle, however, of having enabling legislation to regulate takeovers of Canadian business by foreign owners is sound. It is not all radical. Most industrial countries have established such procedures. Because of the high degree of foreign ownership of Canadian industry, the need in Canada for such legislation is greater than in most countries. Indeed, legislation of this type is long overdue.

I support this legislation as one phase in the evolution of a truly comprehensive national policy with regard to foreign investment and foreign ownership. The problem I have is not with regard to this particular bill. The problem is that this bill does not constitute a comprehensive policy concerning foreign investment and foreign ownership. It does not constitute the comprehensive policy with regard to foreign ownership and foreign investment which members of this House and members of the public generally have been expecting for so many years.

Mr. Brewin:

Mr. Speaker, I wonder-

Mr. Deputy Speaker:

Order, please. Is the hon. member seeking the floor for the purpose of asking a question?