June 5, 1972


AFTER RECESS The House resumed at 8 p.m.


GOVERNMENT ORDERS

FOREIGN TAKEOVERS REVIEW ACT


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


PC

William Gordon Ritchie

Progressive Conservative

Mr. Gordon Ritchie (Dauphin):

Mr. Speaker, before the dinner hour I was pointing out that the oil and gas industry had brought to western Canada an estimated one million in population, or 20 per cent of the population of the west. With our period of high unemployment during the last two decades, I was posing the question where these one million would have found a living, whether in Toronto or Montreal. Certainly, without United States capital the oil industry would not be nearly as far advanced as it is today.

Then, again, I pointed out that recent discussions have been going on in this House and the country at large over the proposed Mackenzie Valley pipeline. Looked at in a dispassionate way, it seems that the best route for bringing oil and gas from the Arctic is down the Mackenzie Valley and into continental North America. Construction of this valley pipeline really depends upon whether Alas-

June 5, 1972

Foreign Takeovers Review Act kan ecologists can convince the United States government that a pipeline through Alaska is not in the best public interest.

In view of the efforts of the Alaska Chamber of Commerce and other people involved, including those who build tankers and people on the west coast and in the United States who need oil, it is likely the Alaska pipeline is the one that will be chosen. What about our own position? It is considered that a $5 billion pipeline is clearly beyond our capacity as a nation to build on our own in the immediate future. This seems to be another example of what will happen without foreign investment because it will be a considerable time before a pipeline is built down the Mackenzie Valley.

The 13 Liberal rebels have expressed dissatisfaction with the government's proposed legislation. They consider it weak and inadequate. These hon. members are all from Ontario, the province which has benefited most from foreign investment as shown by the Ontario government survey. This is also the area which has access to large amounts of Canadian capital.

The proposed takeover committee implies massive government scrutiny of Canadian business. There is great concern professed in respect of what the private sector is doing, yet almost half our gross national income is being spent by the three levels of government. It is time the government reconsidered what it is doing. Surely there is now less leeway for the private sector to have initiative on its own. Presumably, in respect of foreign takeovers each company will be required to manufacture and trade in the interests of the country.

The greatest difficulty is, of course, that the committee will be almost completely political. We will have the same situation as under Bill C-176, the marketing act, where the government will determine where the agricultural industry is to be located. We already have, in the Canadian Dairy Commission, a body that locates industry using politics rather than the market as the determining factor. This new act also will allow the government to decide where industrial activity will take place in Canada. In view of the regional character of Canada, it seems to me past experience has shown that industrial activity will take place in those areas which have the largest representation in Parliament, and this means central Canada.

The necessity of the committee always making decisions with politics foremost in mind is the main weakness of this board concept. Surely the demand on the members of the committee will be so great that it will only make a superficial examination of takeovers. With all the questions involved, such as how many jobs will be created, will Canadian management be employed, will money be spent on research and development, and will export markets be developed-all very nebulous and difficult to answer-I do not think a committee could more than superficially examine any particular problem. Every new company hopes it can accomplish these things but only time will tell whether they are successful.

If the committee functions in any sort of meaningful way in attempting to assess any proposition, it will be years behind in that assessment. It will have many of the

problems which face the Russian state planners. It seems likely that this committee in practice will not function unless it is willing to assume a very large role in the Canadian economy. It certainly is a vehicle by which discrimination against the peripheral parts of the country could be carried on. I hope that when the bill reaches committee many of these aspects in relation to the potentially very powerful committee will be thoroughly investigated. At that time we will have an opportunity to discuss how the committee might best function.

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

William George Knight

New Democratic Party

Mr. Bill Knight (Assiniboia):

Mr. Speaker, I rise to participate in this debate because of its significance to the future of this country, about which my generation is very concerned, particularly in terms of the direction in which we move in controlling the operations of our economy and, in that respect, our society.

It is a long time since the original reports on foreign investment and ownership of Canadian industry were published. There was a great deal of expectation in society that this government, or any government, would make a concrete move in dealing with foreign investment and foreign ownership. We have heard a number of members, including members on the government side, express concern about measures proposed to deal with foreign control of our economy.

We have heard a great deal about foreign ownership being sovereignty versus multinational corporations. These corporations have developed under the British system on the basis of democratic control. Governments are concerned with seeing that the needs of people are met and governments must deal in politics. But multinational or domestic corporations are concerned only with one aspect of the lives of people. There is a fundamental difference between the role of the multinational corporation and the role of the government.

When societies such as that of the Unites States were developed with foreign capital, in most cases investment from Great Britain, those societies maintained control and ownership of property. In this way there was mainly a development of domestic firms. These firms are responsible to the government to the extent that government is representative of the people. Domestic firms were easily controlled, regulated and watched. But in our society in the second half of the twentieth century there has been a fundamental change from sovereignty and national government to international corporations, so that governments such as ours and those of the United States and Great Britain, are caught in a complex situation, having to play one interest against the other. Because of the essential interests of multinational corporations, the government of the United States has been put in the position of having to adopt legislation such as DISC in an attempt to involve these corporations in domestic production. Whenever this is done it immediately affects the economy of countries such as Canada because these countries have allowed their economies to fall into the hands of foreign ownership, thus losing sovereignty in a good many respects.

This difficulty becomes greater when political parties are financed by the corporate aspect of the economy, because it is their responsibility to continue their position of economic power. Because of the manner of develop-

June 5, 1972

ment of multinational corporations in the last half of the twentieth century, many difficulties have arisen. A multinational corporation of the United States operating in Canada serves as a means of draining brainpower while concentrating manual labour in one country and skilled workers in another. Quite often they frustrate geographical planning by the use of investment power. If allowed to locate development where they choose, they can redirect their investment power on an international scale, thus injuring the country in which there has been some control over or planning of investment.

Quite often they can regulate their income, their investment and their profits, if you like, so that they can pay taxes in whichever country has the lowest tax rate. This, once again, allows the corporation to play one country against another country for special concessions and breaks. This was pointed out in the budget brought down by the Minister of Finance (Mr. Turner), in terms of tax cuts.

Some people ask what is the future of multinational corporations. George Ball of the United States State Department says that the structure of multinational corporations will be used to develop a supernational world going beyond nationalism, where profit is the personal motive of economic development. He could be correct in some way. He could well be correct in pointing out that the multinational corporation may set up its own system of allowing the development of international government of a kind which I would find extremely threatening.

As many of my colleagues have pointed out, not only is there need for action by the national government of Canada in coming to grips with this problem and question of foreign ownership, which is not tackled by any means in this piece of legislation, but there is need for national governments be they in Great Britain, in Canada or in the United States, to re-examine our role with each other in terms of developing on the world scene a kind of international examination of the role of multinational corporations and the possibility of setting up certain aspects of international standards to deal with these multinational corporations.

So when it is suggested that there must be international co-operation, along with the government of Canada being prepared to tackle the problem, one can see how important it is that the government come to grips with this problem very soon. Governments will have to co-operate to force multinational corporations to disclose full information concerning their operations. To realize this one need only cite the example of secrecy surrounding, according to the Minister of Industry, Trade and Commerce (Mr. Pepin), the DISC program which I think in terms of the world scene has proven to be counterproductive.

Furthermore, governments among themselves should pass co-operative legislation to set up standard charters or documents of incorporation which would establish certain regulations and certain manners in which multinational corporations could deal with the economy. Governments should set up intergovernmental regulations for adjustment among themselves to prevent corporations

Foreign Takeovers Review Act

playing one government against another. They should consider government representation on boards of directors as well as partial public ownership as a mechanism of control. Governments should refuse corporations the right to operate without the government having a holding in them and setting up a joint holding body for the purpose.

What I am suggesting is that not only is the legislation introduced in this House completely ineffective in coming to grips with the issue of foreign ownership but, further, the government in co-operation with other governments on an international scale must come to grips with the matter of setting certain standards and regulations for the operation of multinational corporations.

Foreign ownership in Canada is neither a new issue nor an issue which will become old with time. It is perfectly obvious, by the introduction of this legislation, that the government sees very little need for tackling this important question which faces the Canadian economy. Throughout our history we have developed this country on the basis of opposing north-south development in such a sense as to fragment and break up the nation. Sir John A. Macdonald developed a plan to build the Canadian Pacific Railway in the manner in which he did, in the hope of avoiding control of that corporation by United States interests. There was great controversy, as there should well have been, concerning the way in which the CPR should be built. But one of the effectual and important things was that it was done in such a manner that there would be Canadian control as he saw it in the 1870s and 1880s.

We have developed our nation, as well, through disputes over the Alaska boundary and our concern about arrangements in respect of the international boundary with the United States. We established an international boundary commission to check into the matter of water resources. So since the early days of Canadian confederation we have continually, in one manner or another, sought to develop the kind of economy that would maintain our political independence from the United States of America.

By the 1960s we should have reached a decade of decision, but it passed without any decisions being made. We had report after report. I need not go into this. We had a call for action by different groups in our society in respect of an independent Canada. This involved people such as Walter Gordon. In 1961 the founding convention of the New Democratic Party called for the development of nationalism of a positive nature, not narrow nationalism such as was developed in the 1930s in Europe but positive nationalism which would show that we want Canada to remain a free, independent nation.

We expect this to be done only by a government which brings about a true concept of Canadian control of the economy. Control of the economy by a foreign country, no matter which one, brings about, in the political realm, a certain amount of loss of independence on the part of the people whether it be through Russian control of the Polish economy or United States control of ours. The dimension might be different but there is the fundamental question that people who do not control their economy cannot control their government and their democratic system.

June 5, 1972

Foreign Takeovers Review Act

It is in this decade, and I believe in the next ten or perhaps 20 years, that essentially we must come to grips with the problem or find ourselves having to talk of reforming the whole of North America in a continental system. If we do not come to grips with the problem now, my generation and generations to come will find themselves more and more involved with the United States of America and its economic system as well as its corporate control.

I had hoped that after the groundwork was laid in terms of reports, this decade would be the one in which there would be action to try to develop a truly independent Canada. But with the government in power and Her Majesty's Loyal Opposition both essentially tied to the corporate interests, I do not think, nor do I believe, that the Liberal party which is holding on to the concept of continentalism will ever come to grips with this issue unless there is a fundamental restructuring of politics in Canada and a strengthening of the position of the NDP.

We have had a decade wherein we should have made a decision, but the end result is this piece of legislation which is before us now. As the hon. member for Waterloo (Mr. Saltsman) and the hon. member for Duvernay (Mr. Kierans) pointed out, it is almost an act of treason in some sense of the word for this kind of legislation to be produced, a piece of legislation which deflates the great anticipation of Canadians and of the younger generation that we will come to grips with foreign ownership in our economy, that we will really delve into the problem, show some imagination and hit it head on.

Why does a foreign company invest? It invests to make higher profits relative to the risk it must take. Some people suggest that because of the small market in Canada, Canadian subsidiaries do not have advantages in production. However, Canadian subsidiaries of international companies usually hold a superior competitive position with similar domestic plants simply on the grounds of their relationship with the parent company. This allows them to expand and grow to the disadvantage of the domestic plant, and thus it allows an eventual takeover.

There is no aspect of this bill that deals with such expansion on the part of such corporations, no attempt to curtail it and redevelop the direction in which we are heading. The smaller size of the Canadian market is not a hindrance to these multinational firms but, in fact, leads to the establishment of small plants and thus increases the advantages of the multiplant corporations which give the small plants access to large-scale markets. This lowers the cost as well, which gives multinational firms a further advantage oyer the domestic plant.

Many sectors of our economy have fallen into foreign ownership, such as Canadian patents 90 per cent of which are foreign owned, 70 per cent by Americans. Foreign ownership of industries is highly concentrated in what I would call an oligarchical position where they fix prices in terms of the Canadian economy. When people talk of the free enterprise system where there is competition, I suggest they talk of something that is far removed from reality.

Foreign ownership is highly concentrated in industries which have control of the market, such as the tobacco industry, the automobile industry, aircraft, oil, rubber, etc. Corporations may generate millions of dollars of profit to their shareholders. However, one must consider where the shareholders reside. The multinational corporation hinders the more equal distribution of income. One need not delve deeply into the tax system in order to note the kind of corporate tax cut which we saw in the budget which further enhanced the position of multinational corporations in the Canadian economy.

Many members of the House have pointed out in the past some of the difficulties which we face in terms of controlling our economy and have given examples such as the one referred to by the hon. member for Duvernay in his speech last fall when he spoke of the income tax bill relating to our exports and the control of our economy. He said:

An additional $1 billion export of energy to the United States, for example, would give us in this country $68 million in wages and salaries. But that balancing inflow on which Mr. Connally and Mr. Nixon are insisting in manufactured goods could mean that we are importing anywhere from $200 million to $350 million in their wages and salaries, depending on the industry. If it is the furniture industry, we would be exchanging $68 million for $330 million. If it is the textile industry, 26 per cent of $260 million on an average of their output is composed of wages and salaries. If it is agriculture, wheat or products like that-and I am at no time speaking of pulp and paper or wheat and fish and hydro electric power, which are renewable resources; I am speaking of nonrenewable resources and agricultural products-the average is 26 per cent. If it is pulp and paper, the average is again 26 per cent. So we are exchanging 6.8 per cent or $68 million out of $1 billion, for $260 million. We cannot have our cake and eat it too. It is some exchange! There may be a balance of trade in dollar terms, but there is no balance of trade in jobs or wages and salaries.

This points out the dilemma which we now face in Canada. We are in fact exporting jobs, salaries and skilled labour. Further to that, as I previously mentioned there is the relationship of the multinational corporation to the whole area of the laws of the country. What develops in the multinational corporation, in an economy controlled by it, is a duality, one loyalty to the laws of the mother nation and the other to the laws of the parent company. Both of these can affect the trading aspects of the nation. The American anti-trust laws and trading with the enemy act both affect the kind of trade and distribution that Canadian industry has allowed when it is controlled by the parent company. American moral, political and economic judgments are fostered in foreign nations through the roots of the multinational corporation.

As I suggested previously, corporations take away Canadian talent which is in the hands of the parent company. Some of these remarks are based on comments made by such people as the vice-president of Dupont Company of Canada who once stated:

Clearly any subsidiary is always the chosen instrument of its parent company. The very reason for its existence is to carry out the function of the parent in its designated sphere of activity and it must recognize this relationship in all its actions.

That is the loyalty to the parent company. Therefore, what develops is a kind of over-all government policy, a policy that affects people in the multinational corporations and people in control of the domestic affairs of the nation, and thus the government loses that kind of power.

June 5, 1972

Direct investment by multinational corporations erodes the decision-making process of citizens, and this is essentially what has been happening in the Canadian economy.

What is the reaction of this government? The government has not set up a screening process. It has set up nothing more than a smokescreen to hide its deficiencies in the realm of policy regarding foreign ownership. I do not think the dismal failure of this government to come to grips with the matter of foreign ownership can be understated. It merely sets up a smokescreen. There have been a number of editorial comments dealing with this subject. The Financial Times of Canada, in an editorial headed "The Missing Policy", wrote:

The government has been talking out of both sides of its mouth. It wants to reassure business that nothing drastic is planned. At the same time it is trying to tell Canadian nationalists that this may be only the first step towards more stringent controls. Some hints are being dropped that real limitations on foreign ownership are merely postponed until the employment outlook is brighter.

The cabinet appears to be split on the issue and several ministers are visibly unhappy about what has been produced, Even after two years of study and debate it appears that the Trudeau government felt obliged-presumably by the approach of the election-to say something about foreign ownership when it hadn't made up its collective mind what to say.

The first part of that paragraph is where the essential truth lies. The government is trying to produce a bill and then go to the people and say it has done something about foreign ownership, but in fact it will have done nothing. As an hon. member has already said in this debate, directors of multinational corporations can roll over and go back to sleep because they have nothing to worry about from the actions of the federal government. The Montreal Gazette, in an article headed "Ownership Policy Puny, Invites Trickery" which appeared on page 10 of its May 3 issue, summed up what the government has done as follows:

The mountain has laboured and brought forth a mouse-

Not only does the government's decision disregard the principle recommendations of its own major task force headed by revenue minister Herb Gray, it also falls far short of the objective outlined by Prime Minister Trudeau himself.

"As a government, our minimum posture is to maintain the status quo," Trudeau told Southam News Services chief Charles Lynch last November.

"American control of our oil and petroleum is 95 per cent, we wouldn't like to go to 99 per cent; the American control of our manufacturing industry is 60 per cent, we wouldn't like it to go to 80 per cent-and so on, and I think if we tell the American people this, they will understand it"-

Takeovers simply aren't the principal problem.

In what the Gray report calls "a more or less normal year," takeovers account for only some 5 per cent of the increase in the assets of Canada's foreign-controlled corporations.

New investment from abroad plays a much more significant role. And the most important fact of all is the expansion of foreign corporations already established in Canada.

I repeat the statement that the most important factor of all is the expansion of foreign corporations already established in Canada. The government has not seen fit to deal with this fundamental question. What the government should do in the future, as has been suggested in this House previously, is create a stronger role for the Canada Development Corporation, to institute a kind of planned

Foreign Takeovers Review Act

economy which develops our country on the basis of the essential needs of Canadians and not on the basis of the essential needs of corporate interests.

While the leader of my party was speaking in this debate he was asked a question about grains and wheat and it was implied that he was talking about the manufacture of wheat in Canada into flour before shipping it abroad. To me it was a preposterous question. Wheat and similar products are non-renewal resources, but the minister in charge of the Wheat Board was comparing them with products that are renewable resources. It is those which we presently ship abroad and buy back as finished goods; the minister should know that.

Essentially, what I have suggested tonight, Mr. Speaker, is that we in Canada must take action on the international scene to persuade other governments, those of Great Britain, of European countries and of the United States to work out the standards which multinational corporations must meet and the roles they must play in the economies of the world. Such steps must be taken, along with much stronger action by the government in terms of developing domestic control of our economy.

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

John Stratford Burton

New Democratic Party

Mr. John Burton (Regina East):

Mr. Speaker, this bill is making a mockery of Canadian nationhood. It is the type of measure which leads to confusion, misunderstanding and resentment among Canadians. It is the type of bill that places Canadian nationhood in jeopardy. Canadians have a right to expect more forthright leadership from the government than is demonstrated in this bill. The government of Canada, whatever its political persuasion, has an obligation to provide more effective leadership to the nation than has been demonstrated in this bill.

Many strains face Canadian nationhood at the present time. I suggest that this type of weak, ineffective response to a serious national problem can only intensify these strains. Canadians at the present time are searching for their identity. They are seeking to remove inequities and disparities that exist in our nation. But what does the government do? Having allowed much of our industry, much of our economy, the control of that industry and our economy to be alienated from Canadian hands, the government says, "We are not going to do anything about that. We are going to do something about future takeovers and future mergers of firms." I suggest that this will not help Canada in its search for identity and in finding ways and means of overcoming some of the problems we face at the present time. I suggest that the record of the Liberal government is pretty bleak and dismal in this whole area.

We can go back a number of years to the early 1960s. First of all we had Walter Gordon who came on the scene shortly after the Liberal government assumed power in 1963. He may have had a somewhat misplaced faith in certain institutions in Canada, but nevertheless all of us must be prepared to give him credit for his courage and for a very imaginative proposal that be brought forward, which unfortunately was shot down somewhere along the line.

I am sure there are some members on the other side of the chamber who remember that incident very well, members such as the Minister of Labour (Mr. O'Connell). At that time, Mr. Gordon presented a proposal for a takeover

2866

June 5, 1972

Foreign Takeovers Review Act

tax which could have prevented some of the problems we are now attempting to wrestle with and which we have been discussing. Following that, Mr. Gordon and some of his associates had to determine a course of action. Eventually they appointed a committee which produced what has become known as the Watkins report, which made a number of proposals to assist in attaining more effective control of the Canadian economy. These proposals were rejected by the government of the day.

Then we had proposals for a Canada Development Corporation. They really originated with the policy convention of the NDP in 1961. Subsequently this idea was picked up by a number of people, but with some variations. One of those people was Walter Gordon. He presented some proposals in this regard. They were shot down. A bill was presented to the House of Commons while he was minister of finance but never saw the light of day beyond its introduction.

Finally, in 1971 we had a bill to establish the Canada Development Corporation. I am sure most people were looking forward to a creative and imaginative proposal. I suggest it was nothing of the sort. We established an institution, a new corporation, and it was set out clearly that it was to be profit-oriented, that it would be privately controlled and that the government's stake in the corporation after it was established was to be limited to 10 per cent. This new instrument as established cannot be, as it develops its operations, an effective instrument for developing our national development policy. The measures which have been enacted cannot change the course of foreign investment, foreign ownership and foreign control of the Canadian economy.

As a result of a great deal of pressure which the opposition exerted on government, a study was undertaken. It was decided to study the question of foreign ownership. This was commissioned in the spring of 1970 and, of course, questions on this matter have been raised in the House of Commons frequently during the past two years. As late as last fall, and I have information I could give in detail if anyone doubts my word or memory-

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Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP OF CANADIAN COMPANIES
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?

An hon. Member:

No; good heavens!

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Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP OF CANADIAN COMPANIES
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NDP

John Stratford Burton

New Democratic Party

Mr. Burton:

-we were assured on a number of occasions that the matter was still under study and that the government had not made up its mind. Later, information came to light clearly showing that the government had made its basic decision last July. It came to light on July 29, to be precise, through a document published in the Montreal Gazette or Montreal Star-I forget which-which clearly appeared to be a copy of a cabinet memorandum that had been leaked.

It was clear that despite what the Prime Minister (Mr. Trudeau) and members of government said on a number of occasions in months subsequent, the government had made its basic decision on this matter last summer. More work was to be done and further discussions were to take place. Finally, May 2 was to be the big day. I can only comment by saying what a ghastly performance that was. What a shameful performance. I am surprised the government had nerve enough to present such a policy to the

House as its answer to the problems which have been discussed for so long.

The government had had this matter under study for two years. As well, a voluminous document was presented to the House of Commons representing the studies and reflections connected with this subject. However, when it came to action being taken we found that there was to be a much more limited response by the government. I ask, does the government seriously think this bill will do the job? What does this bill show about the Liberal approach to public affairs? I suggest the Liberal party does as little as it can get away with. It does not want to disturb anything. It does not want to upset the present power structure in Canada. It does not want to offend the 95 corporations on which it depends for its support. The Liberal party is not truly committed to the process of social change and advance. It will move when it is forced to, when it must and when it has no other choice.

Before May 2 last we witnessed a most curious situation involving the Liberal party and the Progressive Conservative party. The Liberal party, on the one hand, had traditionally been known as the continentalist party, the party which advocated the continental approach to our economic affairs. It appeared that changes were taking place, that the party might be prepared to take action and change direction. The Progressive Conservative party, on the other hand, traditionally had been known as the nationalist party, the party that was concerned about nationhood and had taken stands in the past on that question.

We found in recent months the leader of the Progressive Conservative party (Mr. Stanfield) making statements to the effect, "Let us not scare the Americans. Let us not harm our relations with the Americans. Let us not cut off our source of foreign capital." I am sure that, many faithful, sincere and loyal supporters of the Progressive Conservative party winced and shook their heads as they heard their leader make those statements.

I read carefully the speech of the hon. member for Fundy-Royal (Mr. Fairweather) who began speaking for the official opposition in the debate on this bill. I think he added to the confusion surrounding this situation. I think the approach of the hon. member for Fundy-Royal was at variance with the approach his Leader took, as expressed in statements he has made in recent months. The hon. member correctly noted some of his concerns respecting the bill. He noted its ineffectiveness, some of the problems it must deal with and expressed the view, as I interpret it, that the bill will not accomplish much in dealing with the problem it was introduced to deal with. What sort of topsy-turvy situation affects the Liberal and Conservative parties? It seems they are both in a total state of confusion. Neither is willing to take effective action to stem the erosion of the Canadian economy, to develop alternative approaches or to develop alternative instruments of policy.

In addition, it must be said that the Prime Minister's role in this entire debate has been somewhat pale and ineffective. In his statements of recent days he has adopted a most cautious stance which does not do him credit. He suggested that if this bill were held up in the House of Commons the consequence would be serious. He said

June 5, 1972

opposition parties would be held responsible if the bill were held up and did not pass before the end of June.

Let us examine that assertion in the context of what has happened. As I noted, the study of this matter was begun officially by the government in the spring of 1970. A great deal of background work had been done before then. We were given the official statement of government policy and the draft bill on May 2. Bill C-201 was introduced immediately thereafter. Not until May 29, almost one month after the bill was introduced, was the debate on second reading of Bill C-201 begun. But now the Prime Minister blames the opposition if the bill is held up. That, I suggest, is irresponsible hypocrisy.

We know, for example, that the Prime Minister stalled answering questions by using all sorts of diversionary tactics. He said the matter was still under study, when it was clear that the government had made its basic decision on this question. The Prime Minister also dragged red herrings across the trail, one of the most serious being the entire issue of regional development and the relationship between foreign ownership policy and regional development considerations.

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Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP OF CANADIAN COMPANIES
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?

An hon. Member:

Now you are dragging a couple across the trail yourself.

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NDP

John Stratford Burton

New Democratic Party

Mr. Burton:

He suggested that any restriction on foreign ownership would hurt the disadvantaged regions of Canada. May I quote from a statement the Prime Minister made in Regina early in 1972. The statement gave a great deal of concern to his good friend, Walter Gordon.

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Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP OF CANADIAN COMPANIES
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NDP

Leslie Gordon Benjamin

New Democratic Party

Mr. Benjamin:

If he never comes back it will be soon enough.

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

John Stratford Burton

New Democratic Party

Mr. Burton:

According to a report, the Prime Minister said:

There is this constant trade-off between those parts of Canada which are already fairly developed like the central provinces, and particularly Ontario.

And that's where you find the Melville Watkins and the Walter Gordons who think that enough is enough and they don't want any more foreign capital to develop their province, but they don't always realize that other parts of Canada have not developed that far and therefore they would not mind a little bit of foreign capital if it means there is more technological progress and higher standards of living and so on.

That is what the Prime Minister said in Regina. I suggest the Prime Minister's statement is wrong in fact and that its effect is harmful. Varying studies, some of which have been commissioned by the federal government, relating to economic geography have come to our attention and these show clearly that the pattern of foreign investment is not directly related to the pattern of regional disparity that is evident in Canada. Also, reports which have been produced by the federal government show clearly that foreign investment has been highest in Ontario where the highest level of income in Canada is earned.

The typical pattern of entry of foreign businesses, with some exceptions such as industries that are resource-oriented, has been to Ontario. They go to Toronto or one of

Foreign Takeovers Review Act

the larger centres nearby and establish their Canadian operations. I suggest that the manner in which foreign investment has taken place in Canada has contributed to the problems of regional disparity with which we are now wrestling.

There is another matter concerning regional development policy that we must consider. That is the regional industrial incentives program. The federal government, through the Regional Development Incentives Act of the Department of Regional Economic Expansion, has already committed over $250 million in grants under this program. Over half the money that has been committed under this program will go to foreign-controlled firms.

The Minister of Regional Economic Expansion (Mr. Marchand) maintained that he could not cut off grants to foreign-controlled firms because this would hurt regions in need of help. He has said many times that we need a policy of controls over foreign investment but it has to be a general policy, it cannot be part of the regional development program and cannot be an instrument for controlling or curtailing foreign investment. In response to questions I asked in the House and in committee, the minister expressed the hope that there would be an effective policy to deal with this problem in the foreseeable future. Where is that policy? Where is the minister? It seems that in so far as his policy is concerned, it is business as usual; there is no change.

The foreign takeover bill before us states that it will do something about maintaining Canadian control of our economy. On the other hand, however, we continue to feed this growing monster under programs such as the regional development incentives program. The foreign firms which helped create regional disparities by the pattern of their development will not solve the problem now. We need a different sort of Canada Development Corporation than was presented by the government. We need a complete overhaul of the industrial incentives program.

The bill before us is designed to curb takeovers. But why should a foreign firm be interested in a takeover when it can get help like this to expand an existing operation or start up a completely new operation? What we need from this government is a complete change of policy. The government might take note of the change that was recently introduced by the Ontario government whereby they decided to stop forgiveable loans to foreign-controlled corporations. The Ontario government reached the conclusion that this was not contributing to development in the province of Ontario.

We have Bill C-201 before us. We had the usual type of detailed introduction by the Minister of Industry, Trade and Commerce (Mr. Pepin). He is the same minister who told American businessmen in a number of recent speeches that they had nothing to fear and nothing to worry about with regard to legislation the government was going to introduce. He was right. This minister also had a recent experience with some of the American-controlled subsidiaries in Canada. The minister thought he was dealing with them in good faith; he thought he could rely on them and that they had not taken action through their parent corporations to become involved in the United States DISC program which would undercut their Canadian operations. The minister found out through

25316-58)

June 5, 1972

Foreign Takeovers Review Act

newspaper articles and reports from Washington that he was wrong. He thought he was able to operate on a straightforward basis with these corporations. The bill before us reflects the known concerns and attitudes of the minister. We have known for some time that he wanted to take very little action to control the activities of foreign-controlled firms in Canada.

I wish to review briefly some of the loopholes in this legislation which must be examined very closely. I do so within the context of the suggestion that even in this limited area where the government is proposing to take action, that action will not be effective and will not do the job. I find that clause 2 of the bill is quite ironic. It sets out in grandiose terms the purpose of the act in these words:

This act is enacted by the Parliament of Canada in recognition by Parliament that the extent to which control of Canadian industry, trade and commerce has become acquired by persons other than Canadians and the effect thereof on the ability of Canadians to maintain effective control over their economic environment is a matter of national concern, and that it is therefore expedient to establish a means by which measures may be taken under the authority of Parliament to ensure that-

I ask hon. members to note this passage:

-in so far as is practicable after the enactment of this act, control of Canadian business enterprises may be acquired by persons other than Canadians only if it has been assessed that the acquisition of such control by those persons is or is likely to be of significant benefit to Canada, having regard to all the factors to be taken into account under this act for that purpose.

This is a very grandiose statement but we have this one catch, "in so far as is practicable after the enactment of this act". We find, as well, various factors which the minister says will have to be taken into account in assessing mergers or takeovers in the future. This, of course, is very difficult to assess at this stage. It is not so much a question of the words in the bill but, rather, the manner in which the bill is put into practice once it is enacted.

I have another concern. It appears from examination of the bill that there are certain types of business which for tax purposes might be classed as non-profit. For example, there are some foundations which carry on industrial operations, the profits go for charitable purposes and they are exempt from income tax on that account. The fact is they only carry on a subsidiary operation in Canada. I know of one large, international drug company where this is the case. Most of their research and development work is carried on in England. They do some final testing work in Canada but do none of their basic research work here. They operate in Canada through various subsidiaries but they do not carry on the basic part of their operation here. Such business is exempt from the purview of this legislation.

Another matter that concerns me is that this bill is to be applied to any purchase of shares of a corporation where 5 per cent or more of the voting rights attach. That has to do with a corporation whose shares are traded publicly. It is not a public corporation as such but a corporation whose shares are publicly traded. There are many corporations incorporated as public companies or public corporations but their shares never reach the stock market; they are never traded as such. They would not be involved at this 5 per cent level but, rather, at the 20 per cent level which concerns private corporations. When 20 per cent of

the shares of a corporation are exempt from the purview of this legislation, the situation becomes serious.

There are other clauses in this bill which require further examination, but I do not intend to discuss them at the present time. However, when I was reading this bill, on several occasions, since provision is made for certain things to be done and certain things not to be done, I wondered what penalties were set out. What happens if a person or group of persons fails to take the action prescribed or takes action which is prohibited?

At the end of the bill I found that penalties have indeed been provided. Intentional failure to report a takeover is punishable by a fine of $5,000. Now, $5,000 means a good deal to some people but I doubt it would mean very much to a large corporation which felt it might be advantageous to go ahead with takeover arrangements without reporting them, and then to go through the motions if the government ever caught up with what was happening. The corporation might well be ahead by a good deal more than $5,000.

The bill deals with takeovers and mergers. But what about the expansion of firms already existing in Canada and the establishment of new enterprises? Members might be interested to take note of the pattern of foreign investment in Canada over the last several years. I have here a set of figures obtained from "Survey of Current Business", for November, 1970, published by the United States Department of Commerce.

One of the tables sets out the sources of funds of United States subsidiaries in Canada, giving a percentage breakdown. The percentage obtained from United States parent companies and other United States sources in 1968 amounted to only 6 per cent. Funds obtained from retained earnings amounted to 25 per cent, from depreciation and depletion 41 per cent, from borrowings in Canada 24 per cent, from equity sales in Canada 2 per cent, and from other sources 2 per cent. Only 6 per cent came into the country from abroad. Most of the money was generated internally to provide for the expansion of foreign-owned firms here.

I have another table also taken from "Survey of Current Business" for October, 1970. This shows the inflow of new United States capital investment in Canada compared with the outflow of payments to parent firms. In the period between 1960 and 1969 the inflow of new United States investment amounted to $5,497 million. The amount paid out in interest and dividends flowing back to the United States amounted to $6,252 million. The amount paid out in royalties and fees totalled $1,770 million. So the total for these two items flowing to the United States amounted to $8,022 million, which means that the net outflow during the ten-year period was $2,525 million. These figures should be kept in mind. In addition, there are fees paid out in royalties and in respect of franchise arrangements, sales contracts, and so on, which contribute to the picture.

At the present time there is an absence of policy for dealing with this situation. As I said, a grandiose phrase appears in clause 2 of the bill describing the government's intentions but it has not been followed up by any means

June 5, 1972

for effective implementation. What is obviously needed is an effective way of dealing with the situation I have described-a revitalized and reconstituted Canadian Development Corporation, for example, together with a control instrument which would really do the job.

A great deal of confusion exists as to policy. The hon. member for Duvernay (Mr. Kierans) correctly stated this afternoon that whatever the need for foreign capital in Canada, we were attracting it in the wrong way; we were placing no restrictions on the inflow of equity capital while, on the other hand, discouraging provinces and other institutions from borrowing in the United States.

Mr. Speaker, if there is need for an inflow of capital into Canada, the most effective way of satisfying it while retaining some control over our economy is to allow it to take place in the form of capital borrowing. This, in fact, was the pattern of development in the United States in its earlier years when that country depended on an inflow of capital from Britain. The government is caught amid conflicting priorities. It is encouraging capital investment by offering all kinds of incentives though it is known that in some areas there is a shortage of capital in Canada. On the other hand it has done nothing to bring about a more effective use of labour in Canada by ensuring that Canadians can find employment so as to make a living. After all, more than half a million Canadians are unemployed at the present time. Budgetary policy this spring seems to follow the motto: What is good for the corporations is good for Canada. This seems to be the approach of the Minister of Finance (Mr. Turner).

When we discuss measures of the kind before us, in line with our responsibility to our constituents, we ought to realize fully that we are dealing with a matter which affects the future of this nation, that the future of Canada is at stake and that the decisions we are making now will affect the nature and substance of Canada in the future- indeed, whether there will be a Canada in the future at all. Many of us have a stake in ensuring the development of a healthy society which will reflect concern for those in our community who are least fortunate. It is time the government changed direction and abandoned its present catastrophic course of action.

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

Roderick J. (Rod) Thomson

New Democratic Party

Mr. Rod Thomson (Battleford-Kindersley):

Mr. Speaker, there is some disposition to conclude the debate, so I shall not prolong my remarks unduly. Contrary to all hopes, the government's policy as reflected in the bill before us is similar to its policy in connection with agriculture. It is a stopgap measure, narrow in its viewpoint, shortsighted and deficient in that it allows for no long-term planning. There is no glimpse here of a comprehensive economic plan for Canadian development and the measure suggests no means of increasing and maintaining control over our resources, industries, etc. In effect, it is only running fast to keep from going backward.

Much has been said about the bill and I do not wish to repeat it. However, I do want to kick around for a few minutes some ideas about what we might do in regard to foreign ownership. It seems to me that the present government lacks new business ideas and is not forward looking enough to meet problems in the future. I can think of no

Foreign Takeovers Review Act

better example than the shipping of grain to the west coast. Everybody knows that trade with the Asian rim countries has been improving and we have now sold more grain and other products to that part of the world than the railways can ship. This is very poor business management. I agree that buying boxcars by the government is better than taking no action at all, but I suggest this is a stopgap, ad hoc measure and is typical of what takes place too often in this country. We see much evidence of this sort of thing.

Therefore, why should we be surprised by a bill of this nature that attempts to deal with foreign ownership? Many people have suggested improvements in the shipping of grain, and as a farmer I have made several myself over a number of years. Yet the government still has not produced a long-term plan. It is high time the government made some forward-looking plans to promote Canadian business interests.

I should like to discuss one idea of my own. I suggest that when we use the taxpayers' money to buy shares in a company, or give a company a DREE grant to conduct research that would be worth something to the company be it foreign-owned or otherwise, the taxpayers should receive something back on their investment, on the use of their money. Otherwise why spend the money in the first place? It seems to me we should have a sort of Panarctic approach. If money is given an oil company to prospect for oil in the Arctic, some of the oil should belong to the people.

I also think more thought should be given to the development of Canadian business. I observe the Minister of State for Science and Technology (Mr. Gillespie) in the chamber and I suggest to him, as I have done before, that it is high time someone on the government side produced an industrial strategy that related to items in Canada that we produce very well. An industrial strategy should help Canadian business, which is what we are primarily interested in. A lot is said about foreign capital and foreign ownership as if this were necessarily bad, but the bill before us simply allows a big fish to eat a little fish, provided the cabinet approves, which is a rather negative approach. I suggest that if the government looked after Canadian business, Canadian business would be in a better position to look after itself.

I have another idea I should like to put forward. Suppose a lead-zinc mine-we have several of them in Canada-needed foreign technological know-how or foreign capital for development purposes. We should say to these investors, "If you join hands in partnership with us, we will pay you in lead and zinc. But once we have paid you back, the remainder of the equity in the mine is ours". Let us just consider this idea for a moment. In effect, I am saying that we are not making a very good deal with countries like Japan, Great Britain, Germany and the United States. These countries with technological expertise and spare capital also need resources. My point is that we might make a better deal. We are not as shrewd traders as we might be.

Another point I should like to make is that if we allow these countries to have access to our resources, we should also make a better deal for markets for our manufactured products which are more competitive. A trade-off has

June 5, 1972

Foreign Takeovers Review Act been suggested. If countries want something from us, let us trade something with them in return. It seems to me the government has made some poor deals of this nature. In effect, we have been backwoods boys dealing with shrewd businessmen.

These are not hard and fast suggestions but I did not want the debate to go by without suggesting that we look at other ways of solving our problems. It is not enough simply to take a negative stand and allow foreign capital to come into Canada only on certain conditions. Let us look at developing Canadian industry in a positive way. If we do this, some of our problems may solve themselves.

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP 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):

Mr. Speaker, may I rise, not to take part in this debate but to speak to a point of order. I think you will find that there is agreement among the parties that if a vote on the second reading of this bill is called for-and I can tell you that one will be called-perhaps it could be made an order of the House that the vote be taken not at this time but at 9.45 p.m. tomorrow night. I point out that tomorrow is an opposition day under the aegis of the Progressive Conservatives, and I believe that the House leader for that party will confirm that he and his colleagues are agreeable to this suggestion.

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

Gerald William Baldwin (Official Opposition House Leader; Progressive Conservative Party House Leader)

Progressive Conservative

Mr. Baldwin:

Yes, Mr. Speaker, we agree; and I should like to think that the government would be quite prepared to sacrifice the time of one of its members from a quarter to ten until ten o'clock tomorrow. I think it would be a good idea if the vote were held tomorrow because it would enable hon. members to read their speeches and decide which way to vote.

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

Otto Emil Lang (Minister of Justice and Attorney General of Canada; Minister responsible for the Canadian Wheat Board)

Liberal

Mr. Lang:

That would be agreeable to us, Mr. Speaker. [Translation]

Topic:   GOVERNMENT ORDERS
Subtopic:   FOREIGN TAKEOVERS REVIEW ACT
Sub-subtopic:   MEASURE TO PROVIDE FOR CONTROL OF FOREIGN OWNERSHIP OF CANADIAN COMPANIES
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SC

Joseph Adrien Henri Lambert

Social Credit

Mr. Adrien Lambert (Bellechasse):

Mr. Speaker, I support the proposal which the hon. member for Winnipeg North Centre (Mr. Knowles) has just made, and I understand that it would be in the interest of the House that we proceed with the vote tomorrow night, as suggested.

. [English]

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

Russell Clayton Honey (Deputy Speaker and Chair of Committees of the Whole of the House of Commons)

Liberal

Mr. Deputy Speaker:

Hon. members have heard the House leaders of the various parties. Is it agreed?

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

Some hon. Members:

Agreed.

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

June 5, 1972