June 5, 1972 (28th Parliament, 4th Session)


Max Saltsman

New Democratic Party

Mr. Saltsman:

I have explained our differences, and I have been frank about them. You should be frank about your differences in the Conservative party.
Here I can think of my friends in the Committee for an Independent Canada, who sent a telegram to all of us asking us to support a position on Canadian independence, and to take a strong position on foreign ownership. I think of their desperate attempts to justify their political affiliations, at least those who are not in the New Democratic Party, and to reconcile them with their sense of
Foreign Takeovers Review Act
Canadian independence and their concern about the future. I think of candidates like Mel Hurtig and other fine people, trying to walk the line, saying, "We can do it within the Liberal party." The question is: can they? I don't think they can. Here I also think of newspapers like the Toronto Star. No one can say the Toronto Star has not fought as hard as a newspaper can for Canadian independence. But still it supports the Liberal party. When it comes to a question of the fortunes of the Liberal party they forget about Canadian nationalists. Other issues become more important to them. All of their prestige, and all of the words of the best editorial writers they can command then say, "It's again time to vote Liberal."
I can also think of my friend, Eddie Goodman, the former chairman of the Conservative party, trying to do the same thing within the framework of the Committee for an Independent Canada. These are people whose loyalty to their parties is so great-I am not critical of them for that because my loyalty to my party is deep-that it poses a dilemma for them. How do you reconcile your desire for Canadian independence with on-going loyalty to your own party? These people are still waiting for change to be made from within. Apparently all the people I have mentioned have indicated that they are not prepared to change their political affiliations. They have said that they are going to work from within their parties. But can they bring about this change? Can they, in fact, accomplish this? I do not think they can.
The reason is that the Liberals, for one, are immobilized by their own outdated ideology of free enterprise. They will not intervene in the economy. If they will not intervene in the economy, then the cause of Canadian independence is hopeless.
I was quite interested in the references that the hon. member for Duvernay made to the other measures that are necessary-how it is necessary to relate fiscal and monetary policies, and how it is necessary to have some kind of an industrial strategy if we are going to deal with foreign ownership. I concur in those statements because while foreign ownership is a problem it is not the only problem in the management of the economy. Unless the whole problem of foreign ownership is put in the context of what we as a nation desire, what social purposes we have, what kind of society we want to be, what our objectives are, how we are going to relate to all industry and not just to foreign industry, what sort of things we are going to emphasize and concentrate on, and how we will relate our monetary and fiscal policies to these objectives, then we cannot deal with foreign ownership.
We cannot bring in related legislation on takeovers. To what are you going to relate it? Will you bring in legislation limiting the ownership? How does that tie in with your plans? Which industry do you say is not desirable, and which is? How does it tie in with your plans? When you have no plans you have no datum. You cannot make decisions of this type. This is one of the reasons I and many other people continue to support my party. We at least realize that without some degree of planning in our society we cannot do anything about foreign ownership. This is the critical point about the entire debate on the foreign ownership issue. Unless the nationalists are prepared to take this position, then their nationalism will go

June 5, 1972
Foreign Takeovers Review Act
down the drain. They will not succeed. This is the dilemma.
The Liberal does not want to take this position very often. He believes in the market economy. He believes in keeping his hands off things. He wants them to run their normal course without government interference. He does not want to take the hard measures that are necessary. These will be difficult measures to take. Those in charge will have to speak with the provinces. Many differences must be reconciled. Planning is not an easy matter. This is not the kind of planning you impose on people from the top down. That kind of planning is neither acceptable nor workable. You must sit down and discuss these matters with all the people involved.
There are some provinces that do not feel the same way about foreign ownership, that think the more foreign ownership they can attract the better it will be. Can you blame a province with a relatively low level of industrial development for saying, "Look, we are not concerned about the ownership. We know it has certain effects on the national economy, but 20 per cent of our people are unemployed. Anyone who wants to come in here and put up a factory is welcome." This is a serious problem, but it is not an insoluble one if you are prepared to do some planning about your economy, and if you can say, "There are ways we can help."
There is another difficulty, Mr. Speaker. Very often questionnaires are sent out ask people if they are upset about foreign ownership. Almost invariably something like 80 per cent to 90 per cent reply that we have too much foreign ownership and that we must do something about it. But when you ask the critical question, "Are you willing to pay a price to do away with foreign ownership"? the percentage drops enormously. If the question is coupled with some antagonism toward the United States, then the percentage goes way down. That is a characteristic mark of this country. If we are going to take action along these lines, then it is the responsibility of the national government to persuade the people of Canada that we can do something about foreign ownership without being enemies of the United States, and without any substantial reduction in our standard of living, or in providing employment. In fact, quite the contrary, Mr. Speaker, because by taking action in some areas of foreign ownership we can increase the prosperity of Canada. I will come to that argument a little later on.
We have been brainwashed by the myth of the superiority of the international corporation. The American businessman has been told this over and over again by people in the highest places. No less a person than a former prime minister of Canada, bolstered by all the business leaders, high civil servants, and the cabinet ministers who listen to them, has been taken in by this myth. The public have been brainwashed into believing that there is some superior business technology that we would lose if we took action against foreign ownership. I do not think that is really true. Foreign ownership of enterprises in Canada makes us poorer, rather than richer. I was interested to read the remarks of the hon. member for Grenville-Carle-ton (Mr. Blair) as recorded in part at page 2654 of Hansard for May 29. He said:

There is much evidence to show that whether or not enterprises have been owned in Canada is irrelevant to their performance in the interests of Canada.
His authorities were Professor Safarian and Professor Watkins. I know the hon. member and know him to be very careful when quoting. Yet, he was not very careful in his research. I think both Professors Safarian and Watkins dealt with aspects of performance of American as against Canadian companies. I do not think they dealt with the efficiency of corporations. Researches I have asked the Library of Parliament staff to undertake establish clearly, I think, the inefficiency of foreign controlled manufacturing industries which have set up in Canada, as compared with the efficiency of companies, private or public, that have remained Canadian. The preliminary evidence, I do not say it is conclusive, tends to rebut the claim, heard often, that ownership makes no difference to performance or that American-owned companies are superior to Canadian. The most efficient manufacturing companies in Canada, by and large, are those which have remained under Canadian ownership, and the most inefficient are those which come under foreign control and are broken up into branch plant operations. This is not because the Canadian entrepreneur is more talented at organizing than his American counterpart; this has come about because the pattern of foreign ownership in Canada has proven ineffective and inefficient and is not suited to the Canadian market. American companies have tried to create in this country a replica of the United States market, a market almost 11 times our size. If you make a suit that is 11 sizes too big for a man, you can hardly expect him to look good in it or walk well in it. Many sectors of the Canadian economy are poorer, as a result of being foreign owned, than they otherwise might be. I will not deal with the outflow of funds. That question was excellently dealt with by the hon. member for Duvernay (Mr. Kierans).
Having said all these things about foreign ownership, I return to my earlier theme. We need to consider the whole business of ownership in some kind of national, planned context. I am not in favour of the outright prohibition of foreign ownership; nor am I necessarily in favour of licensing arrangements, which are more and more entered into. Sometimes a foreign corporation, instead of establishing a branch plant in Canada, will licence a Canadian manufacturer to produce a commodity in this country. I have seen some licensing agreements; some are worse for this country than the presence of the foreign corporation. For instance, they sometimes insist that the product shall be sold only in the Canadian market, at a price considerably higher than that charged in other countries. In many ways such agreements limit Canadian manufacturers and impose conditions which are little short of slavery. What is worse, since the conditions are invisible, the people of the country are unaware of the difficulties that may be created by such licensing arrangements. Perhaps some licensing is good. Really, I am suggesting that our difficulty is not with foreign ownership alone.
If we pass this legislation and attempt to prohibit takeovers, how can we deal with a company that says, "If you will not let me take over a corporation, I will start a new company." Nothing prevents the setting up of a new cor-
June 5, 1972

poration. What will happen if the new corporation is to do business in an already overcrowded field? What would happen, for instance, if a tire manufacturer were to establish himself in this way? At present, virtually every United States tire manufacturer operates in this country, as well as one from France. The tire manufacturing field is already overcrowded. Permitting industries to be established in an already overcrowded field and thereby permitting an even greater fragmentation of such industries would work a disservice to the Canadian economy. It would not be a benefit.
Also, a company could say, "Fine; although we are not allowed to take over a company, we will set up in competition to it and drive it out of business." That company may have a thousand times the assets of its competitor; it could lower the price of a commodity and drive its competitor out of business. Actually, big, foreign corporations have available so many options that the takeover route is sometimes the kindest of all and may be preferred to driving another company out of business. How will the government decide, when faced with such situations, if foreign corporations are or are not to be allowed to operate in this country? I do not think the government will be able to decide in these matters. I think it will rubberstamp every request for a takeover that comes before it.
In opening the debate for my party, my leader made an interesting suggestion that has been made by others. He suggested that we ought to use the money in our foreign exchange reserve fund to buy back some Canadian companies. This would accomplish a number of things. There is approximately $5 billion in the fund. It is a source of embarrassment to us. If we took that $5 billion and went to the New York Stock Exchange, say, and began buying shares in some American corporations or repatriating foreign obligations, we should obtain a number of benefits. First, we would rid ourselves of that embarrassing fund of money that is not doing us any good. I am, of course, talking about our foreign exchange reserves. If we were to participate in this kind of "buy back", we should lower the value of the Canadian dollar and stimulate manufacturing in this country. Of course, no doubt some hon. members think that this is such an unusual scheme that it has not been tried. Well, let me say Japan is carrying on a somewhat similar policy. Japan is in a position similar to Canada's, in that Japanese currency is appreciating rapidly. This has resulted in unemployment and in pressures being exerted in that society. That country also has some foreign debt. It is taking money that has been built up in its foreign exchange reserves and is repatriating that foreign debt. I think we can do much the same. Let us use imagination and exercise courage.
It is important to plan because, today, ownership is not as important as it once was-at least, it is not all that important. Whether companies are foreign-owned, domestically owned, publicly owned or privately owned, power in a democratic country, as people become more involved in the political process and understand better what is happening in politics, rests more with the people. It is the government of Canada, by and large, that possesses overwhelming power, not General Motors. We have recently witnessed confrontation between the public power and private power. We must not be confused merely because the government has backed down. Sometimes, it chooses
Foreign Takeovers Review Act
to back down. When the government does not choose to back down in a confrontation with the private sector, the government, exercising the power of the people through representatives elected to Parliament, wins. We have seen this often. More important than legislation such as we are now discussing is the willingness of the government to act when the clear necessity arises to act within the context of an over-all plan.
Some foreign ownership, I think, may be advantageous for us. I think of some areas in which foreign ownership is helpful. To the extent that it is helpful for this nation, I say, why should it not be permitted here. On the other hand, much foreign ownership is not of advantage to Canada. You know, the old idea "The more foreign ownership, the better" has caused us lots of trouble. We can no longer make that assumption. What we have to do from here on is ask foreign ownership to make its case because a case has not been made with the philosophy of the more foreign ownership the better. This is creating a lot of difficulties for this country.
We should be prepared to look at foreign ownership, but first it has to make its case, not just on a takeover because that does not relate to anything. It has to make its case in terms of its expansion from the use of internal funds and with regard to whether it is going to open a new factory. We have never before asked that that be done. We have not created a framework whereby we can judge the case it is trying to make or created a mechanism whereby we can tell what benefit to Canada their operations will be.
We all know that no country is completely free. As much as I would like to see it completely free, with no strings attached, just as I as an individual would like to be completely free with no strings attached, there is not this kind of complete freedom for anyone or any country. We want a world where we are interrelated, have some concern for each other and want to help each other. There is going to be some interdependence. The crucial question is not whether we are totally free, but the extent to which in this kind of interlocking world we can preserve the maximum freedom to pursue our own objectives. That is becoming more and more difficult with the high degree of foreign ownership in this country.
This government does not seem to have the foggiest notion about how to proceed with the problem of foreign ownership. On one hand, they bring in this legislation which states that any company with assets in excess of $250,000 under takeover threat is going to be examined. How do you determine that? There are many ways this can be hidden from the government if a company so chooses. The corporations Act does not call for the disclosure at the $250,000 level. It must be in the millions before disclosure is required. The Canada Development Corporation cannot step in and take such action. It cannot purchase anything unless the assets are in excess of $1 million.
We had the Unemployment Assistance Act. When the government of the United States imposed a 10 per cent surtax, instead of taking other action that was open to it, this government, in a panic, said "Don't worry about it. If you lose any benefit, we will give you a benefit. We will up

June 5, 1972
Foreign Takeovers Review Act the ante." With the reduction of the corporate tax to 40 per cent, this has now been put into permanent legislation. That was an attempt to outbribe the Americans under the DISC program. I do not think we can operate in this way. There is no indication whether or not we want all these companies, whether they are worth bribing or of what value they are to us. It has come to the point where the government is making such substantial bribes that we wonder whether the whole thing is worth it. We do the same under DREE. There is increasing evidence that these companies would have located without the bribes.
There is no real science policy. I notice that the Minister of State for Science and Technology (Mr. Gillespie) is in the chamber. I have been looking to him for great things. To date, all I have been getting has been nice speeches crossing my desk, but no science policy. We were hopeful that once a member of the cabinet was designated to be responsible for science, we would hear something. If something is going on, we are not hearing about it. I suspect there is still no policy and that we are still passing out money in the vain hope that perhaps some of it will do some good.
The government is either walking or running around, depending on their energy on any given day, in a grand flap. They do not seem to know where they are going or what they are doing. The air force used to call it "situation snafu". That means it is all "fuddleduddled". I remember what "snafu" means.

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