Nationalists in the boardrooms

David Thomas December 7 1981

Nationalists in the boardrooms

David Thomas December 7 1981

Nationalists in the boardrooms


David Thomas

Calgary’s Seventh Avenue has acquired a tidy, almost quaint continental ambience. Refurbished facades and the banning of car traffic have helped. But the sophistication is owed primarily to the city’s silent new light rail vehicles (LRVs) built in Düsseldorf, West Germany. The LRVs were an immediate success at their introduction last May, and early this month Calgary’s city council voted to buy another 35 from the German consortium Siemens-Duwag. The decision enraged Canada’s mass transit industry. At least three domestic manufacturers, including Bombardier Inc. of LRC train and snowmobile fame, are capable of producing Calgary’s cars. Yet the city froze them out of the deal. Grieves Bombardier Marketing Director Carl Mawby: “It seems somewhat unfair that we can win handsomely in the U.S. but not be given an opportunity to bid in our own country.”

Such discrimination against domestic industry was once commonplace. Now it is rare enough to serve as tinderdry fuel for the fires of Canada’s new economic nationalism. A decade ago, political and academic voices echoed emptily in the wilderness of Canadian nationalism. Today, the most clamorous Canadianism comes from businessmen. And profit—as much as patriotism—is their motive. Most auspiciously for their causes the new boardroom nationalists are not the intellectual insurgents of yore: pipe-sucking professors, earnest authors and populist politicians whose ardor was cooled by a climate of public apathy.

The new nationalists are an elite corps of mercenaries, eyed nervously by the Canadian business establishment and by their American counterparts. At the cutting edge of Canadian capitalism, they include risk-takers such as Robert Blair and Jack Gallagher, who operate the country’s energy giants. They also embrace such whiz-kids as Michael Cowpland and John Shepherd who are at the top of successful electronics firms, along with world-class engineers, such as Bernard

Lamarre, who design Canada’s megaprojects, and competitive managers of home-owned manufacturing firms. To their opponents, their clarion call of Canadianization carries the same frightening charge as Iran’s Islamization or Quebec’s francification with the same implications of fundamental shifts of power. Says Leigh Instruments Ltd. Chairman John Shepherd: “We can talk publicly now about the fundamentals of ownership when 10 years ago you might

have been lynched for doing so.” The National Energy Program (NEP) with its bold proposals to Canadianize the energy sector may have scared traditional “free marketers” both in Canada and in the United States, but some Canadian business people immediately saw just how advantageous it could be. Shepherd, whose firm sells postal sorting equipment to the United States and electronics to the transportation industry, explains that Canadian manufacturers are the natural beneficiaries of the NEP. Canadian-owned oil giants are more likely to call upon domestic suppliers. Says Shepherd: “The effect on the engineering and manufacturing sectors of Canadianizing the energy companies is just terribly overlooked and yet it is probably the biggest single consequence of that process.”

The new nationalists have their own catechism. It is a report in June by the Major Projects Task Force under the joint chairmanship of Robert Blair, president of NOVA, an Alberta Corporation, and

Shirley Carr, executive vice-president of the Canadian Labour Congress. By uniting business and labor leaders, the task force sought to find ways to enhance the domestic benefits of the country’s big public and private undertakings. Essentially, the task force wants Canadian-owned enterprises to get preferential, or at least equal, treatment in the awarding of contracts. It also wants the federal government to sponsor a clearing house for information on project schedules, costs and requirements.

Called the Major Projects Assessment Agency, it would have authority to demand information from project sponsors and would help Canadian industry and educational authorities match production and training to anticipated opportunities. The agency would also have a mandate to recommend ways of maximizing benefits to Canadian industry.

In the case of the Calgary LRVs, the Major Projects Assessment Agency could have chided the city into inviting tenders from Hawker Siddeley Canada Ltd., Ontario’s Urban Transportation Devel-

opment Corp. and Bombardier Inc. Bombardier, for one, would clearly have stood a good chance of getting the Calgary project. In May, the company beat the German consortium that supplies Calgary’s cars in competitive bidding to produce similar vehicles for a new system in Portland, Ore. Bombardier’s price was 16 per cent lower than that of Siemens-Duwag.

The corporate nationalists also have a patriarch—once a lonely prophet—in the person of Walter Gordon. Finance minister from 1963 to 1965 in the Liberal government of Prime Minister Lester Pearson, Gordon remembers just how isolated and vulnerable the Canadian nationalist of the past was to pressure from the outsidein particular from Washington. As finance minister, Gordon proposed—and was forced to drop—a 30-per-cent tax on the sale of Canadian-owned businesses to foreigners. Even today he maintains: “I don’t think people who are not in government fully appreciate the pressures from Washington on any Canadian government.”

There was little protest from Canadians when his tax proposal was abandoned. But now business nationalism is a burgeoning force. To U.S. critics, Canadian flag-wavers are merely exploiting patriotism for profit. Says Alan Buckley of New York’s business research institute, The Conference Board: “The maple leaf is really just a fig leaf to hide anticompetitive business strategies.” The most nationalistic Canadian businessmen, Buckley points out, are those who compete directly with foreigners for domestic markets.

There is plenty of perturbing evidence to justify the new nationalism. Even giant Northern Telecom Canada Ltd. is in a state of worry unusual to the country’s successful multinationals.

Northern Telecom President Basil Bénéteau issued this disquieting diagnosis in October:

• Canada imports about twothirds of its manufactured products—more than any other country—and suffered a negative trade balance of $18 billion in finished goods last year.

• Canada buys about 80 per cent of its technology from other nations—at their prices. In doing so, Canada assists other countries to build up their technological base and squanders the chance to develop its own brain industry.

• Canada owns only 45 per cent of its own manufacturing industry, one of the lowest figures for domestic ownership of any developed nation.

Against such a discouraging background Jack Gallagher’s Dome Petroleum Ltd. rises as a monument to the renewed symbiosis of domestic entrepreneurship and nationalistic government policy. Incentives favoring Canadian-owned exploration for new oil reserves mean that Dome will be virtually guaranteed a big share in northern energy development. And Dome is passing that advantage on by reserving as many of the attendant economic benefits as possible for Canadian firms. Most of the innovative drilling and production platforms and the icebreaking tankers to

ship Beaufort Sea oil will be made in Canada, spreading oil wealth across the country. Dome’s purchase of Davie Shipbuilding Ltd. of Lauzon, Que., for example, has made the shipyard’s 1,700 FrenchCanadian workers the direct beneficiaries of nationalist oil policy.

The list of companies helped by preferential public policy is growing and—not surprisingly—so is the number of capitalist patriots. Bombardier’s success in the mass transit market, for instance, was seeded by the 1974 decision by Montreal to order new métro cars from the then inexperienced manufacturer. Now, the company is constructing 180 cars for Mexico City’s subway. Bombardier is also assembling commuter rail cars in Barre, Vt., in a plant that it opened to conform with protectionist “Buy America” regulations. Says Raymond Royer, president of the firm’s

mass transit division: “Preferential treatment of domestic enterprises exists in practically all industrialized countries and has helped reinforce their national manufacturing sectors. We have to develop here in Canada a greater national trust in domestic industry so that we will have a base market from which to grow and develop international credibility.”

With just such credibility as its major asset, Montreal’s Lavalin Inc. is on its way to becoming one of the world’s great engineering firms. From its beginning in 1936, Lavalin benefited from the preference of Quebec’s religious orders and governments for local Frenchspeaking engineers in the construction of institutional and public works, culmi-

nating in the construction of the Olympic Stadium and the James Bay hydroelectric facilities. Says President Bernard Lamarre: “The fact that we worked on James Bay gives us a business card with extraordinary credibility overseas. The best guarantee for a foreign client is to tell him that your own people have confidence in you.”

But perhaps the most vocal and influential of the new nationalists is energy magnate Blair. Blair’s leadership is explained partly by his power as president and chief executive officer of NOVA. But more important are Blair’s close Ottawa connections, which have been a central cause of the flowering of economic nationalism. NOVA, parent of Husky Oil Ltd., stands to gain greatly from the National Energy Program. Ca-

nadians, Blair preaches, should be the first to benefit from massive investments in their own country. And ownership, Blair argues, is critical: “I just don’t think there’s such a thing as a multinational company. Every company is national, according to the nationality of its directors and its senior management. They have certain national biases and they build up around their home base a community of engineering firms, equipment makers, suppliers, consultants, lawyers and accountants who follow the company everywhere it goes.”

Blair reiterates some of the standard branch-plant economy complaints with new force. In particular, he rues the fact that branch-plant procurement policies and critical research-and-development programs tend to favor a company’s mother country. Not only that, says Blair, the branch-plant economy has denied Canada a loyal entrepreneurial

and managerial class. “Each generation of aggressive and energetic young people has looked at the business scene and, in a higher proportion than elsewhere, they have chosen government or law or the universities because those are the independent arenas of authority in Canada,” he says. “Business has been merely branch-plant.”

NOVA practises Blair’s preachings by demanding of its own suppliers an accounting of the Canadian content in their proffered goods and services. The NOVA questionnaire that accompanies its tender invitations is a Canadian first, but one that is being copied by Petro-Canada, Dome Petroleum and others. Says Blair: “We know this because they are trying to hire our purchasing specialists.” NOVA asks its potential suppliers to specify the extent to which they themselves foster other Ca-

nadian-owned enterprises, how much Canadian innovative technology is contained in their products and how they are doing their part to increase beneficial ownership and control by Canadians in foreign-owned firms. Executive Vice-President Robert Pierce affirms that NOVA’s procurement policy is essentially one of self-interest. Declares Pierce: “Our principal corporate reason for seeking to strengthen Canadian ownership and control is that it makes good business sense. Our companies want long-standing, well-established supplier relationships to construct and operate various projects and plant facilities.”

The most formidable barriers to greater Canadian economic nationalism remain U.S. government and business leaders. Their bluster, according to some Canadians, is tinged with hypocrisy since non-tariff protectionist policies are rampant in that country. Says

John Bulloch, president of the Canadian Federation of Independent Business: “I would say to the Americans that we want to be as nationalistic as you are, not one bit more. Then I would explain all the restrictions that the States have on imports from Canada and how our banks have been used as brokers to sell out our country.” As well, says Bulloch, foreign ownership has distorted Canada’s business lobby: “Big business in the United States is American; big business in Japan is Japanese; big business in Germany is German; big business in Canada is American.”

Bulloch’s bitter irony is directed at the country’s least familiar, but most powerful business lobby: the Business Council on National Issues. Created in 1976 as a conservative lobby, with its executive office at the edge of Ottawa’s Parliament Hill, the Business Council is

a select club of 150 chief executives of multinational corporations, the big banks and some Canadian-owned businesses. The Canadian firms are allied in interest and ideology with the foreignowned giants. Last September, a highpowered Business Council delegation met with Industry Minister Herb Gray to condemn bluntly his economic nationalism. Led by Alton S. Cartwright, president of Canadian General Electric Company Ltd., the six-man contingent told Gray that they oppose Canadianization of the oil and gas industry and that they have “strong opinions against” proposals to require public announcement of intended acquisitions by foreign companies so that Canadian firms could join the bidding.

For their part, the Americans have made it equally clear that they disapprove of Canadianization attempts. And revenge is already in the works. Canadian drillers may lose their access to U.S. government lands if Interior Secretary James Watt bends to congressional pressure and decides that Canada’s National Energy Program discriminates against Americans because it ties exploration incentives to Canadian ownership. The House of Representatives has voted to subject Canadian investors to the same rules as U.S. firms, which may cover no more than half the cost of taking over a U.S. company with borrowed money. In late October, President Ronald Reagan’s administration issued a list of demands for Canadian policy changes. They included withdrawal of the energy policy incentives designed to increase domestic ownership of the petroleum sector and elimination of requirements that foreign takeovers of Canadian firms be of significant benefit to Canada. Canadian concerns over acid rain and the auto pact are likely areas of American retaliation if Ottawa refuses to retreat.

The power of an angry United States over Canada’s government is evident in Ottawa’s Nov. 12 budget retreat on promises to enhance Canadianization. That reverse, however, may prove to be temporary. As External Affairs Minister Mark MacGuigan warned a New York audience in September: “It would be a mistake to suppose that a Canadian government would be able or willing to resist the historical momentum of our country’s growing determination to have the necessary amount of control over its own destiny. Recriminatory rhetoric will get us nowhere, except into a more excited and nationalistic home environment.”