Tories and businessmen had been criticizing it ever since Pierre Trudeau’s Liberals created the agency 11 years ago. According to them, the Foreign Investment Review Agency was slow, secretive and an impediment to foreign investment that was costing the country jobs and capital. Last week they finally had an opportunity to rejoice as the Commons heard the final debate on a bill to kill the agency and replace it with a less forceful body called Investment Canada, which Industry Minister Sinclair Stevens said will bring Canada out of its “defensive shell.” While opposition critics and economic nationalists accused the Tories of putting a For Sale sign on Canada’s borders—Liberal MP Herb Gray, FIRA’S architect, described the change as an act of “ideological idiocy”—the investment community in Canada and abroad approved the new look. Said Dominion Secu-
rities Pitfield economist Carl Beigie: “It’s a 180° turnaround in terms of basic philosophy.”
FIRA, the agency about which one discouraged U.S. investor once said “we have nothing to fear but FIRA itself,” acted as a gatekeeper. By contrast, under Bill C-15 one of Investment Canada’s main tasks will be to greet foreign funding and promote investment in an economy already more than 25-per-cent owned by outside investors (compared
to two per cent in the United States). The new agency will review only onetenth as many foreign transactions as FIRA did, limiting its attention to direct takeovers of businesses with assets of more than $5 million and indirect takeovers, in which a foreign investor buys a Canadian firm by taking over its foreign parent, involving assets of more than $50 million. The act also gives Stevens the final decision on all applications—a right previously vested with the cabinet.
Businessmen in Canada and abroad hailed the creation of Investment Canada, which now only awaits the Commons’ final approval and the Senate’s acceptance—despite opposition threats to do their best to block Bill C-15’s passage. A spokesman for the Prudential Assurance Co., Britain’s largest institutional investor and holder of $40 million in Canadian assets, said, “We think the change creates a better business environment and increased confidence.” Added one official in the U.S. trade representative’s office in Washington:
“Hey, three cheers for Mulroney. The guy knows what he’s doing.” Indeed, Mulroney’s drive has already met with some success. None of the 594 applications made by foreign investors since Mulroney was elected last September has been rejected—a fact that is partially credited with the huge increase in net direct foreign investment in 1984, to $2.38 billion from $200 million in 1983. And business analysts cited last week’s move by the government to reduce its deficit by $1.1 billion as further encouragement to international investors.
But many Canadians appear to remain skeptical about the benefits of foreign investment. Steven Langdon, for one, the NDP industry critic in Ottawa, said that with Investment Canada the country will not only be open for business, it will be “open for surrender.” He added that the search for offshore money to create jobs is based on “the myth that there is some huge pool of capital out there.” Instead, he pointed out, Canada’s biggest foreign investor, the United States, has itself been a net importer of capital since 1981. For his part, publisher Mel Hurtig, the chairman of the Council of Canadians, a nationalist lobby group, charged that the Tories are selling out the nation’s most valuable assets. He added: “The Americans have a tremendous advantage now with the cheap value of the Canadian dollar. They’ve got a built-in bonus to come in and take over Canadian companies and close them down and simply service the Canadian market from their parent corporations.”
Hurtig also disagreed with the Tories’ contention that more foreign investment will create jobs. He pointed to a recent study of the Canadian Independent Computer Services Association, which claimed that Canada has lost 180,000 jobs because of foreign control of the computer and data-processing industries. According to Liberal MP and former transport minister Lloyd Axworthy, the rfal importance of FIRA was that it improved about 40 per cent of those applications it accepted by securing commitments to jobs and research and development. “The real value of FIRA was not as a rejection machine but as a bargaining machine.”
The critics of Investment Canada are currently focusing their concern on several applications which will proba oly be the first major cases before the new agency. Investment Canada’s likely president, Paul Labbé, the former commissioner of the old FIRA, must decide whether to approve the sale of 51 per cent of Mitel, the Kanata, Ont.-based maker of telephone superswitches, to British Telecom. As well, he must decide on the fate of three publishing firms: Prentice-Hall Canada Inc. and Ginn and Co., both of interest to New York-based
Gulf and Western Industries Inc., and Copp Clark Pitman, being courted by Britain’s Longmans.
Investment Canada’s allies say that new investment is critical regardless of where it comes from. Declared Neil Johnson, chief economist at Toronto’s Nesbitt Thomson Bongard: “It is simply a recognition that we can’t afford to Canadianize when we have 11-per-cent unemployment and a $35-billion deficit. I mean, where does the money come from?” Added Andrew Kniewasser, president of the Investment Dealers Association and former senior assistant deputy minister of industry, trade and commerce: “I don’t think any reasonable person can think the issue is Ts Canada up for sale or not?’ We live in an increasingly international economic community.”
For most of its history Canada has depended on outsiders to develop its resources. By 1957, 56 per cent of the nation’s manufacturing and 70 per cent of its mining interests were controlled by foreigners. The Liberals, alarmed by a few conspicuous takeovers in the early 1970s, set up FIRA in 1974 to screen foreign takeovers and new foreign firms starting up in Canada. The agency was in trouble almost from the beginning, attacked by the business community for being too strict and by nationalists for being too lax.
In its first seven years of operation FIRA did begin to change the contours of the Canadian economic landscape. Foreign ownership, which stood at 33 per cent in 1974, was down to 26 per cent by 1982. But its very success marked it for extinction when Trudeau’s Liberal government ended. For much of the business community it had come to symbolize the administration’s lack of understanding of the country’s economic needs.
But the discussion about controlling the flow of money into Canada may be already outdated. According to University of Toronto economist Ed Safarian, the real issue may be money flowing out of the country. “The fact is,” he said, “that our own economic multinationals, like Northern Telecom or Abitibi, are going outside. We are now the world’s sixth-largest foreign investor ourselves.” Safarian said that Canada has exported 55 per cent as much capital as enters the country—$40 billion, compared with investments of $75 billion. He added that, merely by staying at home, money could create jobs just as well as foreign investment. “That is the bottom line,” he said. “What is the barn worth after all the horses are gone?”
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