The Year of Living Dangerously
In 1999, U.S. takeovers of Canadian companies have ‘taken on a disturbing new reality.’ The result: ‘We have become squatters on our own land.’
Peter C. Newman
So here we are, at the butt end of the 20th century that was supposed to belong to Canada, only to find that Canada no longer belongs to us.
This was the year the tectonic plates holding the country together shifted, leaving us exposed as never before to having our economic destiny controlled by outsiders. During 1999, what had been a trend became a torrent. What had been the occasional incursion of American investors to grab Canadian companies with promising potential turned into a fire sale. With our dollar worth 40 per cent less than the American greenback, and a government in Ottawa oblivious to our currency’s plight, the sellout of Canada resembled the liquidation of Eaton’s.
The American takeover of Canadian business is hardly a new phenomenon: in the past dozen years alone, direct American investment in Canada has surpassed $800 billion. But there’s a significant difference between past incursions and the current riptide of sellouts. Without most Canadians being aware of it, the Americanization of our economy has entered a disturbing new reality. Corporate
takeovers do not necessarily determine collective destinies. But there comes a point when the incursion of foreign capital takes on qualitative instead of merely quantitative dimensions.
This was the year we stepped over that invisible line: we now control a smaller portion of our productive wealth than the citizens of any other industrialized country on earth. Instead of the proudly independent nation our founding fathers intended us to be, we find ourselves, on the cusp of the millennium, well on the way to becoming an economic colony of the Americans—self-governing still, but indentured to the Yankee dollah, just the same.
We have become squatters on our own land.
In the past 12 months, Americas global traders have moved in and grabbed nearly everything that wasn’t nailed down, except Cape Breton and the terminally unprofitable B.C. ferry fleet. Vacuuming up the best of Canadas corporate assets at an unprecedented rate, they paid more than $25 billion for 127 companies in the first 11 months of this year—compared with $16 billion for 121 companies for all of 1998. “Canadian icons are falling like tenpins,”
Never before has our planet been so directly
wired into a single economic power source: the brutal dynamism of American business
complains David O’Brien, chairman of Canadian Pacific Ltd., one of the country’s defining corporations, which conducts much of its business outside the country but stubbornly remains headquartered in Calgary. “The great Canadian fire sale is under way.”
Some of the major victims of 1999 s unprecedented American onslaught include the iconic MacMillan Bloedel Ltd. in Vancouver; Poco Petroleums Ltd. and MetroNet Communications Corp. in Calgary; JDS Fitel Inc. in Ottawa; and Club Monaco Inc., Noma Industries Ltd., Newcourt Credit Group Inc., Midland Walwyn Inc., Peoples Jewelers Corp. and Shoppers Drug Mart Ltd. in Toronto. Spar Aerospace Ltd. sold its robotic division, which carried the Maple Leaf into the stratosphere on the Canadarm, to the American-owned Macdonald-Rotweiler. Super-patriot Ted Rogers, chairman of Rogers Communications Inc., which owns Macleans among other publications, ceded a hefty minority interest in his cable network to Bill Gates, the American empire’s reigning monarch. Even Ma Bell, that most Canadian of corporate icons, sold 20 per cent of itself to Chicago-based Ameritech Corp. for $5.1 billion. All Canadian telephone companies, once preserved for domestic ownership, are currently under siege. Bell merged its directory assistance operation with Arizona-based Excell Global Services in a new company that immediately cut the operators’ hourly $19.50 wage in half.
Some of our largest companies remain headquartered in Canada, but have transferred their command posts to the United States. That lengthening list includes The Seagram Co. Ltd., once one of Montreal’s corporate mainstays. Nortel Networks Corp., the $ 100-billion king of Canadian high-tech, still maintains its token headquarters in Brampton, Ont., but is really run out of Dallas. Nova Chemicals Corp., this country’s largest independent chemical firm, is moving its headquarters from Calgary to Pittsburgh. The CEO ofThomson Newspapers Corp., our world-class multimedia showpiece, is also an outsider—Stuart Garner, who works out of Stamford, Conn. From there, this transplanted Brit shepherds his fellow transplanted Brits, currently in charge of the Thomson chain’s flagship paper, The Globe and Mail. “No, Bernardo isn’t the name of a great Canadian chef,” a senior staffer recently replied to a query from Fleet Street exile, now Globe editor, Richard Addis. “He’s a killer.”
Other firms have been Americanized by the transfer of a majority of their stock into U.S. portfolios. Even such flagship Canadian outfits as Canadian National Railway Co. now have more American than Canadian shareholders. CN has been particularly aggressive in going stateside, buying for $3.5 billion the Illinois Central Railway, which gives its freights access to U.S. ports on both oceans, as well as the Gulf of Mexico. The move shifts the company’s centre of gravity south: 60 per cent of its shareholders are now American.
Canadian stock exchanges are booming, but they are becoming increasingly powerless. Some 225 of the Toronto Stock Exchange’s most valuable companies, including Nortel, Four Seasons Hotel Inc. and Imax Corp., are now interlisted with U.S. exchanges, where the bulk of their trading takes place. It’s a sign of the times that more than a quarter of the TSE s most future-minded companies now report their results in U.S. dollars.
These, and the many other incursions into what was once holy Canadian territory, are forcing us to face the onslaught of U.S. economic expansionism, just as it is becoming an irresistible force. Individually, Americans are charming; collectively, they’re a menace. Whether they’re dispatching hunter-killer squads into Vietnamese rice paddies or corporate raiders with blow-dried hairdos into Canadian boardrooms, they’ve always believed in achieving their manifest destiny. It’s a winner-take-all philosophy; nice guys finish last.
Ever since the fall of the Berlin Wall and the end of the Cold War a decade ago, the United States has transformed itself from an ambitious supermarket into a restless empire, more powerful than any since the Roman legions controlled civilization. No one dares challenge America’s supremacy. Never before has our planet been so directly wired into a single economic power source: the brutal dynamism of American business on the march. Two-thirds of the world’s top 50 multinationals are American, and some are richer than medium-size countries. Eight of the world’s largest high-tech conglomerates live stateside, as do the leading enterprises in such essential post-industrial categories as financial services, biotechnology, media, entertainment, genetics, software design and the Internet.
Canadas aspirations are increasingly being trampled by the rampaging American rhinoceros. (The animal symbolism of U.S.-Canada relations has escalated from the more benign
image of mouse and elephant, to a flea trapped within the imperious hide of a wild rhinoceros.)
The American exercise of raw power can be silent and deadly. When the feds were trying to decide whether Canadas chartered banks would be allowed to handle car leasing, previously reserved for car manufacturers, General Motors Corp., which is run out of Detroit, quietly dropped the word around Ottawa that to do so would endanger the future of its assembly plant at Ste-Thérèse, Que.
The banks were immediately shunted aside, no reason given.
U.S. takeovers have transferred the decision-making powers that count, including senior job promotions, south of the border. Once-independent domestic firms are being forced to operate according to imported agendas and values. As well, significantly fewer research dollars and philanthropic contributions are being spent here. The accelerating drain southward of our best brains is the inevitable result. “We are losing a large part of our country,” laments Peter Godsoe, chairman of the Bank of Nova Scotia.
The most surprising recruit to the nationalist cause is Thomas d’Aquino, president of the Business Council on
‘Canadian icons are falling like tenpins.
1 he great Canadian fire sale is under way.’
National Issues, the powerful Ottawa lobby group for big business. “Much of corporate Canada is on the auction block, and at bargain prices,” the BCNI major domo recently wrote Prime Minister Jean Chrétien, urging his government to halt the sellout. “Canada faces an accelerating loss of key head office functions and the high-paying jobs that go with them.” D’Aquino later in a speech accused the government of failing to grasp the gravity of the situation, noting that “too many of its members and advisers are content with the crumbs that Canadians have managed to gather as we stroll behind the combine harvester of the American economy.”
That’s strong language from an organization that has been dedicated to pushing Canadian business into the globalized economy. What prompted d’Aquino’s letter was his overdue realization that globalization guarantees no level playing fields. It had been advertised as a natural marketing phenomenon, promising to increase business and multiply profits for all concerned. Instead, globalization turned out to mean Americanization, period. The fact that the PM turned a deaf ear to d’Aquino’s eloquent letter pinpoints Canada’s dilemma: we have a government content
to preside over the dissolution of the country’s economy.
Under such an uncaring regime, this country will inevitably be reduced to a slightly backward extension of corporate America’s northern sales territories. “To us,” Jacques Maisonrouge, the former head of IBM’s European and Asian operations, once patiendy explained to me, “the boundary separating Canada from the United States is no more significant than the equator—just a line on maps, devoid of meaning.”
Although it seriously accelerated during 1999, the race to take over Canadian business received its most significant impetus from the Free Trade Agreement, which came into effect on Jan. 1, 1989. Trade between the two countries has more than doubled since; it now totals a daily $1.3 billion, compared with about $500 million a day in 1988. But in the process, the FTA totally reoriented Canadas economic axis from east-west to north-south. Instead of perpetuating this nation’s founding metaphor of a bounteous land stretching from sea to sea, our defining horizon now faces due south. The FTA, later strengthened by the more widely ranging 1994 North American Free Trade Agreement, has placed this country into the jaws of a magnet that has transformed the very essence of being Canadian. We have, willy-nilly, become less the citizens of a country than of a continent.
The current foreign investment crisis flows direcdy from the nature of most free trade agreements. Aimed at eliminating
tariffs, they seldom respect those original boundaries. As their economies coalesce, the free trade partners expand into other, more intimate formats. These can range from customs unions to common markets and economic unions, allowing various degrees of free movement of people and money. The most dramatic recent example is, of course, the economic integration of Europe, complete with its plans for a common currency, plus unification of monetary, fiscal and social policies among its founding members. Only one step remains beyond such a cozy bonding: political integration. And that won’t be far behind. In a Aug. 30, 1999, speech in Frankfurt, German Chancellor Gerhard Schröder declared: “The introduction of the common European currency was in no way just an economic decision. Monetary union is demanding that we Europeans press ahead resolutely with political integration.”
That’s what makes the prospect of a common currency between Canada and the United States so frightening. Its mostly Canadian academic advocates insist it would guarantee monetary stability, allow us a better shot at buying out American firms and raise Canada’s standard of living by saving interest costs on our national debt. Perhaps. But we would also be sacrificing what’s left of our independence. Countries that share currencies require roughly equal debt-to-GDP ratios; any such move would wipe out Ottawa’s remaining social pro-
We have a government content to preside over
the dissolution of the country’s economy
grams, including medicare. “A common currency would turn Canada into another Montana or South Dakota,” warns Senator Jack Austin, who has studied the issue. “But God bless Alan Greenspan, who keeps reminding us that any other country using Yankee greenbacks must understand that his Federal Reserve Board policies stricdy serve the interests of the United States. That should warn us off any such tactics.” (Strange to have a stuffy Washington banker with Buddy Holly glasses cast as a guardian of Canadian sovereignty.) Still, prominent advocates for surrendering an even greater chunk of our sovereignty continue to be heard. Raymond Chrétien,
who speaks both as Canadas ambassador to Washington and as the PM’s nephew, has called for a customs union that would harmonize the two economies and “codify our future together,” whatever that means.
What it means is that the debate about American dominance over Canada is taking on far more dangerous directions than merely economic takeovers. Under a customs union, the bone marrow of our nationhood—our culture—would be at stake. Despite nearly 133 years of trying to harden its contours, ours remains a putty culture, penetrable and unshaped. American culture, in contrast, is the United States’ most successful commercial export. Hollywood, for example, amortizes most of its films in home markets, minting its profits from foreign
Swallowing Canadian companies
\41ue of U.S. acquisitions of Canadiern companies (in billions)
distribution. That’s why government-imposed exceptions that limit unimpeded access of its cultural exports are regarded by Washington as the equivalent of a declaration of war.
That was the issue during last summer’s magazine dispute. We had been sighted in the crosshairs of the struggle to make American culture so predominant that none others can thrive. Washington was determined to win access for its splitrun magazines (U.S. publications with Canadian advertising content), because if we stopped them, other countries might work up their nerve to try the same.
Washington need not have worried. Merely threatening retaliation was enough to persuade the Chrétien government to fold, risking the future of Canadian magazines in the process. “There’s a difference between compromise and collapse,” former Alberta premier Peter Lougheed told me recently. “And Ottawa collapsed.”
Next on the list was supposed to be a federal initiative to ensure a Canadian presence on the Internet, the most important medium of the 21st century. The CRTC neatly avoided that battle be£ fore it was joined by unilaterally declaring that Web pages in this country will require no Canadian content rules. Nada.
These two recent examples illustrate how difficult, if not impossible, it is to move against further intrusions of American investment. Anything we attempt to do to assert our sovereignty—economic, cultural or political— will be brought to a standstill by the empire to the south of us. The conquest of any nation takes place not on battlefields or in boardrooms, but within the hearts of its people and the minds of their leaders. Conquest requires surrender. The U.S. takeover of Canada owes less to American strength than to Canadian weakness. It is happening because at this crucial juncture in our history, we are led by a politician with only one priority: his government’s re-election. That he might find himself presiding over a hollowed-out nation-state, no longer in charge of itself, has never entered his mind.
Grieving for my country, at this midnight hour before the next millennium—left with the fugitive souvenirs of a misspent century—I am reminded of that long-ago cry from the heart of another beleaguered American neighbour, former president Porfirio Díaz of Mexico: “So far from God ... so near to the United States!”
My other memory is the exuberant outburst of chief U.S. trade representative Clayton Yeutter, at a White House signing ceremony of the Free Trade Agreement. “We’ve signed a stunning new trade pact with Canada,” he gloated. “The Canadians don’t know what they’ve signed. In 20 years, they’ll be sucked into the U.S. economy.”
Clayton Yeutter was wrong. It didn’t take 20 years. E3