Trying to have it both ways

Canada's attitude to foreign ownership of the country's major industries has generally fluctuated between suspicion and outright hostility.  Many years ago, the old Foreign Investment Review Agency (FIRA) was a byword for economic xenophobia.  FIRA is long gone, but the Federal government maintains -- and does not hesitate to use --  the power to rule on whether proposed foreign investments are in the national interest.  Some sectors of the economy are off-limits to foreigners altogether: banking, for example.  Foreign involvement in that industry is tightly regulated, even as Canadian banks go on acquisition sprees abroad.  My own former employer, Toronto Dominion, now has more branches in the US than in Canada, yet Canadians would never tolerate a US bank building up such a position within Canada.

In the past, the main concern for Canadian policymakers was to prevent excessive US control over the domestic economy.  Nowadays, the would-be investors come from further afield.  Last year, the Canadian government attracted international opprobrium for turning down the proposed acquisition of Potash Corp. by BHP Billiton of Australia.  Currently there are at least two major deals awaiting the Federal nod, both in the petroleum sector.  A proposed takeover of Progress Energy by Petronas of Malaysia has already been turned down, though the Government has given Petronas an opportunity to make fresh representations.  Also pending is a megadeal for CNOOC of China to purchase Nexen Inc.

The Government is stalling on making a final decision on the CNOOC-Nexen deal, supposedly on the grounds that it wants at the time it announces its decision also to set out its general approach to foreign ownership.  (Prediction: it will be ambiguous).  The fact that an authentically right-wing government like the current one in Ottawa has to agonize over this is the clearest possible indication of the level of public hostility that still exists towards foreign investors.

An added complication is the rise of sovereign wealth funds, in countries from China to the Middle East, who are constantly on the lookout for investment opportunities in Canada and elsewhere.  Here's the thing, though:  Canada has its own equivalent of the sovereign wealth funds, in the shape of the massive public sector pension funds of the larger Provinces, notably Ontario and Quebec.  These funds are enthusiastic buyers of foreign assets, especially in the UK, where they own stakes in the Channel Tunnel and various airports -- the type of assets that Canadian governments of almost any stripe would almost certainly place off-limits for foreign buyers.

Time to grow up, perhaps?  When Canadian banks are hoovering up branch networks across the US, and Canadian pension funds are buying up strategic assets in Europe, maybe the government should try to offer comparable treatment to companies wanting to bring money into Canada.  That would take a bit of courage: the tone of public debate on the CNOOC/Nexen deal, in particular, shows that Canadians still want to keep foreign investors well away from the "commanding heights" of the economy.