The old debate over the value of foreign investment has resurfaced with the possible sale of Alcan and Stelco, and with the 2006 foreign takeovers of other major Canadian firms, including the Hudson’s Bay Co., Inco, Dofasco and Falconbridge. An Ipsos Reid poll in May showed that 56 percent of Canadians were concerned about foreign ownership of Canadian firms. According to NDP leader Jack Layton, ”œThe country is going to hell in a handbasket.” Also concerned, but much less dramatic, were the federal Liberals, who called for a three-month moratorium on the takeover of large Canadian companies, during which time an expert panel would study Canada’s foreign investment laws.

As Canadian politicians, journalists and academics discuss the role of foreign capital in the Canadian economy, it is worth recalling that we have been here before. In the late 1960s and early 1970s, Canadians argued vigorously about foreign invest- ment. Though much of the vocabulary has changed since then, our current discussion largely mirrors that earlier debate.

The economic nationalists of the 1960s and 1970s had a wide range of complaints about foreign investment, which they believed limited Canada’s sovereignty and damaged the country’s economy. Foreign-owned companies, they asserted, were less likely to seek export markets, to use the services of Canadian professional firms (accountants, architects and the like), to employ Canadians in senior manage- ment roles, to purchase domestic components and supplies and to conduct research and development in this country.

Most of these assertions were not supported by empiri- cal evidence. In fact, the one economist to conduct extensive research on this issue, A.E. Safarian, concluded that many of these claims were unfounded. Nonetheless, the nationalists pushed for limits to foreign investment, and the Trudeau government responded by creating a company that would buy up Canadian firms that might otherwise fall into foreign hands, by establishing an agency to screen the influx of cap- ital from abroad and by creating a national oil company.

For the critics of foreign investment, these were empty vic- tories. Rather than pursuing a nationalist mission, the Canada Development Corporation (CDC) struggled to balance two objectives, keeping Canadian companies in Canadian hands and making a profit for its shareholders. For the nation- alists, the CDC leaned too often toward the latter goal. They also denounced the Foreign Investment Review Agency (FIRA), because it recommended approval of the vast majority of applications for new foreign investment in Canada.

In 1976, the minister responsible, Jean Chrétien, made the government’s position clear when he emphasized the value of foreign investment and expressed doubts about nationalists, people who were often ”œusing the flag for their own interests.”

Chrétien was skeptical about the nationalists, because he thought their cause was one of self-interest and their proposals would not benefit the major- ity of Canadians. ”œThere are a lot of places in Canada where people don’t give a damn who owns what,” he insist- ed. ”œThey want a job.” Though foreign investment did indeed bring costs, it also provided benefits for many Canadians. Members of the working class who wanted well-paying manufac- turing jobs had little interest in a move- ment to turn away foreign capital. They were skeptical about policies that went against their material self-interest.

A further problem with the nationalist agenda was that it fostered regional conflict. Polls showed that prosperous Ontario provided the greatest support for limits on new capital from abroad. At the same time, however, other regions were desperate for funds to promote develop- ment. In the late 1960s and early 1970s, premiers in the western and Atlantic provinces were desperate for capital and condemned proposals to screen or limit foreign investment. As historian Michael Bliss wrote in 1970, Newfoundland pre- mier Joey Smallwood was willing to ”œdeal with the devil if he has the capital to produce jobs for Newfoundlanders.”

The ebbs and flows of anti- Americanism also help explain the brief success but ultimate failure of the nationalist movement in the early 1970s. For many Canadians, the United States represented violence ”” violence against the Vietnamese, against civil rights protesters, against college students. Many Canadians doubted American values and yearned to dis- tance their own country from its neigh- bour to the south. In the mid-1970s, after the United States pulled out of Vietnam, and after rioting in American cities and on college campuses came to an end, anti-Americanism in Canada waned. The nationalist movement lost its momentum, in part because anti-American sentiment was now fading.

Though the nationalists may have roused middle-class Ontarians, they did not convince the Canadian public or the government of the value of their propos- als. Trudeau enacted some symbolic measures to demonstrate a concern with foreign investment, but the Liberal gov- ernment itself was never fully commit- ted to the nationalist agenda. The Foreign Investment Review Act had been passed in 1973, when Trudeau’s Liberals were in a minority position in the Commons. At the first opportunity, after the govern- ment’s majority was restored in 1974 and after the nationalist movement began to lose strength around the same time, the cabinet began to back away from FIRA and other such measures.

Though the term ”œnationalism” is seldom used in today’s debate, those arguing for restrictions on foreign invest- ment espouse views similar to those of nationalists from the 1960s and 1970s. They now talk of the ”œhollowing out” of corporate Canada ”” the transferring of head office functions abroad, and with them the related executive, professional and research jobs. They assert, without much argumentation, that foreign investment threatens Canada’s sover- eignty, leading, in Layton’s words, to ”œthe loss of our ability to chart our country’s future.” Foreigners also threaten Canada’s national identity. According to Layton, ”œthere is an intangible value in the pride and identity that is attached to Canadian business icons.”

When companies like Molson, Labatt, the Hudson’s Bay Company and the Montreal Canadiens are sold to for- eigners, ”œour collective sense of identity takes a hit,” Layton argued. Much like those of the earlier period, these asser- tions were not based on empirical research. A March 2007 study by the Institute for Competitiveness and Prosperity suggested that the ”œhollowing out” of Canada was a myth. The critics, however, dis- missed the report, pointing out that it was based on data that might have been the most recently available but did not include the takeovers of 2006 and 2007. They offered no alter- native evidence or analysis.

Much as today’s nationalists share many of the ideas of those from the 1960s and 1970s, so their fate will likely mirror that of their predecessors. All the ingredients that contributed to the failure of the nationalist agenda in the 1970s ”” the public’s reluctance to turn away foreign capital, the divisive nature of nationalist policies, the unwillingness of the government to take substantive action and the shifting terrain of anti-Americanism ”” will play a role in preventing a new generation of nationalists from achieving their goals.

Canadians continue to covet the benefits that flow from foreign capital, despite the problems associated with it. May’s Ipsos Reid poll, which showed sub- stantial Canadian concern over foreign investment, also revealed that more Canadians (40 percent) believed that the current level of outside capital ”œbenefits the Canadian economy as a whole” than those (37 percent) who thought that for- eign investment ”œhurts the Canadian economy.” The poll reflected not just the views of those concerned about employ- ment, but also investors who want high- er share prices. A larger pool of potential buyers helps to raise a stock’s value, which is why Claude Lamoureux, presi- dent of the massive Ontario Teachers’ Pension Plan, defends corporate takeovers as an essential part of globaliza- tion and good for the countries involved.

Nationalist policies continue to divide Canada by region. In the most recent poll, Ontario registered the high- est level of unease about foreign invest- ment. Editorials in the Toronto Star and the Globe and Mail raised concerns about the issue, while the country’s other major newspapers ignored the matter or argued against further government intervention. The Vancouver Sun, for example, insists that foreign investment ”œenhances trade, creates jobs, fuels innovation, increases the pool of capital and generates revenue for government.”

The government itself is reluctant to become involved. In November 2006, it announced plans to appoint an expert panel to review the relevant legislation, but six months later it still had not been created. Industry Minister Maxime Bernier has rejected calls to expedite the panel’s work or to delay any large takeovers until the review is complete. A change of government is unlikely to alter Canadian policy in any substantial way. The Liberal Party is a diverse organ- ization. Its ranks include David Orchard, an old-fashioned protectionist, but also many more who agreed with Jean Chrétien and Paul Martin when they pursued measures to foster international trade and stood by while foreigners took over Canadian enterprises. The Liberals may talk about reviewing investment laws, but it is hard to imagine that they would do anything substantive to limit foreign capital once in government.

Finally, much of this new debate aris- es at a time when Canadian opin- ions of the United States are at another low point. George W. Bush’s disastrously conceived, inadequately justified and calamitously executed war in Iraq has spurred Canadian doubts about the United States, much as Vietnam did more than 40 years ago. A recent Globescan poll for the BBC showed that 56 percent of Canadians believe that the United States has a ”œmostly negative” influence in the world, compared to 34 percent who believe the US plays a ”œmostly positive” role. Still, this situa- tion cannot be expected to last. Bush’s presidency will end in January 2009, and his successor, whether Hillary Clinton, Rudy Giuliani, John McCain, or Barack Obama, will surely distance a new administration from the mistakes of the old. With the rhetoric of the Bush years gone, and as the US struggles to extricate itself from Iraq and rebuild its position in the world, Canadian hostility will decline, much as it did in the mid to late 1970s. Support for limits on foreign cap- ital will subside long before nationalists can convince the Canadian public of the necessity of such measures and before the government can enact them.

Older observers no doubt feel a sense of déjaÌ€ vu when watching the current debate over foreign invest- ment. We have indeed been here before. The circumstances are similar enough to suggest that today’s efforts to limit foreign capital will fade in much the same way that they did the last time we travelled this road.

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