News

Foreign Takeovers: Pressure Mounts for Job Protection, Clearer Regs

Labour, and some corporate voices, say it's time to put some muscle on the Investment Canada Act.

By Ben Christopher, 26 Jan 2012, TheTyee.ca

Protestor for the defence of Canadian jobs

On the bus to Jan. 21 rally in support of CAW 27 workers locked out of U.S.-owned Electro Motive Diesel Company in London, Ontario. Photo by Tom Balint, CAW 99.

Text size:

Rate this:

Login/Register

Related

It goes something like this: a large multinational corporation saunters across the border, snaps up a Canadian business, and immediately throws a few hundred more of this country's remaining middle-class manufacturing jobs onto the chopping block.

That's exactly the scenario playing out in London, Ontario, say organized labour advocates, where over 500 workers have been locked out of an Electro Motive Diesel plant after the unionized workforce refused to ratify a new contract that would see their pay cut in half and their benefits slashed.

All of this just 18 months after the train company was scooped up by a subsidiary of the U.S. heavy machinery giant, Caterpillar, in a 2010 acquisition deal.

It's bad news for the members of London's local CAW 27, who staged a "day of action" rally in London this Saturday. But it could happen to anyone. That's the warning coming from a growing chorus of labour supporters, who say the bureaucratic machinery designed to protect Canadian jobs from mercenary multinationals -- a little-known piece of legislation called the Investment Canada Act -- has been willfully mothballed.

And it's not just unions complaining about the Act. Also looking for increased transparency and disclosure of government dealings in the assessment of foreign takeover bids, at least according to one economist, are foreign investors themselves.

A benefit to whom?

As it reads on paper, the Investment Canada Act is fairly straightforward. A foreign company cannot take over a domestic one unless it can be shown that the investment "is likely to be of net benefit to Canada," the legislation reads.

But according to Canadian Labour Congress president Ken Georgetti, the exact meaning of "net benefit" has not always been entirely clear.

"The circumstances of this lockout once again illustrate the shortcomings of the Investment Canada Act in protecting Canadian workers in foreign takeovers of Canadian companies," Georgetti wrote in an open letter to the Prime Minister early this month.

That the proposed wage cuts and subsequent lockout in London were introduced so soon after Electro Motive Diesel was purchased by the Caterpillar subsidiary, Progress Rail Services, is proof, says the CLC president, that the 2010 deal was not properly vetted.

By all accounts, it wasn't. According to a spokesperson for Industry Canada, the Electro Motive purchase was never subject to a full review. Instead, because the dollar figure attached to the deal fell beneath the cutoff for investments deemed big enough to review (which in 2010, stood at $299 million for companies operating within WTO member states), Progress Rail Services was simply required to notify the government of its intent to purchase the company.

Georgetti says that simply isn't good enough. The Act must be reformed, he says, to make job creation and protection the overt standard by which "benefit" is defined, to lower the cut-off of reviewable investments, and to make the decision process transparent and open to public input.

"The Act fails to ensure that foreign-owned takeovers of Canadian business have a 'net benefit' to Canada," Georgetti continues in his letter. "And once again, Canadian workers with decent-paying jobs vital to the health and growth of the Canadian economy are being betrayed by the weakness of the Act."

Georgetti points to other recent "failures" of the Act, which include the 2006 purchase of Toronto-based nickel concern, Inco, by the Brazilian mining conglomerate Vale, and the 2007 purchase of Hamilton's Steelco by U.S. Steel. In both cases, proposed cost reduction campaigns by the new owners resulted in protracted labour disputes.

Rubber stamped

As it happens, Electro Motive Diesel may not be the ideal poster child for the dangers of foreign ownership. When the company was picked up by Caterpillar's subsidiary in 2010, they were purchased from a consortium of private equity firms based out of New York and Boston. Before that, EMD was owned by one of the world's largest multinational corporations: General Motors. When the London, Ontario plant was opened in 1949, it was Detroit giant GM that built it up to the prominence, which Georgetti now says is under attack by foreign corporations.

But that isn't necessarily the point, says Andrew Jackson, chief economist for the Canadian Labour Congress. "We aren't opposed to foreign ownership in general," he says. "Some foreign owned companies operating in Canada provide good jobs and invest quite a bit in Canada."

But there does need to be additional oversight when an acquisition is made, he argues. Multinational corporations are more likely to streamline their operations by shutting down components of their new purchase that the company is already performing elsewhere, and abandoning ties with Canadian suppliers. In addition, he argues that Industry Canada regulators need to ensure foreign businesses aren't simply gobbling up the Canadian competition to gain access to valuable R&D, or to gain untoward control over a particular natural resource.

While regulators might be making those kinds of assessments, there is no way to be sure, he says.

"The government does have a lot of discretion to turn down a foreign takeover if it's deemed not to be a net benefit to Canada," says Jackson. "But the impression is that for the most part, applications are glanced at and rubber stamped."

From FIRA to Investment Canada

SFU professor Marjorie Griffen Cohen shares that impression of the Act.

"In practice it means almost nothing," she wrote in an email exchange with The Tyee. "Right now everything simply goes to the highest bidder and that type of process rarely allows the needs of the people or the country to be considered."

But things weren't always this way, she says.

In 1973, Pierre Trudeau created the Foreign Investment Review Agency, which established a rigorous screening process for large-scale foreign investments. Introduced just two years after the advent of the first Canadian Content regulations, the establishment of FIRA was a response to considerable public concern over the growing power of multinational corporations and the growing influence that those corporations (especially the American ones) were seen to exert over the national economy and Canadian culture.

But in the 1980s, the Mulroney government found FIRA restrictions too onerous a set of constraints on foreign companies wishing to do business in Canada. They protected Canadian jobs, the argument went, by coddling inefficient businesses at the expense of economic growth and dynamism. In 1985, FIRA was given the friendlier designation, Investment Canada, and the Investment Canada Act was passed, greatly reducing the agency's mandate.

Since then, says Cohen, under Conservative and Liberal governments alike, federal oversight over foreign investment has been cursory and, worse yet, utterly opaque.

"I imagine that the lack of any serious evaluation and even criteria for evaluation is not something the government would want to have visible," she says.

Unlikely bedfellows

In this call for additional transparency, organized labour is joined by an unlikely bedfellow: multinational corporations and global capital markets.

"The [Investment Canada Act] is often criticized for a lack of transparency both by investors and by citizens or groups interested in monitoring approval processes and commitments made," writes Steven Globerman, an economist who teaches at Western Washington University and SFU. "Investors also have concerns about consistency in the application of the criteria for reviewing investments."

These concerns came to a head in Nov. 2010 when, in one of the first times in recent memory, the Act was used to kill a major investment proposal, blocking Australian mining giant BHP's takeover bid of the Potash Corporation of Saskatchewan. Then-minister of industry Tony Clement explained the decision as a necessary step to retain national control over a vital natural resource.

But at the time, some critics claimed that politics had much more to do with it. Saskatchewan Premier Brad Wall had come out strongly against the proposed takeover in the lead up to the Industry Canada decision. Throughout that fall, Wall rallied opposition to the idea of foreign ownership across Saskatchewan -- a province the federal Conservatives needed the support of in the upcoming 2011 election.

In a paper published last fall by the University of Calgary School of Public Policy, international business attorney Lawrence L. Herman sums up the critique from the business side:

"More transparency and public disclosure of ministerial decision-making will lead to more consistency, as foreign investors will know the hurdles they have to meet," says Herman.

In other words, while labour and capital may differ over how aggressively they'd like to see foreign investments vetted, both want a peak behind the curtain at Industry Canada.

'We just can't write letters anymore'

To labour organizers in London and throughout Ontario fighting against what they see as an assault on the Canadian middle class, debate over the minutiae of federal foreign investment policy can seem a little abstract.

In a show of solidarity with the locked out London workers, Doug Nesbitt is helping to organize a series of pickets at Caterpillar equipment dealerships in and around Kingston this coming Friday. Acting independently of CAW, the Queen's University TA and co-chief steward of the Public Service Alliance of Canada local says similar demonstrations of support have and will take place in Toronto, Hamilton, Peterborough, and London.

Nesbitt says he hopes that by putting pressure on local suppliers, the financial pinch "will run up the chain to Caterpillar itself."

Asked about possible reforms to the Investment Canada Act, Nesbitt says that while the business plans of some foreign corporations may deserve special scrutiny, Canadian corporations are often no better. Either way, he says, that is not the focus of his campaign.

"The union in Canada is in a tough place," he says. "They are going to be destroyed unless we change the way that organized labour does solidarity work. We can't just write letters anymore. We have to actually start applying economic and political pressure." [Tyee]

Ben Christopher reports on labour and industry issues for The Tyee and others.

28 Comments:

Login or register to post comments

  • Fiat lux

    3 weeks ago

    IT should be clear to anybody

    IT should be clear to anybody with bit of brains and there are all kinds of statistics showing that some 90% plus of "foreign investment" takes over existing businesses, and fires workers. Applauded by our politicians , praising their "wealth creating efficiency", begging for more.

    It would be interesting to see whether foreign investment every "creates" any net number of jobs at all in any given year.

    Foreign investment is part of the national debt, a liability and nothing more than asking for impoverishment and liability.

    In other words, it is a goddamn fraud to steal the country blind. Why should we waste any resources to buy useless fighter planes, when the country is up for sale and "free trade" overrules democracy ?

    Now try to tell this to our politicians and economics professors.

    Ed Deak.

  • Van Isle

    3 weeks ago

    I agree with Ed but our

    I agree with Ed but our problem is the bloody idiots who spue economic claptrap over the television and radio waves. The average policitian is being told what and how to think.

  • Fiat lux

    3 weeks ago

    Van....This is exactly why I

    Van....This is exactly why I always talk about the crap originating in our universities as "economics" and being used to brainwash the public and licence politicians to commit irresponsible and criminal acts.

    Exactly the same way religions have been and are still used as licences to enslave and commit mass murder as the Will of God.

    Neoclassical economics are just another form of religion used for the same purpose.

    Just watched Harper making a speech in Davos to the leaders of the international corporate mafia on how well Canada is doing and promising that environmentalists won't stop the pipelines.

    The guy is going crazier and more irresponsible by the minute.

    Ed Deak.

  • igbymac

    3 weeks ago

    The fix is in

    ...and there will be no stopping it by conventional means. The government has little, and ultimately no, reservation in gunning you down or targeting you and making your life hell if you do not STFU or comply.

    The reality is most people, and I mean the vast majority, are not interested in learning. Natural inquisitiveness has been beaten out of them, and the educational system is not designed to foster such a gift.

    When the economic-political charade finally collapses upon its own sword, the people we finally accept what is abundantly obvious already: the hegemonic pursuits of Empire are dictating our politics, and we will never be free from the decisions of empire until we start to make our own.

    So letting self-grandizing destructionists like Stephen Harper anywhere near a position of influence is what we first need to understand must not be allowed to happen. Personally, I wouldn't entrust the man with feeding my dogs.

  • A Voice

    3 weeks ago

    Kodak

    Classic scenario...Kodak buys Creo in Vancouver, sells off the assets, outsources the intellectual properties off shore, and gets rid of most of the work force. Perfectly viable & profitable company in the lower mainland...destroyed.

  • For a better world

    3 weeks ago

    US Job Recovery Program?

    The transfer of the Electro Motive Diesel plant to US operations could be part of Uncle Sam's job recovery program, and this scenario may be just the tip of the iceberg. This approach is more likely than bringing back Corporate operations from China. Corporations do not want forgo any of their lucrative profits. They plan to continue utilizing cheap Asian labour with virtually no employment, health, or environmental standards.

    We have already seen where forest manufacturing jobs have shifted to the US Northwest through our exportation of stumpage-free logs. Of the $5 billion in Canadian export taxes illegally levied by George W Bush, most of the $4 billion returned to Canadian operators was used to upgrade American facilities.

    The Canada/US lumber tiff is a game initiated by forest giants. Their main objective is to acquire public resources for nothing. They do this by playing one government against the other. Many of these forest giants have operated on both sides of the border.

  • Fiat lux

    3 weeks ago

    I have long suspected that

    I have long suspected that the main reason for the financial deregulation in the 80s and 90s, pushed by special interests and politicians under their control, has been the major takeover and collectivization of global economics.

    Now they have huge reserves, both in resources and capital and are forcing the world into a major depression, which would, or will, give the total control over humanity.

    Harper's involvement with the Citizens Coalition, set up to wreck Medicare, is also part of his involvement in these future plans for dictatorship and enslavement in true blue Soviet style, while waving the flag of "free enterprise capitalism".

    There's been a push by Ecuador and other countries for some financial re-regulation at the WTO level, but it was shot down by the EU, USA and "Canada". Guess why, and why we have almost a million in foodbank lineups, growing by the day, while Harper is making a speech in Davos on how well Canada is doing with "job creation" and planning to cut pensions.

    Ed Deak.

  • anne cameron

    3 weeks ago

    let's all

    learn a different way of counting...ein, zwei, fier, phumf....spelling is difficult, probably not correct but I'm sure you get my drift...

    Ed Deak, I love ya!

  • dorothy

    3 weeks ago

    It takes two parties to tango

    Why is it that we always rant about the foreign investors and about the government that lets them invest. Why don't we ever take potshots at the deserters, who cash out while the going is good and leave 'their' workers to the tender mercies of whatever goonsquad will fork over the cash? Should it not be imperative that they take care of or compensate the people who have helped accumulate the wealth they bundle up and ride into the sunset with?

  • rantnic

    3 weeks ago

    YA GOTTA BLEVE

    Is the second son of God really the now recognized "person" General Electric. Should we all now bow, as our politicians do to this new Deity? "The Economy is my master, I shall not want. It maketh me lie down with the wolves, but I am protected for GE stands with me, because I am a shareholder".

  • frank2

    3 weeks ago

    We need more economic

    We need more economic nationalism. I'd like to see foreign take-overs banned, though I appreciate the practical difficulties of policing this. But there have to be sharper teeth introduced into existing rules.

    At the same time, we need to see more efforts to implement overall regulations which slow the impoverishment of the majority. everything from requiring payment of a living wage, to requiring worker representation in corporate decision making, etc. etc.

  • Fiat lux

    3 weeks ago

    Some jerk, who was the head

    Some jerk, who was the head of GE, said it years ago that he would like to put all production facilities on barges, so he could tow them around to the lowest wage areas of the world.

    Just watched the news on CBCTV and there was a line running across the bottom of the screen that some company in Montreal is firing 700.

    Most likely taking the work to China to be energized by Tar Sands oil from the Enbridge pipeline. Harper just declared it in Davos
    that it will be built, because he says so.

    When Mulroney's first FTA racket became a reality with his reelection in 88 with 42% of the votes, beating even Harper's 39%, the first company that announced moving out of Canada was Gillette, the very next day.

    I threw out all my Gillete products right then and never bought a single one since. Neither are we shopping at Walmart. If a few million people would follow this example, we could see some results.

    When will people and the opposition realize that Chinese and other slave labour products imported are not "cheaper", but "more expensive", yet our economists and "conservatives" are not calculating the real costs, as it would upset their braindead theories.

    Ed Deak.

  • RickW

    3 weeks ago

    dorothy

    Quote:
    Why don't we ever take potshots at the deserters, who cash out while the going is good and leave 'their' workers to the tender mercies of whatever goonsquad will fork over the cash?

    With the emphasis on "potshot"....because I think it will be coming to that.

  • Kreditanstalt

    3 weeks ago

    "...of net benefit to

    "...of net benefit to Canada..."

    "...the needs of the people or the country..."

    (?)

    The only employment likely to come from such vague, imprecise, unquantifiable mandates is...more lawyers!

    Perhaps it's best just to abolish FIRA altogether. Were I planning an (profit0making!) investment in Canada, I wouldn't want governments interfering at all. Heavens, it might discourage ALL foriegn investment - period.

    The profit motive - which of course drives ALL planned investment - is totally incompatible with ill-defined, intangible and highly political "needs of the country", "stakeholders", "needs of the people" and " net benefits", etc.

    Good grief. Get real. In the not-too-distant future, heavily indebted and job-short jurisdictions like Canada will probably be begging for ANY foreign investment...

  • beyond hope

    3 weeks ago

    Opium of the People

    As long as we remain deeply sedated by inane video games, YouTube, Facebook and Twitter, the latest "must have" Apple products, regular trips to the mall for some good 'ol "retail therapy" and celebrity gossip programs on the 50" flat screen, Canadians will remain blissfully unaware of the blatantly obvious. Consumerism-the opium of the people.

  • Cynic

    3 weeks ago

    This article points to yet

    This article points to yet another example that proves our government is actually our enemy. Somehow we have to stop them. I heard harper on the radio today, he's overthetop, blatant dictator-speak, doesn't give a shit about Canada or Canadians. How can it be that we endure such obvious disregard for our country? Who voted for this little protofascist?

    Our government is our enemy.

  • Fiat lux

    3 weeks ago

    Cynic.... We need government,

    Cynic.... We need government, as we need police on the roads to ensure safety, so perhaps you should qualify that it is not the principle of government that's causing the problems, but the people who are running it.

    One of the main reasons for the demands for "small governments" by the ruling classes is that they want to take over and dictate, as they're doing in right now with their pimps in power.

    In other words, we need democracy back in governments.

    Ed Deak.

  • Granville

    3 weeks ago

    Britain, 1965.

    The U.S. 'owned' 13% of the the British economy. Most people thought that was 12% too much.

    Almost every country on earth is worried about foreign ownersip, except a few like China, North Korea and Taiwan.

    The one country that has a genuine beef is Tibet. Do BC trade unionists ever think about Tibet? Is there an International Brigade to free that poor country, invaded and culturally-dominated-by-a-foreign power country as it is?

    Ponder that and remember; if we in BC have a problem it is all relative.

  • Cynic

    3 weeks ago

    Absolutely, Ed. I blame the

    Absolutely, Ed. I blame the elite, not "government" per se. As I said it's them, not it, that we have to stop. It's truly chilling to see how flagrantly arrogant they're becoming. I think they feel secure in their control of the security forces, that the security forces will defend them and enforce the nwo. We're not going to get the elite on our side, so our challenge is to get the forces to turn around.

  • RickW

    3 weeks ago

    Kreditanstalt

    Quote:
    In the not-too-distant future, heavily indebted and job-short jurisdictions like Canada will probably be begging for ANY foreign investment...

    Guess what? It's here (and it has been for quite some time). "Foreign investment" is the mantra of just about every government, federal and provincial, that we've had for the last 1/2 century.

    So answer me this: why do Canadian mining companies operate profitably overseas, and foreign companies develop mines in this country?
    http://www.stopajaxmine.ca/blog/another-response-to-peter-kent

  • Kreditanstalt

    3 weeks ago

    @RickW

    Answer? High-grade ore bodies don't respect government boundaries. Plus growing resource scarcity, high demand & world prices for metals...?

    But how many companies in Canada make machine tools, coathangers, clothing, TVs, CD players, PCs, motherboards, computer chips, bicycles, clocks, high-end watches, cell phones, iPads (etc.), medical equipment, nails/brads/staples/fasteners or light fixtures?

    And of these very few how many can find markets overseas?

    Our problem is HIGH LABOUR COSTS. It takes a gold mine to attract foreign investment, I guess...

  • Fiat lux

    3 weeks ago

    High labour costs are the

    High labour costs are the result of high prices and high profits in and respectable, democratic society,trying to ensure decent living conditions for citizens.

    We had all those industries,- including my own manufacturing shops-, producing for the local markets, employing skilled people, paying decent wages, owning their own homes with one breadwinner per family. No foodbanks for employed people.

    But it was all ruined, wrecked and sold off to "foreign investors" who now control our economy, inflated the money supply, raised costs, stripped the country, plus the fraudulent "free trade racket.

    As the then Executive VP of the Royal Bank, Edward Neufeld said it in a speech in Singapore on Oct. 18, 1991, (taken verbatim from a tape) :"It is in the national interest and makes sense for Canadian manufacturers to move to Mexico and cheap labour to remain competitive or perish, and bring back the profits to repay investors"

    Now they moved to China, wiped out also the Mexican middle class and private enterprise, replacing it with virtual civil, gang, warfare over drugs. The country has been ruined, with Canada on the way, by economists miseducated in universities under
    the control of the corporate mafia and crooked politicians in their pay and service.

    The good old communist/capitalist/conservative conspiracy to enslave the world, with the best example of their brotherhood in China.

    The whole crime wave is so obvious that it is painful to watch, yet some people still support the crooks who are forcing it on us, with their ignorance and votes.

    Ed Deak.

  • Granville

    3 weeks ago

    Who will take over when China's labour rates are too high?

    The Race To The Bottom should be an Olympic event. It is too late for the 2012 London Games, but it is a shoe-in for 2016.

    There ought to be a bi-athlon event with a 100-metre relay dash, and a dive from the 10-metre board into a dry pool.

    The winner would be the country that doesn't enter. Second place would go to the country that outsourced the race and third prize would be the country with the highest rate of unemployment. The judges would be the IMF. France could surrender, gracefully.

  • RickW

    3 weeks ago

    Kreditanstalt

    But you didn't answer why a Canadian company would go overseas, instead of developing the mine that some Polish company wants to develop.

    If said Polish company wants to operate in Canada, does it have a way around your so-called "high labour costs"?

  • North of Hope

    3 weeks ago

    Harper Cartoon

    I believe this captures the spirit of Harper.

    http://thechronicleherald.ca/editorial-cartoon/2012-01-29-editorial-cartoon

  • OwlRol

    3 weeks ago

    ICA is a regulatory body, antithesis to free marketers

    Can't rethink the Investment Canada Act without rethinking Harpo's "market forces" mantra.

    He has lowered federal corporate taxes to about half that of the USA. He wants to fast track environmental asessment procedures for corporate projects. He cares little about organized labour's issues and defunds organizations that oppose his rugged development agenda. He's a strong, narrow track, economic advocate of Free Trade and deregulation.

    The ICA is a regulatory body that, I suspect, he and others would like to be rid of, but it would look bad in the public eye.

    So keeping it ineffective is the next best option in the deregulatory mind, especially in the corporate-government, revolving door model.

    As badly as foreign investment regulations need an overhaul, I can't see this Harper government willingly embarking on such a course, likely they prefer an opposite direction, if politically possible.

  • OwlRol

    3 weeks ago

    Energy vs labour costs ultimately cancel free markets

    Several corporate plants moved back to Mexico from China due to high fuel and transportation costs (just before the meltdown). If fossil fuel prices continue to increase with recovery, that parade back to N. America will increase.

    This may likely be the urgent trans national corporate agenda of expanding coal, oil and gas exports, not just fossil fuel profits.

    Without those cheaply available fossil fuels, globalized transport becomes much more unaffordable, even as labour costs (even in China) increase.

    At some point, labour costs will drop below fossil fuel energy costs, especially on long distance transport, and that will push local or regional production and consumption to a new level, beyond ethical or environmental sensibilities, to very practical activities.

    Thus the major, mid to long term concern of trans-national corporations, without a cheap mechanism for long distance transport systems, is that they will wilt and die.

    But the hodge podge, poorly planned systems of the free market, when it becomes ineffective by bankruptcy, crash or otherwise, will hurt us all into rethinking our systems.

    Trouble is that most of us, including politicians and CEOs don't want to think that far ahead.

    Koodos to Harper' crew to even think about long distance costs for pensions, albeit a matter of spending priorities, such as idiotic F35 purchases, but even here they refuse to consider other long term issues equally or more significant beyond that bottom line. Sad sack blinkered thinking.

  • trick

    3 weeks ago

    @ Rick W

    'But you didn't answer why a Canadian company would go overseas, instead of developing the mine that some Polish company wants to develop.

    If said Polish company wants to operate in Canada, does it have a way around your so-called "high labour costs"?'

    Yep. Simple, albeit sad...Canadian mines operate in foreign countries by hiring foreign workers for a pittance. Foreign companies operate mines in Canada by bringing in their own workers - also at a pittance. It works both ways! Miners don't care where they work - after all, it's all underground! - as long as everyone makes a buck. When was the last time you met a Canadian miner, someone who actually went down the hole every day? We used to have the best in the world. No more.