Wednesday, May 09, 2007

“Even the Montreal Canadiens are now American…”

Sources: CanWest News Service: Tories slammed for standing by as firms gobbled up; Financial Post: Canada Inc. needs better governance; Flaherty to issue clarification on tax policy; Ottawa Citizen: Pressure mounts on Tories to explain takeover policy

The title of this entry is a statement made by a member of the New Democratic Party (NDP) in Canada. It illustrates how political tensions are mounting there over two related policies that affect international commerce:

1) The “gobbling up” of Canadian firms by foreign entities—a government agency, Investment Canada, is charged with overseeing and approving or denying bids by foreign interests to take over domestic companies—it has yet to deny a single bid.

2) A proposal by the Conservative (Tory) government that would eliminate the ability of Canadian corporations to deduct interest from loans used to finance foreign investments. The Tories claim the measure would prevent “double-dipping” by domestic companies that locate in “tax havens” and so already avoid paying Canadian taxes. The Liberals and the NDP, however, claim that the policy undermines the competitiveness of domestic companies in the global market.

Tensions regarding these policies have increased in the wake of a hostile takeover bid by the U.S. based Alcoa, Inc. of Canada’s Alcan. Both are major aluminum producers. However, it does not appear that Alcoa will be alone in trying to acquire Alcan, significant interest has come from other foreign corporations as well.

Alcan joins a growing list of Canadian companies that have been purchased by foreign interests, and minority parties are beginning to question whether or not the takeovers are serving the best interests of the Canadian people. In particular, concerns have been voiced over potential job losses. Quebec’s Industry Minister noted that “[t]he government does not intervene in financial markets or the structure of ownership of companies,” but “[w]e do intervene to preserve jobs.”

For discussion:

Do you think the Canadian government can “intervene to preserve jobs” without “intervening in financial markets or the structure of ownership of companies”?

Do you think job preservation is a proper role for the government?

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