The case against opening up Canadian businesses to foreign ownership – by Madhavi Acharya-Tom Yew (Toronto Star – July 4, 2012)

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Erin Weir, economist for the United Steelworkers, doesn’t dispute the potential upside of new investment, but he says it’s important to consider the potential pitfalls of foreign takeovers – particularly the loss of Canadian head offices and the jobs that go with them.

For unions, a foreign owner can lead to a loss of bargaining power. The United Steel Workers had substantial bargaining power with Inco but that changed when Vale bought the company in 2007.

“Then the unions representing Canadian miners had a lot less negotiating power because Vale operates mines producing the same commodities around the world,” Weir said. Not only are they more difficult to bargain with, but foreign managers are less tolerant of Canadian norms, Weir said.
 
“We have found that foreign employers have been especially aggressive in trying to take away defined benefit pensions. That probably reflects the fact that in many countries, an employer would not be expected to provide a pension,” he said. “Managers of multi-national corporations are often not very accepting of the need to provide defined benefit pensions in Canada.”
 
The year-long strike by workers against Vale in Sudbury – and an 18-month strike against the company in Voisey’s Bay, are examples.

Late last year, the Canadian government and U.S. Steel Corp. settled a court case that started when Ottawa sought to fine the firm in 2009 for breaking job-projection promises it made when it bought Hamilton-based Stelco in 2007 for $1.1 billion (U.S.). Its decision to idle the facilities affected about 1,500 jobs.

Weir suggests there’s often a rush to say that a Canadian company would have to close its doors if not for a foreign takeover, but he’s skeptical.
 
“If the consequence of rejecting it is that the business would be shut down completely, that would be a pretty good argument for allowing it. But it doesn’t seem likely that Inco would have gone out of business if Vale hadn’t taken it over.”
 
Weir isn’t opposed to all foreign ownership, but suggests the review process under the Investment Canada Act needs to be more robust.

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1220767–canada-day-week-debate-last-of-three-parts-the-case-against-opening-up-canadian-businesses-to-foreign-ownership