Two huge issues for Canada

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The Canadian people desperately need someone who can and will save Canada.

Prime Minister Harper’s plans, if not stopped, will destroy the Canadian economy.

The ordinary working people of Canada know what has to be done.  They are looking for a leader who will do it. 

The first issue is that we have to stop all sales of Canadian companies to foreign entities.  There is absolutely no benefit whatsoever to the Canadian people or the Canadian economy in selling a Canadian company to a foreign entity. 

The other huge issue where Canadians are desperately looking for leadership is Harper’s delight in making big business deals with China, and also with the European Union.  Again, the ordinary working men and women of Canada know that these deals are disasters for Canada. 

The reasons why these deals are bad for Canada are two-fold:

o  We are tiny Canada (in terms of population) getting into a deal with a huge entity, China or European Union.  It is a deal between an elephant and a mosquito.  The mosquito never comes out ahead in this type of deal.

o  Rather than getting closer to China with the latest Harper deal, we should be cutting ties with China.  Our imports of manufactured goods from China are five times our exports to China.  This situation cannot continue.

We are at a crossroads in Canada now, created by Harper's proposed deals.  We are facing a stark choice.   Either we go forward with Harper to destruction of the Canadian economy, or we find leadership to stop Harper and put Canada on a path to economic recovery.

A funny/sad story

I want to tell you a funny story.  About three weeks ago I received a statement from the Liberal Party, stating how good the Liberal Party is and how bad the other parties are.  The criticism levelled at the NDP was that the NDP is against all sales of Canadian companies to foreign entities. 

In other words, the Liberal Party is saying that sales of Canadian companies to foreign entities are very good for Canada, and any party that does not support these sales is doing a disservice to Canada.

The funny aspect and the very sad aspect is that unfortunately the NDP is not against selling Canadian companies.  In a recent NDP policy statement I received today, there are comments made by Ms Helene LeBlanc, NDP MP for Lasalle-Emard, and Industry Critic, referring to issues of determining net benefit to Canada of the proposed Nexen sale, and also the issues of whether jobs will be protected and whether the head office will remain in Canada.

Ed Farkas comment to Ms LeBlanc:  If you are worried about these issues, then obviously you should come out strongly against all sales of Canadian companies to foreign entities.  In this way you will achieve the best chance of maintaining jobs and head offices in Canada.  If you discuss the details of a proposed takeover with the Conservatives, you legitimize the idea of takeovers.

The NDP statement also includes a statement by Mr. Peter Julian, NDP MP for Burnaby-New Westminster, and Natural Resources Critic.  Mr. Julian is quoted as follows:  "Foreign investments are crucial for reinforcing our economy, but we must ensure that these investments are not made at the cost of quality jobs and the sustainable development of our resources".

Ed Farkas comment to Mr. Julian:  My comment is the same as my comment to Ms LeBlanc.  In addition, I am very unhappy to see your statement "Foreign investments are crucial for reinforcing our economy."  Where did you get this statement?  What factual basis do you have for this statement?  Have you received instructions to use this wording?  Are you aware that this is the same wording used by the Conservatives and the Liberals?

Where is the left-leaning party that is supposed to be acting in support of the ordinary working (or unemployed) people of Canada?


Further discussion of sales of Canadian companies

The Conservative, Liberal, and NDP parties (alphabetical order) appear to accept “foreign investment” as a good thing.

 

“Foreign investment” is code for “selling a Canadian company to a foreign entity”.   A code phrase is used because it sounds better.

 

After decades of infinite repetition, many people use this code phrase without thinking of its real meaning.

 

Regardless of terminology, the fact is that a foreign purchase of a Canadian company provides no benefit whatsoever to the Canadian economy, to the Canadian people, or to Canada itself.

 

Often we hear

 

+   “…the need for foreign investment to grow our economy and create jobs.”

 

+   “We need foreign capital to develop our resources.”

 

These statements are completely and totally incorrect.

 

How could our economy get larger by selling one of our companies?  If we now own a smaller number (by one) of billion-dollar companies, our economy must in fact be smaller!  We have a one-time wad of cash, but profits and dividends formerly going into our economy from this company are now whisked out to the foreign entity.

 

The real and correct meaning of “foreign investment” applies to a case where a country does not have the capital needed to build a facility.  Examples:

+  A country borrows money from a foreign entity for use in constructing facilities that are needed immediately.  The country sees the interest payments as an acceptable price for having the facilities available at an earlier date.  The borrowed money is ultimately paid back to the foreign entity.

+  A foreign company comes in and builds a facility, such as a railroad, using its own money, and is compensated by receiving the profits from operation of the facility.


The issue of capital

Canada is a fully-developed country with plenty of capital. Based on the Vanier Institute report “The current state of Canadian family finances 2011-2012”,Appendix C, with data from Statistics Canada on number of households, Canadians own investments totaling over one trillion dollars. 

The dark side is Canada’s growing trade deficit in manufactured goods.  The trade deficit is real money sent out of Canada, never to be seen again.  This money is a true waste of capital.  Under a wise, rational, intelligent, government (have we had one of these in the last 50 years?), the capital we send out to foreign countries to pay them to do manufacturing for us could instead be used in constructive ways here at home.

 

When a foreign entity comes to Canada to buy a Canadian company, it is cherry-picking the best companies, not investing in Canada.  This process is the financial version of the one night stand. There is no commitment.  Even if a purchaser provides promises, usually the promises are broken.  Again same as a one-night stand!

 

A further result of a purchase is that control is put in foreign hands.  As one modest example, a foreign company purchasing a Canadian store chain will not be interested in ensuring that Canadian-made goods are on the shelves.

 

More serious is foreign purchase of a resource company.  Twenty years from now, the price of that resource, oil, coal, natural gas, or other, may be five or ten times higher than now.  Canadians may desperately need that resource for their own use.  But the mining rights are in the hands of a foreign entity that probably will not wish to sell to Canada.

 

Why have successive governments allowed the sale of Canadian companies to foreign entities?  Top officials of Canadian companies receive millions if their company is sold.  Maybe these officials influence the government to allow the takeovers. The shareholders also receive windfall profits.

 

In summary, when a foreign entity purchases a Canadian company, there is absolutely no benefit to the Canadian economy.  The only benefit is to the foreign entity, and to the country where that foreign entity is located. 


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