The Toronto Star is the largest circulation broadsheet in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. This column was originally published November 16, 2010.

“But it is not reciprocity to allow Vale to buy Inco. The Brazilian government has the absolute right to stop any takeover of Vale. Reciprocity would mean that if Vale has the right to buy Inco, then Inco would have the right to buy Vale. Similarly, it is not reciprocity to allow BHP to buy Potash. As part of the BHP-Billiton merger, the Australian government imposed draconian restrictions on BHP, meaning that BHP can go hunting internationally but it can never be hunted.” – Roger Martin, November/2010

Roger Martin is dean of the Joseph L. Rotman School of Management at the University of Toronto and chairman of the Institute for Competitiveness & Prosperity.

Sadly, the federal government’s decision to block the purchase of Potash Corporation by BHP Billiton Ltd. is likely to hurt the future competitiveness of Canadian companies.

This does not imply that Canada has no right or cause to challenge foreign takeovers of Canadian companies. Far from it. The problem is with the “net benefit” theory and rationale used by our government to block the takeover.

This approach to foreign direct investment is in stark contrast to the approach to merchandise trade, the traditional focus of trade policy, where the theory is reciprocity: you let us send you our BlackBerrys without tariffs or restrictions and we will let in your GE MRI machines.

We need to move policy from net benefit to reciprocity as the defining criterion.

If net benefit was used in merchandise trade, there would never be a lowering of trade barriers because every single industry or company that is adversely affected would wrap itself in the protective flag of net benefit.

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