The case for 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.

Foreign ownership can help Canadian businesses get an injection of new capital and gain access to international supply chains or new technology, says Laura Dawson, a researcher, senior fellow at the Macdonald-Laurier Institute in Ottawa, and a consultant on cross-border trade, market access, and regulatory issues.

“Foreign investors can help Canadian businesses do things they couldn’t do on their own,” she said. “You can develop an industry domestically but in order to take it to the next step, you often have to have an infusion of foreign capital or know-how.”

Canadian high-tech firm Newbridge Networks, for instance, was acquired by telecommunications giant Alcatel for more than $7 billion in 2000. At the time, Newbridge was floundering with poor earnings and a sinking stock price.

Today, Alcatel-Lucent is headquartered in France and ranks among the world’s telecom powerhouses. It is also considered one of the most innovative companies in the world.

“Newbridge reached a certain point as an IT company and then it need access to complimentary technologies and global markets,” Dawson said.

Dawson recently authored a paper arguing floundering Blackberry maker Research in Motion would be better off with a foreign buyer that can provide access to new markets, new capital, or new technologies.

“This is a country of 34 million people and we have one of the smallest population densities in the world. It’s really hard to service a large number of companies out of Canada,” Dawson said.

For the rest of the market, foreign competition can bring a new level of competitiveness to the industry. “By increasing the competition, it does make the domestic industry pull up its socks a bit,” she said.

She points to the takeover of Algoma Steel by India-based Essar Group in 2007 as an example of a struggling Canadian business that was revived by foreign ownership. The deal has benefited not only Sault Ste. Marie companies, and its workers, but also the community, she said.

A foreign takeover can also put a small community plant on the map. For instance, Belleville, Ont. serves as the North American manufacturing site for Procter & Gamble’s Always and Olay Daily facials, and Brockville is the North American manufacturing site for Swiffer, Bounce, and Downy.

There are, however, instances where a foreign takeover ignites a bitter battle with employees. The takeover of Inco by Brazil-based international mining giant Vale in 2007 was followed by a year-long strike with employees in Sudbury.

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1220766–canada-day-week-debate-last-of-three-parts-the-case-for-opening-up-canadian-businesses-to-foreign-ownership

 

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