The National Post is Canada’s second largest national paper.
State ownership makes mockery of markets
Recent media reports portray Ottawa as ready to horse-trade its way out of a looming foreign investment crisis over takeovers of Canadian companies by state-owned enterprises. In Bloomberg’s version, “Canada plans to ask China to allow several transactions in exchange for approval of state-owned CNOOC Ltd.’s $15.1-billion bid for Nexen Inc., said a person with knowledge of the matter.”
Finance Minister Jim Flaherty quickly announced that he personally had no knowledge of the matter. But speculation persists, particularly over attempts by the Bank of Nova Scotia and Manulife Financial to secure greater access to Chinese financial sectors. The Canadian mining industry is also keen on massaging its way into the Chinese market, and if that means using CNOOC’s $15-billion Nexen takeover as a reciprocity play, so much the better. Or so it is said.
As the Harper government wades deeper into the challenge posed by state-owned enterprises investing in Canada, whether from China or Malaysia or even the United States, some overarching issues need to be recognized. Foremost is this: The global rise of state-owned enterprises (SOEs) poses a threat to the market principles that have governed international and national investment for decades, and that dominate Canadian law and policy today.
Investor-driven corporations, aiming to maximize profits in an open competitive market, are at the heart of market capitalism. Some find it politically advantageous to talk of state-owned enterprises as part of the rise of some benign “state capitalism” around the world. These two words are a mischievous ideological sabotage of Western values. A half century ago, state capitalism was called fascism, and it should continue to be today.
The very idea of reciprocity between Canada’s rule-of-law system based on economic and individual freedom and China’s totalitarian regime boggles the imagination.
If banks, resource companies and computer manufacturers want to do business in a country that cannot or will not open its markets and protect corporate rights, that’s a business problem. Canada as a country has nothing to trade on this front, unless it intends to undermine its own core economic and political values at home.
Canada should therefore follow the highest principles in dealing with SOEs from Malaysia, China or anywhere. Easy to say, but what might that mean in practice? Should Canada accept foreign direct investment from state-owned enterprises? If yes, under what conditions? Should the CNOOC-Nexen deal be approved? Or the Petronas takeover of Progress?
The point has often been made, including in this newspaper, that as a free-market, open-investment country, Canada could just let CNOOC pay its 60% premium to Nexen investors, who can take the money and run, leaving the Chinese to sort out the overpriced asset schmozzle they purchased.
For the rest of this column, please go to the National Post website: http://opinion.financialpost.com/2012/10/25/terence-corcoran-fascism-by-another-name/