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The Salon is ONW's weekly gathering place where three of Canada's brightest and most respected political strategists come together to analyze national issues affecting Ontario. Rick Anderson is former senior advisor to Reform Party Opposition leader Preston Manning; Anne McGrath was Chief of Staff to the late NDP leader Jack Layton; and Richard Mahoney, former Liberal advisor to Rt. Hon. Paul Martin. 

Today our political strategists gather in The Salon to discuss Prime Minister Stephen Harper's controversial decision to allow the take over of Canadian energy company Nexen by Chinese state-owned China National Offshore Oil Corporation (CNOOC): 


Anne McGrath:

The Prime Minister's news conference announcing the approval of the CNOOC-Nexen and Petronas deals was noteworthy not just because of it's length (possibly the longest news conference he's held as PM) but also because of the convoluted, twisted and almost tortured logic of accepting a deal but saying that it would not have been accepted had there been better rules. He has had ample opportunity to create those rules in the two years since he voted in favour of an NDP motion to set out clear guidelines.


Richard Mahoney: 

That was bizarre. Contrasting his conclusion: "This is the end" of the series of takeovers, with the ruling on the two deals, which actually allowed the takeovers. It is also ridiculous that it took two years of promising guidelines to come up with guidelines that the government could have come up with two years ago. 


Rick Anderson:

Hi all. Most of the folks I talk to, including here in Ontario, say the PM got this pretty much about where he needed to - welcome this investment, but at the same time send a pretty clear message to markets, investors, foreign countries, that we are not interested in waking up a couple of years from now to discover that foreign governments control most of our energy projects. What's bizarre about that?


Anne McGrath:

Except he didn't welcome the investment. He said that he would accept it but that this is it, won't happen again, which begs the question of why accept it if you don't think it's a good idea and it shouldn't happen again? What does it mean for future deals which I understand may be pending in Ontario where investors are buying up properties.

 

Richard Mahoney:

There are valid concerns about foreign investment and state owned enterprises (SOEs). It was fair for the PM to signal and articulate that. I also think that many here in Ontario and elsewhere thought those particular transactions could go through without severe disadvantage to the country. It is good that Mr. Harper is finally coming around this last year to the importance of China - he mocked his predecessor for his focus on China and India, but now understands the strategic importance of this.

 

Rick Anderson:

The government found these two proposed investments to be of "net benefit to Canada," the test applied under the existing law and policy. At the same time, the PM and Ministers Paradis and Oliver said that "going forward," proposed investments by state-owned enterprises would be subject to a higher degree of scrutiny, and will only be approved in "exceptional circumstances." To most people, I think does seem like a sensible approach, no?

 

Anne McGrath:

The major vulnerabilities in these and other foreign investment decisions have to do with the lack of transparent guidelines or rules, the unpredictability and the inconsistency. These decisions don't help them in these critically weak areas. These concerns come not only from New Democrats but also from more conservative sources, even, most recently, the Calgary Chamber of Commerce. Surely, both investors and the Canadian public would welcome a set of reasonable guidelines outlining "net benefit." The fact that CNOOC is state owned by the Chinese government puts this desire for clarity into stark relief.

 

Richard Mahoney:

Sensible in this case, but, how do you establish when "exceptional circumstances" exist? Secondly, the government has been promising to come up with a definition for "net benefit" to Canada under the legislation, but really has not done so. Finally, these new guidelines of the governments apply to the oil patch only. Many here in Ontario wonder what happens if a key Ontario asset, such as hydroelectric power, is the subject of a similar takeover?

 

Rick Anderson:

This "transparency"/"definition" discussion is opposition gobbledygook for trying to find a way to criticize the government's approach without actually opposing it. Would the NDP, or Liberals, have rejected these two investments? I think not; I have not heard them say so. Would the NDP or Liberals be fine with an unlimited welcome mat for foreign SOE investments? I think not, at least I have not heard them say so. There's more clarity to the government position than to that of the NDP or Liberals. Most people appreciate that major transactions like these should be looked at on their merits; a one-size-fits-all set of rules is asking for trouble.

 

Anne McGrath: 

The NDP clearly opposed the CNOOC-Nexen deal on the basis of environmental and national security concerns, clearly tied to the fact that CNOOC is Chinese state-owned. It was a rational decision based on information that also included more conservative sources such as CSIS and members of the business community. At the same time, they have been clear that foreign investment, based on a clear demonstration of net benefit to Canada, would be welcome. I agree that the Liberals have been perhaps more cagey, opposed but not opposed. They have the disadvantage of being in a leadership race and can't box the new leader in or be overly critical without knowing the direction of the party under new leadership.

 

Richard Mahoney:

It's tough to be in government, isn't it? People will criticize you for things like juvenile attempts to control media coverage by releasing important decisions concerning the Canadian economy on Friday afternoons at five o'clock, or worse. They will criticize you for not having thought through your approach to China and making it up as you go along. For attacking China and those that argued for its importance for trade, and then embracing that view when you finally wake up to its economic importance. Yep, it's tough.

 

Rick Anderson:

Well, OK, but the point still is the decisions made involve some $20 billion of investment in the Canadian economy. And I am not hearing many people say these decisions should have been different. That's a pretty good day in government, especially on such a complex matter.

 

Anne McGrath:

It sure didn't look like a good day to be in government. Major news announcement at the end of the day on Friday. Typically referred to as "taking out the trash" in politics 101. Certainly didn't have the hallmarks of a good news story and the narrative was labyrinthine. "Yes, we'll do it but we don't like it and it won't happen again." It certainly seemed like he was speaking at least as much to his own base, which is very nervous and some of who are even downright opposed to a takeover by the Chinese government in a strategic resource sector.

 

Richard Mahoney:

Look, this is an important decision. It clarifies things a bit for the next takeover targets in the oil sands: an Encana, a Talisman. But what it provides no clarity on is other key sectors of the economy. How will the government approach a state-owned takeover of a key asset to the Ontario economy? And as far as where the Liberals sit on this transaction, it was Liberal leadership candidate Justin Trudeau who went out ahead of everyone else and put out a thoughtful analysis of why CNOOC-Nexen deal should be allowed under these circumstances. My criticism is of what the government has failed to do, rather than this individual decision itself.

 

Richard Anderson:

Good question, Richard, re a key asset of the Ontario economy. Imagine, for instance, hydro. That would deserve a very hard look - do you think we can write up such a decision, theoretically, in advance of any actual proposed transaction? Potential investors know now that that would be examined closely, as it should be, and quite possibly not approved. That seems right.

 

 

 

 

Posted date : December 12, 2012
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