In 2021-22, Canada attracted only US$119 billion in foreign capital. Capital outflows were more than twice that amount
The supposed “hollowing out” of Canada’s corporate sector invariably spikes as a political concern whenever a storied Canadian company is acquired by foreigners. A ruckus was raised when in April 2023 Glencore attempted to buy out the B.C. mining company Teck. Keeping its metal mining assets, Teck eventually sold its coal assets to Glencore for C$9 billion. But there haven’t been many major takeovers recently. Politics aside, that is not good. When managers don’t fear competition, productivity suffers.
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A half century ago, during the government of Pierre Trudeau, Liberal minister Herb Gray introduced a bill whose goal was the screening of foreign takeovers of Canadian companies. He specifically argued that in many of “Canada’s fastest growing industries the principal companies, the ones which hold the dominating positions, are controlled by non-residents.” The outcome was the establishment in 1973 of the Foreign Investment Review Agency (FIRA) to determine if foreign acquisitions of Canadian companies were of “substantial benefit” to Canada.
In 1985, the Mulroney government replaced FIRA with Investment Canada, which aimed to be more welcoming of foreign investment in order to spur economic growth. A much smaller fraction of takeovers would be reviewed and the test for acceptability was reduced from “substantial” to simply “net” benefit.
The political issue returned when several large........