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Harper government mum on foreign investment rules

When it comes to foreign investment and Canada's natural resources, the Tories can't get it together and the result is billions in lost revenue.

Back when I was eight or nine, my friend Gina decided to teach me how to play poker. I hated playing with her—the rules were different with every hand. If she had jacks, then jacks were wild. If she had a full house, that beat four deuces. If she had two pair, that beat everything. I quickly learned that you can’t win a game with constantly changing rules—so I packed up my toys and went home.

Watching the Harper government’s clumsy handling of China’s bid for Nexen and the Northern Gateway pipeline proposal is giving me Gina flashbacks. In both cases, the corporations involved want to develop a strategy, so they need to know the rules of the game. But the government keeps changing them.

In the case of the Nexen deal, the parties involved are begging the government to tell them what is and what isn’t allowed. But even though we’ve been through this several times before—recall Australia’s BHP Billiton’s bid for Potash Corp.— we still have no decision framework. Later this year, it’s hoped we’ll finally get one when the government announces whether it will permit China’s CNOOC to take over the Calgary-based oil and gas company.

Similarly, the Northern Gateway pipeline, which would help us sell our oil to China, has now been held up for six years because the government can’t decide what the rules are. The project was originally announced way back in 2006, but there has been delay after delay, and the Chinese eventually withdrew. Six years later, we’re no closer to a decision, and no one’s buying anything.

If the Nexen deal was killed because the government decided it was bad for Canada, or Northern Gateway was nixed because the environmental risk was too high, it would be a different matter. But when you make no decision at all, that’s essentially saying no for now, and with every month that passes, we’re missing out on billions in revenue.

Why can’t the Harper government get it together? Politics, of course. The Tories are frightened to death about the optics of these deals. They know that from an economic perspective, the Nexen deal should be allowed, as should the Northern Gateway pipeline. But the majority of voters are leery of letting the Chinese in, and the pipeline is a public-relations nightmare. Yes, the government needs some flexibility when making these decisions, but with no guidelines, whenever a project come up, it simply bows to the political pressures of the day, rather than choosing what’s best for the country.

An interesting solution was recently proposed by Michael Moore, professor and director, energy and environmental policy, at the School of Public Policy at the University of Calgary. He suggests that we bring all the stakeholders to the table, whether they be pipeline companies or First Nations leaders, and hammer out the rules once and for all. We should get a common agreement on how these projects should be assessed and, most important, get them all to agree to abide by the final decision, in advance. The result would be fewer lawsuits and a clearer time line for appeals.

If we did that, some projects may not get approved, but the companies involved would at least get a timely decision so they could move on to the next project, or try again. Much better than being kept in limbo for six years while costs mount, your proposal slowly dies and your partners give up in disgust. Which they will. Because, as Gina taught me years ago, when you play a game without any rules, in the end nobody wins.

Duncan Hood is the Editor of Canadian Business magazine.