Editorial: Keep the economy open

Canada must ignore the cries of the economic nationalists and remain open to foreign investment.

On March 3, U.S. Steel announced it is idling its Hamilton Works and Lake Erie Works near Nanticoke, Ont., until further notice, throwing 1,500 people temporarily out of work. That is sad news, of the sort being repeated in factories and offices across the country. But nationalists, take note: this is not a nefarious anti-Canadian move prompted by Buy American provisions in the U.S. stimulus bill.

Global demand for steel is collapsing, and U.S. Steel is also shutting down operations in several states. (It will temporarily concentrate production in Pittsburgh, Pa.; Gary, Ind.; and Birmingham, Ala.) That said, the move carries powerful symbolism. The Ontario steelworks, formerly known as Stelco, has been in continuous operation since 1861. And some Canadian politicians reacted angrily. “They signed what we perceive to be a contractual agreement with the Government of Canada,” Industry Minister Tony Clement fumed during a news conference. Sure enough, according to a company filing obtained by the Hamilton Spectator, U.S. Steel agreed to $200 million in capital expenditures through 2012, and also committed to “maintain employment levels.” Both the Ontario and federal governments will be scrutinizing these commitments carefully in the months ahead. Fair enough.

Some observers, including York University professor James Laxer and Ontario New Democratic MPP Paul Miller, see the Stelco shutdown as an example of why Canada should close its borders to foreign investment. It’s the old economic nationalist argument. But at a time of scarce global capital, hearkening to the siren calls of nationalism and protectionism is precisely what politicians should not be doing. “Keeping markets open and avoiding new protectionism is key to strengthening prosperity throughout the world,” notes Klaus-Schmidt Hebbel, the chief economist of the Organisation for Economic Co-operation and Development, in the 2009 edition of Going for Growth, which focuses on how OECD countries can maintain growth through the crisis. “Under no circumstances should the mistakes from previous crises be repeated.”

Canada, a country whose economy is still in transition, stands to benefit from foreign investment now as never before. And that is why U.S. Steel’s actions should not be interpreted as reason enough to close our borders to foreign capital.