Is Canada really rich in natural resources?: Calculating the effects of Foreign Ownership

Posted on September 13, 2009

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In Toronto, CBC business reporter Jeannie Lee said there is a great deal at stake for Canada — and especially for southern Ontario, where Canada’s steel industry is concentrated and where the global slump has already gutted the auto industry.

Canadian steel plants produced almost 16 million tonnes of steel in 2007, employing about 32,000 people and, by one estimate, supporting 140,000 indirect jobs, she said.

from “Buy American” rule in U.S. stimulus bill could cost Canada jobs, CBC News (January 29th, 2009)

Expanding on the closing theme from last week’s post “Buy American: Establishing Artificial Boundaries or Removing Unwanted Barriers?,” in which I introduced Colin Clark and Jean Fourastie’s “three-sector hypothesis of industry” – actually four with the addition of the Quaternary Sector, the January 29th CBC News article is interesting for a number of reasons.

While there is no doubt that the steel industry is of course part of our indigenous Primary Sector which cultivates our nation’s abundance of natural resources, I must admit that I had not contemplated the impact that foreign ownership of these companies had on the overall issue of free trade and the Buy American Policy.

Perhaps this is an overly simplistic view, but if we do not own the companies who employ our workforce in this Primary Sector, is it not similar to renting versus owning your home?

For example, if I am renting I would of course take care of the daily living maintenance required as part of the general upkeep of the home.  However, and for obvious reasons, I would not be inclined to invest a great deal in making home improvements such as adding a deck or installing new plumbing.

The point I am making is simply this, who owns what were once our companies, what are their interests and, at what point will those interests conflict with those of our national interests?

I am asking these questions for a number of reasons including the fact that I would like to know the answers.  I am also interested in understanding if we have somehow mistakenly equated having indigenous resources as being the same thing as controlling them.  If memory serves me correctly it wasn’t that long ago that we took legal action against a US conglomerate who arbitrarily decided to pull up their Canadian stakes.  (Note: reference the July 18th, 2009 article in TheRecord.com titled “Ottawa sues former Stelco Group.”)

In essence, and without summarily discounting the 32,000 direct and 140,000 indirect people the steel industry employs, are we spending too much energy fighting for a disappearing sector with concentrated interests in Central Canada, instead of focusing on the repatriation of our national domestic economy through the proactive development of Tertiary and Quaternary Sectors?

Let’s be honest, the fight for the Canadian steel industry should have happened before these companies were sold in the first place.  Suing American industrial giant U.S. Steel Corp. to force it to live up to job commitments that were made when it bought the former Stelco Inc. by pointing to the provisions of the Investment Canada Act doesn’t instill a great deal of confidence in terms of a favorable outcome.  What’s the old saying, possession is nine-tenths of the law?

Once again, I am not professing to have any great solutions because like most Canadians, I do not have all the facts.  However, it just seems to me that opening-up government contracts to perhaps the very companies who have bought Canadian firms, then broke their commitments under said agreements by closing down plants, is similar to the Doom Loop that Jim Collins described in his book Good to Great.

If I am missing something, please tell me.  But for all intents and purposes, it look s as if we are fighting yesterday’s “lost” war today.  Maybe it’s time that we followed the “general pattern of development,” of wealthy nations, and progressed to the latter phases of the Clark and Fourastie sector hypothesis of industry?

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