Adam Adamou's  Instablog

We shouldn't sell "our" natural resources to foreigners.

We sell our natural resources to foreigners all of the time.  The Canadian population is less than a fraction of the world's population. If we didn't sell our resources to foreigners we'd be pretty well broke as a nation.

No, I mean that we shouldn't sell control of our natural resources to foreigners!

What is being acquired are the shares of a company that are presently held by one set of "foreigners" (more than 50% of Potash shares are held internationally) by a different set of "foreigners".  I don't see any evidence that this new group of foreigners will have an interest in paying a premium to acquire this company in order to run it into the ground! In fact BHP is a very well run and internationally respected company.  Furthermore - Canadian law applies as much to one set of owners as it does to another be they Canadian or not. It appears to me that the implication from this line of reasoning is that "Canadians" are somehow more moral in their decision making than non-Canadians. This is a highly nationalistic viewpoint and more representative of a "far-right" philosophy than of a "far-left" world view.

Yes, but Canada's natural resources belong to EVERYBODY!

No. They do not. They belong to those that own them or that own the rights or the companies that mine/harvest or distribute them along the economic chain. It makes no difference to Canadian law or to the payment of Canadian taxes whether these owners are Canadian citizens, landed immigrants or nationals of an other country.

Hey - they'll steal our jobs!!

No, they won't. The actual resources are in Canada and they will be mined in Canada by, for the most part, Canadian employees who pay Canadian taxes. There is in fact less mobility in the resource industries than there is in the high technology or manufacturing industries because the ultimate resource is *in* Canada.  It's far easier to move a manufacturing plant or a computer programmer than it is to move the world's potash.

But they might control or manipulate the price of potash if they control the company!

Why would somebody buy a company at a premium and then reduce the value of it by moving the price lower than what the market will bear? The purchaser is a private company with economic not political interests.  In any case Potash could change their pricing now or a Canadian buyer who comes along down the road might do the same thing. All Canadian laws apply to all of the companies that operate in Canada including foreign owned companies.  Canada has anti-trust and price fixing rules that were established to deal with these scenarios should this be a real concern. The same laws that apply to the current owners will apply to the new owners.  This is a nonsense argument.

They might not pay their taxes to us!!

If by this you mean tax evasion, note that if they don't pay their taxes they will be charged, fined and potentially jailed.  If by this you mean that they might find a way to reduce their over-all tax burden by effective tax planning (tax avoidance) - then you may be right. But this is something that is done by all companies and individuals in all industries and it is perfectly legal.  In fact if the current management and Board are not taking action to minimize their tax burden then shareholders should hold them to account as they are not doing their job.  Is the suggestion here that we should we make tax planning illegal?

If the government wants to raise taxes or to change the tax code – they have the authority to do that. If they are using this "net benefit" rule as a tax tool then it’s the wrong tool for the job.

Show me how Canadian ownership rules have led to a Canadian "discount"!

Historically, this has unequivocally been the case. But a discount can take many forms beyond just a share price or a valuation discount. For example is there anybody in Canada that would disagree with the statement that our phone and cable rates are much higher than in, for example, the US or Europe, where such controls are not in place?  Who doesn’t complain about our national broadcasters who are protected from foreign competition only to broadcast the same shows with “Canadian” commercials?  Is that what protecting “Canadian culture” is all about?  What about the monopoly in the book industry (a protected culturally sensitive industry) that has led to a monopoly in the retail book sector, an oligopoly in the publishing industry and higher prices for books and periodicals for all of us?  Where's the "net benefit" in this?  Do you remember the outcry when Wal-Mart was set to enter Canada because “it would destroy Canadian jobs”?  Today we benefit from lower prices and Wal-Mart is one of the largest employers in the country, particularly for young people and for the working retired. 

Yeah - but I still disagree... you "free marketers" are all bonkers!

That's a political statement not an economic one.