When Canwest asked the Montreal billionaire investment lawyer and pension fund manager Stephen Jarislowsky to comment on the Rio Tinto takeover of Alcan, he responded that Canada is committing âeoeeconomic suicide.âe
Jarislowsky has a point, but such actions are also grounds for revolt. Foreign ownership of resource based corporations turns Canada into a twenty-first century version of a tenant farmer: the absentee owners get the economic surpluses, Canadians get only enough to live on.
With the breakthrough of China and India into the front ranks of economic power, increased world demand for resources has pushed up Canadian commodity prices and increased corporate profits.
Rio Tinto calculated it could make more money by buying an existing resource producer âe" Alcan âe" than by investing in, say, additional aluminum production.
Along with 68,000 employees and $23 billion (U.S.) in revenue, Rio Tinto acquires Alcanâe(TM)s capacity to produce cheap hydro-electrical power âe" the key for smelting aluminum. Aluminum prices are up from about $1,750 a ton to $2,795 and Rio Tinto is prepared to borrow $40 billion to complete the transaction.
So long as the Quebec government keeps Hydro-Quebec from taking over the power business and charging a competitive rate to Rio Tinto for its cheap energy, the London based Australian British company will do just fine until world prices drop. Then Canadian jobs are at risk and corporate frills such as the promised Montreal based Advisory Board and the Alcan world headquarters on Sherbrooke St. will disappear.
Meanwhile in Chile, the second stop of his Americas tour, Prime Minister Harper was looking after Canadian mining interests by signing a memorandum of understanding on foreign âeoeinvestmentâe . Canada just happens to be the fourth largest foreign owner in Chile and the largest in mining. Promoting Canadian business as foreign owners was the Liberal âeoeteam Canadaâe strategy, introduced by Jean ChrÃ©tien. Canadian patriotism was a cover for foreign exploitation. Now, with the Americas trip, the strategy is officially bipartisan and Harper is defending Canadian business ownership abroad.
Call this the assisted economic suicide strategy for Chile and the three other countries on the visit: Columbia, Haiti, and Barbados. Just as Canada gets bilked by its absentee landlords, so Canadian companies, aided by our government, can strive to bilk others by themselves becoming absentee landlords. Overall, Canada puts on a little imperialist face.
In the early 1990s John Dillon of Kairos identified the American strategy in Latin America. Investment agreements were pre-requisites to receiving limited debt relief under the then Baker plan. Once countries had signed away their rights to control their own resources by making laws to govern foreign companies operating in their countries, the Americans would talk about re-scheduling foreign debt.
U.S. policy in developing bilateral trade agreements has featured a similar approach. First comes the carrot: those countries get access to the U.S. market. Then comes the can-opener: the U.S. makes rules to govern the economy in the interests of its companies.
On a smaller scale Harper has a similar scenario for his Americas tour. First he holds up the carrot: Canadian foreign aid. Then he brings out his version of a can opener: the memorandum of understanding on foreign investment aka. the donâe(TM)t-mess-with-our-companies memo.
The Americas Policy Group has written the prime minister suggesting another approach.
The increased levels of foreign ownership in Canada are the best reason going for calling for higher tax rates for corporations. The Canadian Labour Congress has shown that when properly weighted for size, Canadaâe(TM)s corporate taxes are about the same as in other countries. Canada has the highest level of foreign ownership of any industrialized country. Since those levels are rising, the way to get appreciable benefits for our citizens from the exploitation of our natural resources is through corporate taxation.
As an example of how not to do things, the Alberta governmentâe(TM)s 25 cents-per-barrel royalty on the $60 barrel of synthetic crude from the Alberta tar sands will do nicely. Tar sands production is undertaken by American companies, at great environmental expense for super-profits and shipped to American consumers. The Alberta citizen gets two bits a barrel.
Itâe(TM)s time for a revolt.
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