Government Can Stop Sale of Canadian Companies on Grounds of National Security

[a_majoor]

How it will end:

1. One branch of the American Military or Intelligence will realize that a RADARSAT would be just the thing to meet their needs.
2. US Aerospace companies will scramble to create some version of the technology. MDA may be approached for patent rights, but radar is radar, so most companies will be able to create a comparable system without infringing on any patent or technology rights. MDA is unable to enter the competition since they are not a US company and have difficulty ramping up to meet ITAR and other restrictions.
3. US RADARSAT becomes operational
4. Some future Canadian government decides a RADARSAT of their own would be nice
5. MDA is underbid by an American Aerospace firm, "our" satellite is a dumbed down version of the one used by the CIA, NSA, US Navy, NOAA or US weather service, and launches uneventfully from Vandenberg AFB.
6. MDA declares bankruptcy and closes.

 

[George Wallace]

How it will end:

1. One branch of the American Military or Intelligence will realize that a RADARSAT would be just the thing to meet their needs.
2. US Aerospace companies will scramble to create some version of the technology. MDA may be approached for patent rights, but radar is radar, so most companies will be able to create a comparable system without infringing on any patent or technology rights. MDA is unable to enter the competition since they are not a US company and have difficulty ramping up to meet ITAR and other restrictions.
3. US RADARSAT becomes operational
4. Some future Canadian government decides a RADARSAT of their own would be nice
5. MDA is underbid by an American Aerospace firm, "our" satellite is a dumbed down version of the one used by the CIA, NSA, US Navy, NOAA or US weather service, and launches uneventfully from Vandenberg AFB.
6. MDA declares bankruptcy and closes.

How it will end?

Well, there are some flaws in you statements.  Lets see what happens if we change a word or two.

1. One branch of the American Military or Intelligence will realize that a RADIO would be just the thing to meet their needs.
2. US Aerospace companies will scramble to create some version of the technology. MDA may be approached for patent rights, but radio waves are  radio waves, so most companies will be able to create a comparable system without infringing on any patent or technology rights. MDA is unable to enter the competition since they are not a US company and have difficulty ramping up to meet ITAR and other restrictions.
3. US RADIO becomes operational
4. Some future Canadian government decides a RADIO of their own would be nice
5. MDA is underbid by an American Aerospace firm, "our" satellite is a dumbed down version of the one used by the CIA, NSA, US Navy, NOAA or US weather service, and launches uneventfully from Belarus as previous ones were.
6. MDA declares bankruptcy and closes.


It isn't the Radar spectrum or Radio spectrum that is in question.  They will never change, and everyone on the planet who wants can utilize them.  What is in question is the Hardware and Software developed to use these Waves to make a "Product" that is useful for a client.

 

[a_majoor]

It isn't the Radar spectrum or Radio spectrum that is in question.  They will never change, and everyone on the planet who wants can utilize them.  What is in question is the Hardware and Software developed to use these Waves to make a "Product" that is useful for a client.

Since MDA Canada will have few options or resources available to exercise or extend its intellectual capital, they will gradually fall out of currency. This is the same as putting real capital in a mattress; even a bank account generates some interest and more aggressive investments of capital have the potential to generate much greater return on investment.

The United States has a much larger intellectual, technological and financial resource base than we do, and lots of systems which are conceptually similar to RADARSAT, J-STARS and AWACS are two simple examples and much of the technology developed for Ballistic Missile Defense is also applicable (imagine using these sensitive sensors and processing algorithms in space and pointing towards the Earth to see what I am getting at), so the argument that MDA has some sort of unbeatable advantage only applies if the MDA team is continually working and launching satellites, which I think we all agree will not be the case.

 

[MarkOttawa]

The USA (NRO) has had radar (SAR) Lacrosse intelligence satellites for quite some time:
http://www.globalsecurity.org/space/systems/lacrosse.htm

It is difficult to assess the resolution that could be achieved by this radar in the absence of more detailed design information, but in principle the resolution might be expected to be better than one meter. While this is far short of the 10 centimeter resolution achievable with photographic means, it would certainly be adequate for the identification and tracking of major military units such as tanks or missile transporter vehicles. However, this high resolution would come at the expense of broad coverage, and would be achievable over an area of only a few tens of kilometers square. Thus the
Lacrosse probably utilizes a variety of radar scanning modes, some providing high resolution images of small areas, and other modes offering lower resolution images of areas several hundred kilometers square. The processing of this data would require extensive computational power, requiring the transmission to ground stations of potentially several hundred mega-bits of data per second.

Sure beats RADARSAT-2.  More:
http://www.satobs.org/spysat.html

Mark
Ottawa

 

[stevenstaples]

MDA sale caused unlikely alliance of opponents
Esprit de corps military magazine. June 2008, Vol 15 Issue 5. p 12.
by Steven Staples

Members of the Canadian Forces have a lot to celebrate in the government’s decision to block the sale of a large part of Canada’s space industry to a U.S. firm last month. The government’s intervention ensured that crucial satellite technology, vital to the conduct of CF missions at home and abroad, will remain in Canadian hands.

On April 10, 2008, Industry Minister Jim Prentice announced that he would use his authority under the Investment Canada Act to disallow the acquisition of the MacDonald, Dettwiler and Associates Ltd. (MDA) space division by U.S. arms maker Alliant Techsystems (ATK).

The $1.3 billion deal would have handed over to ATK ownership of the iconic Canadarm and Canada’s remote sensing radar satellite RADARSAT-2, a satellite that can take very high resolution images of any place on Earth through clouds or even at night. 

“I don’t get it,” proclaimed a clearly perplexed Daniel Friedmann, CEO of MDA, after being grilled by Members of Parliament concerned about the deal. Indeed, MDA completely underestimated the amount of controversy the sale would generate when, in January this year, it was announced, and began to move through the government’s approval process for foreign take-overs of Canadian firms.

Looking back over the debate of the past few months, one can feel some sympathy for MDA, given the rather unusual positions taken on the deal by those inside and outside government.

First, let’s consider opponents of the deal. The sale of MDA’s space division to ATK was opposed by an unlikely group of people: MPs from all parties, editorialists, former military leaders, employees, scientists and space experts, nationalists and peace advocates.

The Rideau Institute, for instance, which has been accused of being “anti-defence” by Jack Granatstein and others, argued that the sale should be opposed on the basis of national security.

“The sale of MDA assets to ATK will seriously weaken or defeat Canada’s ability to achieve the objectives of the Remote Sensing Space Systems Act which are explicitly to ‘ensure national security, the defence of Canada, the safety of Canadian Forces, Canada’s conduct of international relations, and Canada’s international obligations,’” I wrote to Industry Minister Jim Prentice and Foreign Affairs Minister Maxime Bernier in March.

UBC Professor Michael Byers is a frequent critic of defence policy. Writing with Liberal Industry Critic Scott Brison in the National Post, Byers argued, “What could be more important to Canada’s national security than our ability to monitor all of this vast country, especially in emergencies? What foreign investment could be of less net benefit to Canada than selling our eyes?”

Second, and just as unusual as defence policy critics decrying the loss of sovereignty and defence capability, traditionally small government, free-enterprise Conservative Party members were urging that the government block the sale.

“It is a waste of your money and a betrayal of the public interest,” Calgary MP Art Hanger wrote regarding the hundreds of millions of tax dollars invested in RADARSAT-2 that would be lost through the sale. “It’s about time Canada stop playing the nice guy at the expense of our own security and sovereignty – not to mention our own research and development capacity.”

The prospect of losing control of Canada’s premier land-monitoring satellite was untenable for the government. Blocking the sale conflicted with the Conservative Party’s traditional free enterprise principles, but the satellite played a key role in fulfilling the government’s priorities of defending Canada’s national security and Arctic sovereignty.

Third, and more unusual still, was the silence from organizations and commentators who typically advocate strongly for maintaining and greatly expanding defence capabilities. There were no opinion articles in the Globe and Mail from Jack Granatstein, and no press releases from the Conference of Defence Associations. Even the Canadian Council of Chief Executives, which is always concerned with improving relations with the White House, said nothing.

The political significance of this decision is hard to overstate. It ranks among the most important decisions made by the Canadian government, including the decisions not to join the U.S. missile defence system or the U.S.-led invasion of Iraq.

Minister Prentice’s decision marks the first time that a minister has used the Investment Canada Act to prevent a foreign take-over of a Canadian firm. Out of 10,000 foreign take-overs since 1985, nearly 1,600 have been reviewed and approved. None have ever been denied – until now.

Supporters of Canada’s space industry and capabilities are now rallying to win more government attention and support to their cause. Canadians have been reminded how important our satellites are for our national interests; now it is up to the government to respond in kind.


Steven Staples is President of the Rideau Institute on International Affairs, an independent research, advocacy and consulting group based in Ottawa. He is a researcher, writer, frequent commentator on defence matters, and author of Missile Defence: Round One (Lorimer: 2006).

 

[a_majoor]

And our friend completely missed the point that preventing the sale of MDA simply means the design team and skillsets will either atrophy with disuse or leave Canada, rendering the entire "national capabilities" argument moot.

Once again, it does not pay to try to arm wrestle the "Invisible hand" of the market.....

 

[Edward Campbell]

The much publicized RIM “bid” for NORTEL’s wireless division gives Industry Canada a new dilemma.

The jewel in the crown is NORTEL’s LTE technology that may be the “solution” to many of the would-be 4G service providers. Whoever owns 4G may do very, very well in the next few years.

It is a bit much to say that 4G is Canadian intellectual property but there is no doubt that NORTEL – including many, many people in NOTREL’s Ottawa campus – pioneered it. Certainly, some of LTE is uniquely Canadian and Canadian taxpayers, indirectly (through R&D tax breaks), contributed to it.

Should that make Tony Clement do for RIM/to NORTEL what Jim Prentice did to MDA? RIM sure hopes so. The very threat of government interference may be sufficient to drive either Nokia Siemens or MatlinPatterson out of contention or drive the bankruptcy courts to delay or revise the process.

It appears to me that the same nationalist sentiments – never too far below the surface when Canada/US issues are involved – may drive the politics again. For many, many Canadians anything is better than “selling out” to Americans. That, far more than any business or legal considerations, may be the “driver” here. Tony Clement need not move too soon; he can, at the arbitrary stroke of a pen, disallow any sale, no matter which courts approved it, on national security grounds.

--------------------

Mods: could we re-title this thread as “Government can stop sale of Canadian companies on grounds of National Security”? That will allow us to discuss MDA and NOTREL in the same thread. 

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail, is the latest on the Nortel/RIM saga:

http://www.theglobeandmail.com/report-on-business/ericsson-makes-plans-but-rim-wont-give-up/article1231786/

Ericsson makes plans, but RIM won't give up
BlackBerry maker again calls on Ottawa to intervene as Swedish telecom company gains larger toehold in North American LTE market

Karim Bardeesy and Paul Waldie

Toronto — Globe and Mail
Monday, Jul. 27, 2009

Telefon AB LM Ericsson's successful bid for Nortel's wireless assets gives it a new advantage in the North American mobile marketplace, locking out a key competitor as carriers begin the transition to more data-intensive technology.

Ericsson's $1.1-billion (U.S.) bid beat out offers from Nokia Siemens  Networks and MatlinPatterson Global Advisers, a New York-based private equity fund, in an auction that ended early Saturday morning.

BlackBerry maker Research In Motion Ltd. (RIM-T82.50-0.79-0.95%) also said it was interested in Nortel's assets and made an unofficial offer of $1.1-billion for the auctioned assets plus other wireless patents, but did not participate in the proceedings, arguing its bid had been blocked by Nortel. Yesterday, RIM said it hadn't given up and called on Ottawa to intervene.

“Now that the auction is completed, the government has the authority and responsibility to get involved to protect vital Canadian interests,” the company said in a statement yesterday.

In outbidding Nokia Siemens for the right to license Nortel's fourth-generation long-term evolution (LTE) patents, Ericsson has consolidated gains made when it won a major contract to supply Verizon Communications Inc. with 4G technology. The company plans to roll out LTE service in 20 to 30 centres in 2010.

“ Now that the auction is completed, the government has the authority and responsibility to get involved to protect vital Canadian interests. ”— Research In Motion statement

LTE, which has yet to be introduced commercially, promises mobile download speeds into the hundreds of megabits per second.

The fastest Canadian home Internet access currently available is Bell's 16 Mbps, while Rogers promises a 50 Mbps service in August.

Nokia Siemens, which kicked off the bidding contest on June 19 with an offer of $650-million, has been losing market share to Ericsson. Ericsson's networks unit increased sales by 4 per cent in the last quarter, while Nokia Siemens dropped by 21 per cent.

“Every vendor has been developing LTE in isolation from one another. Ericsson's move gives it a larger slice of the patent pie,” technology analyst Carmi Levy said yesterday. “Less of its potential revenue will be siphoned off in paying licensing fees to others.”

Ericsson CEO Carl-Henric Svanberg said the acquisition would add 2,500 employees to the firm, about 400 of whom will be focused on LTE research and development. Some jobs are expected to be cut due to the transaction, but both companies have said they want to preserve as much employment as possible.

Under the deal, Ericsson will get CDMA, or code division multiple access, contracts with North American operators, including with Nortel's former parent company Bell Canada, as well as Verizon, Sprint, U.S. Cellular, and Leap. Ericsson also gets LTE assets and certain patents and patent licences relating to CDMA and LTE.

CDMA is a rival standard to the dominant cellular standard GSM, or global system for mobile. LTE, or long-term evolution, is a next-generation wireless network technology that promises to be much faster and allows cellphone operators to stream video and other advanced services on their devices.

“Nortel has clients on the board who have plans to migrate from CDMA to LTE over time. Nortel was ahead of anyone else in that regard, and that was a key advantage to any suitor,” Mr. Levy said.

The deal is subject to approval by bankruptcy courts and government regulatory authorities in Canada and the United States. RIM still has an opportunity to block Ericsson's purchase or reopen the bidding, but a source familiar with the auction said it won't be easy.

A joint hearing is scheduled for Tuesday in Ontario and Delaware, and RIM could file an objection. However, the objection could only be filed in Ontario court, the source said, because the deadline for objections in the U.S. court has passed. That could make it difficult for RIM.

RIM will have a hard time convincing the court to reopen the auction or overturn the sale because the bidding process was approved by both courts weeks ago and RIM had not filed a formal objection within the stated deadline, the source said.

There had been speculation RIM was planning to team up with a bid from MatlinPatterson. However, a source familiar with the auction said there was no sign of RIM at the auction. “They didn't participate,” the source said. “We plan on going forward.”

In a statement on the weekend, Nortel said it would “work diligently” with Ericsson to close the sale later this year. It also said it would work on finding the right buyers for its other businesses, including a division that makes phones and other telecom equipment for businesses and another that provides network technology and infrastructure.

With files from The Canadian Press

I don’t know what two (one American, one Canadian) bankruptcy courts might decide to do if RIM argues that it was unfairly excluded from the bidding and its offer provides the best value for creditors – what bankruptcy courts aim to accomplish.

I am sure that the government “regulators” (AKA Stephen Harper) will be bombarded with petitions – some from powerful Tory insiders – to block the sale on national security grounds.

One might wonder how LTE, or most other Nortel patents, might be matters of national security but I can assure readers that it (national security) is a huge “blanket” which can be used, in international law, as a major and bomb-proof protectionist measure. Our good friends and neighbours to the South use it constantly to restrain trade in a manner that would be quite improper if anything but “national security” was invoked.

 

[Edward Campbell]

Here, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s National Post, is a pretty fair assessment of the Nortel situation:

http://network.nationalpost.com/np/blogs/fullcomment/archive/2009/07/28/john-ivison-intervention-argument-is-as-bankrupt-as-nortel.aspx

John Ivison: Intervention argument is as bankrupt as Nortel

July 28, 2009

John Ivison

If the Harper government bows to pressure from opposition parties and Dalton McGuinty’s Liberals to block the sale of Nortel’s wireless assets to Sweden’s Telefon Ericsson, would the last conservative to leave Canada please turn out the lights.

To be fair to the government, there are no serious indications that Tony Clement, the Industry Minister, is set to nix the deal. He has said that he is reviewing the takeover proposal but under Canadian law, he is obliged to do so.

Still, the government’s response will determine if the Prime Minister’s fine words on resisting protectionism were just so much hot air. 

There have been suggestions that, since the government bailed out GM and Chrysler, it should intervene to prevent Nortel’s wireless technology from falling into the hands of what one columnist called “absentee owners”. The answer should be that the government has learned from its mistakes.

The Conservatives have been justly criticized for betraying some of their most deeply held principles. Yet, they have also introduced changes that are more closely identifiable with the type of government they purport to be -- namely cuts to corporate income tax and liberalization of some investment restrictions in industries like air transport and uranium mining. The fruits of these policies are already apparent -- Tim Hortons said last month it was coming home and would move its registration to Canada to take advantage of lower corporate tax rates.

Knee-jerk nationalists argue that the government should intervene because the result of the sale would be a brain drain out of Canada and the loss of another “iconic” Canadian company, in the wake of Alcan, Inco, Falconbridge and Hudson’s Bay Company. One supposes that Nortel resonates as an enduring symbol of corporate Canada, in the same way that the Titanic is held as an icon of British shipbuilding. 

There is a seductive, if superficial, logic to this “hollowing out” argument that the facts entirely fail to support.

A detailed study by the Conference Board last year showed that corporate takeovers are, in fact, of net benefit to Canada. The study concluded that there was no longer-term trend toward greater foreign ownership in the economy -- with levels remaining stable at around 30%, well below the peak of the 1970s. In the decade between 1994 and 2004, foreign companies made 92 major acquisitions, with an average value of $2.9-billion, which compared to the acquisition of 133 foreign companies, with an average deal value of $2.1-billion, by Canadians. 

The Conference Board said that corporate transformation is the norm -- only 71 of the top 200 companies in 1990 are still present in the same form.

Those foreign takeovers have provided shareholders with an average premium of 28%, money that was presumably re-invested elsewhere in the economy. Alcan shareholders received US$101 in cash for their shares in the summer of 2007 -- many times what the company would likely be worth today.

As for the brain drain argument: “There is no empirical macro evidence that supports the view that takeovers lead to fewer quality jobs or reduction in the quality of jobs,” said the report’s author, Dr. Michael Bloom.

Canada already has a more protectionist investment regime than many countries -- whole sectors of the economy from financial services to telecoms are off-limits for foreign companies. Manulife Financial paid $11-billion to acquire Boston-based insurer, John Hancock, in 2003, yet Canadian investment rules mean Hancock would not have been allowed to buy Manulife. 

Are we now prepared to send out signals that Canada is closed for business when it comes to technology too?

The government has tightened investment rules in one important area. There were legitimate concerns that state-owned entities -- mainly from China and the Middle East -- were intent on buying up large swathes of Canada’s resources sector. As a result, the government introduced a national security test to block purchases by companies with “non-commercial objectives and unclear governance”.

But that description hardly fits Ericsson, which is already a good corporate citizen in this country, with operations in Toronto, Montreal and Vancouver. In fact, its research and development centre in Montreal is the company’s largest outside Sweden and it claims to have invested $2-billion in R&D over the past 10 years.

The government’s own panel on competitiveness, chaired by former BCE chairman Red Wilson, recommended liberalizing many of the barriers to foreign investors, in part by increasing transparency and predictability. The government has moved to implement many of those recommendations but that good work would be undone with the stroke of a pen, if it intervenes in the Nortel case.

Stephen Harper, an avid student of Adam Smith, used to agree with the great economist that little good has ever been done by those who claim to trade for the public good. Let’s hope he still does.

National Post

jivison@nationalpost.com

There is another, political, factor: Ontario vs. Québec. Nortel is, for a wee while more, an Ontario company. Its head office is in Toronto and its Canadian, wireless, R&D is in Ottawa. Ericsson Canada’s HQ is in Montréal, so is its (very small) R&D facility. Ontario wants to keep those good, high paying R&D jobs in Ottawa; Québec would love to move them to Montréal.

 

[Edward Campbell]

See: here for some background.

According to this article, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail the government’s problems (and the Liberal Party’s opportunities to capitalize on them) are growing:

http://www.theglobeandmail.com/report-on-business/ottawa-guidelines-for-state-owned-investors-get-first-test/article1271106/

Ottawa guidelines for state-owned investors get first test
PetroChina's $1.9-billion investment in Athabasca Oil Sands is not expected to meet much resistance

Shawn McCarthy

Ottawa — Globe and Mail
Tuesday, Sep. 01, 2009 08:22AM EDT

When Ottawa acted in late 2007 to erect a new screen for state-owned companies looking to invest in Canada, the clear target was an expansionist China, whose ravenous resource companies were gobbling up assets around the globe.

But that was before the great thaw.

Putting behind it three years of frosty relations, the Harper government this year has sent a parade of senior ministers to Beijing with the express intent of luring Chinese investment to this country.

The message appears to have been received. PetroChina Co. Ltd.'s (PTR-N109.75-3.44-3.04%) $1.9-billion investment in Athabasca Oil Sands Corp.'s development projects represents the first large Chinese investment in the Canadian oil sands – and the first major test of the new federal guidelines for state-owned enterprises, which lay down a series of factors Ottawa will consider when reviewing an investment from such a company.

Despite some concerns about PetroChina's ultimate control resting in the hands of senior mandarins of China's ruling Communist Party, the company will likely face little opposition from the federal government on this deal.

Just two weeks ago, Finance Minister Jim Flaherty was in Beijing and told officials that Canada welcomed commercial investments in resource development from Chinese companies, so long as they are subject to proper corporate governance.

Among the new guidelines, which fall under the Investment Canada Act, PetroChina would have to commit to export the oil sands production in a commercial manner, rather than pursue any unprofitable project to ship the oil to resource-hungry China.

Federal officials would also examine PetroChina's ownership structure to ensure it does not operate as an agency of the central government. Under the guidelines, adequate governance includes commitments to transparency and disclosure, independent members of the board of directors, independent audit committees and equitable treatment of shareholders.

The major Chinese oil companies – PetroChina, China Petroleum & Chemical Corp. (Sinopec) and China National Offshore Oil Corp. (CNOOC) – have international subsidiaries that trade on public stock exchanges, employ outside directors, and run their operations like any global oil company.

Those subsidiaries “largely do operate like other oil companies overseas,” said Steven Lewis, who studies Chinese oil companies at the James Baker Institute at Rice University in Houston.

“Overseas, they do seem to be working to international market conditions.”

Mr. Lewis said Chinese companies operating in Africa sell their crude on international markets – the oil that they produce in Sudan is marketed in Europe, for example – rather than shipping it back to China.

However, he added, there is some question of transparency in the corporate governance of PetroChina's parent company, China National Petroleum Corp., the wholly owned state enterprise that is Asia's largest oil and gas producer.

“It's not really clear about the leadership of any of the Chinese national oil companies – the degree to which the heads of them still have to be appointed by the party and approved by the Central Committee,” he said, adding that traditionally the top echelon of management have been Communist Party members.

“It does seem that, in the end, the Chinese government does have a say. It does have some strings to pull that are distinctly political.”

Still, the political rapprochement between Ottawa and Beijing has served to reduce the level of mistrust between the two governments.

“I think you have to look at the specific investment to make a final conclusion, but there is a very good understanding with the Chinese with regard to the extent and nature of the investments we would welcome,” said Peter Harder, chair of the Canada China Business Council and former deputy minister of foreign affairs in Ottawa.

Conversely, a decision to block the PetroChina deal would seriously set back Canada-China relations, at a time when many Canadian firms desperately need the investment dollars that China has to offer.

Last month, China Investment Corp., the country's sovereign wealth fund, agreed to invest $1.74-billion to become the largest class B shareholder in Vancouver's Teck Resources Ltd., Canada's largest base metals producer.

Athabasca Oil Sands had sent clear signals to the market that it was looking for a deep-pocketed partner to help finance the development of its bitumen deposits. And the PetroChina investment is likely the first of several as long as there is no political resistance.

It remains unclear how the U.S. government would view a growing Chinese presence in the oil sands.

When it approved construction of a pipeline to bring oil sands bitumen to American markets, the U.S. State Department said in was in that country's strategic interest to have a secure source of oil supply from Canada.

Former U.S. vice-president Dick Cheney had said it would not be in the U.S. interest to see a major Chinese presence in Alberta. But President Barack Obama's administration has so far been silent on the issue.

Rice University's Mr. Lewis said the Obama administration so far seems to be welcoming any investment that will produce more oil for world markets.

This is not the same as the government’s duty to review some acquisitions to ensure that they have “value” for Canada.

The so called Sovereign Investment (and/or Wealth) Funds are ways for governments, rather than corporations, to “invest.” There is considerable worry, especially in the USA, about them. They are popular in Asia and are used by such capitalist bastions as Singapore.

American “worries” about Chinese “investments” in Canada are another delicate problem. It is, probably good politics and certainly good policy to welcome increased Chinese investment, even by government controlled entities, despite some US reservations. In fact, the occasional bit of harshly expressed angst from America Firsters is “good” for whichever Canadian political party (government) is on the receiving end.

 

[Edward Campbell]

More on the China/oilsands issue, reproduced under the Fair Dealing provisions (§29) of the Copyright Act from today’s Globe and Mail:

http://www.theglobeandmail.com/globe-investor/chinas-move-into-oil-sands-irks-washington/article1272498/

China's move into oil sands irks Washington
Alarm bells are sounding in the U.S. capitol over PetroChina's $1.9-billion investment in Alberta projects

Shawn McCarthy

Ottawa — Globe and Mail
Wednesday, Sep. 02, 2009

PetroChina Co. Ltd.'s (PTR-N109.15-0.60-0.55%) $1.9-billion investment in the oil sands is raising alarms in Washington, with thehead of a congressionally-appointed China watchdog saying the company is clearly a vehicle of Beijing's Communist government.

Carolyn Bartholomew, chairwoman of the U.S.-China Economic and Security Review Commission, said Tuesday that Ottawa should subject the proposed investment to a thorough review that would include sensitive national security issues.

And she rejected the contention by PetroChina and its supporters that the state-owned enterprise acts like any other commercial oil company in its international operations, professing concern about a growing Chinese presence in America's “backyard.”

“I think that an acquisition like this should raise national security questions both for the government of Canada and for the government of the United States,” Ms. Bartholomew said in an interview from Washington.

With reserves second only to Saudi Arabia, the oil sands have been recognized as an important component of U.S. energy security. The State Department explicitly cited the benefits of a secure, non-Middle East source of oil when it issued a permit last month to Enbridge Inc.'s $3.3-billion Alberta Clipper project, which will carry oil sands bitumen to U.S. refineries.

Ms. Bartholomew declined to say whether Ottawa should block the deal, saying that is a decision for the Canadian government to make.

Under the Investment Canada Act, Ottawa reviews foreign takeovers worth more than $600-million to ensure they represent a net benefit to Canada, and has recently added a national security test that requires input from departments responsible for Canadian security.

In December, 2007, the Harper government introduced guidelines for state-owned enterprises looking to invest in Canada. It said it would approve deals that are made on a commercial basis from companies that have transparent and commercially oriented corporate governance.

Prime Minister Stephen Harper Tuesday acknowledged that PetroChina's investment in the assets controlled by Athabasca Oil Sands Corp. is more controversial than a private sector, foreign investment in Canada would be.

“I will just say that there are laws in place to review foreign investment transactions when they meet a certain threshold and our government has strengthened those reviews by including a clause that allows officials to examine issues of national security,” he said.

Ms. Bartholomew said PetroChina and China's two other major state-owned oil companies –Sinopec and CNOOC – are key players in the Asian giant's drive for energy security.

“The evidence is that they aren't commercial companies. Some people believe they function a little independently, but the reality is they are controlled by the government, and for that matter, they are controlled by the Communist Party, which of course controls the government,” she said.

The bipartisan commission that Ms. Bartholomew heads was created by Congress in 2000 to monitor China's economic expansion and provide advice on its implications for U.S. security interests, and it has influence with the so-called “China hawks” among both Democrats and Republicans on Capitol Hill.

Ms. Bartholomew was originally appointed to the commission in 2003 by Nancy Pelosi, then minority leader in the House of Representatives and now Speaker of the House. Before joining the commission, Ms. Bartholomew served as Ms. Pelosi's foreign affairs adviser.

PetroChina is the international operating arm of China National Petroleum Corp., the country's largest oil and gas company. The subsidiary has shares listed in New York, Hong Kong and Shanghai, and employs some independent directors on its board.

Wenran Jiang, a China expert from the University of Alberta, said PetroChina's investment in the oil sands appears to be commercial in nature.

Gordon Giffin, a former U.S. ambassador to Canada, said he doesn't expect the Obama administration to oppose the Chinese investment in the oil sands.

“While the leases involved are pretty substantial, in the scheme of things, it's not that huge,” said Mr. Giffin, now a lawyer who now works with several Canadian energy firms.

But the deal will certainly raise the profile of the strategic value of the oil sands at a time when U.S. environmentalists are pushing for punitive measures that would discourage development in order to limit emissions of greenhouse gases.

“I think it's good in the sense that it's an event that should bring about some turning of attention by American energy thinkers to the value of the assets sitting in Alberta, and not enough thought is given in Washington to the strategic value of the assets that sit in Canada,” Mr. Giffin said.

If, and it’s still a very BIG IF we are going towards a fall election then Ms. Bartholomew’s “suggestion” that ”Ottawa should subject the proposed investment to a thorough review that would include sensitive national security issues” is almost a 100% guarantee that the sale will go ahead with only the most cursory review. Most Canadians are, broadly, anti-American and they love nothing more than to ”pull the eagle’s feathers” when that can be done without fear of reprisal.

Giffin gets it. The proposed deal is not, in and of itself, a “big deal” and it might, finally, provide a wee tiny bit of logical thinking in Washington – something that has been sadly lacking for nearly 20 years.

Caveat lector: I have a pretty long record of advocating a sharp turn in Canadian foreign policy – away from Europe and towards Asia. I do not regard China as a military threat to the West, in general, and to America in particular. I know some (many?) US officials want to make China into a threat but, in most cases, the real “enemy” they are battling is in Washington and it consists of people who want to cut budgets for defence projects that “need” a big, sophisticated “competitor” like China. I am, additionally, a philosophical free trader. I oppose trade restraints, including those based on “national security” grounds. I thought the government’s decision to block the sale of MDA, for example, was entirely unjustified and, mainly, was a reaction to the “knee jerk anti-Americanism” (of too many “ordinary” Canadians) that drives too many decisions made by Canadian governments.

 

[GAP]

Well your comments yesterday regarding the US sitting up and taking notice has come to fruition.....was it not Japan/China that was investing heavily in infrastructure inside the US not more than a decade ago? Strange how that works....it's OK for us, but not you....

 

[MarkOttawa]

MacDonald Dettwiler back in the news--will gov't do anything?

MacDonald Dettwiler to buy satellite imagery firm DigitalGlobe for $3.1-billion
...
DigitalGlobe’s satellites supply high-resolution images to its customers such as the U.S. Department of Defense and companies including Facebook Inc. and Uber Technologies Inc...
http://www.theglobeandmail.com/report-on-business/macdonald-dettwiler-to-buy-digitalglobe-for-about-31-billion/article34126606/

MacDonald, Dettwiler head office may move from Vancouver to U.S.

...given the highly sensitive nature of the technologies involved and the number of approvals required on both sides of the border, the deal has hurdles to jump.

Asked if MDA has received any objections from the Canadian government, [MDA CEO Howard] Lance told The Canadian Press: "Not that I'm aware of."

Lance said he thinks the administration of U.S. President Donald Trump will see the deal as positive "based on our ability to bring the U.S. government [NGA, NRO, Pentagon] enhanced solutions to their missions."..
http://www.ctvnews.ca/business/macdonald-dettwiler-head-office-may-move-from-vancouver-to-u-s-1.3299449

Mark
Ottawa