Dec 12
14
The Deal With China: So Good We’ll Never Do It Again: Rod Taylor
Prime Minister Harper announced last Friday that cabinet had approved the takeover of Nexen by CNOOC (the China National Offshore Oil Corporation) for $15.1 billion as well as the $6 billion takeover of Progress Energy Resources Corp. by Malaysia’s state oil and gas company, Petronas. The two deals put a significant chunk of Canada’s oilsands development into the hands of two state-owned enterprises, one being essentially a business arm of Communist China. The late-Friday announcement was presented as “in Canada’s best interests” (of course) but the confident salesmanship often displayed by the PM was a bit low-key.
For one thing, he was quick to offer this bit of a consolation to those who were either discouraged or outraged by the transaction: “This is not the beginning of a trend but the end of a trend,” a remark which hung in the air a little too long to make anyone comfortable. The obvious question is: “If this is so good for us, why won’t we do more of it?” or “If we don’t want to keep transferring control of our resources to foreign, state-owned enterprises, why agree to this sale?”
In general, the transaction—which took place against a backdrop of questions about how Canada’s environmental rules and regulations and labour laws will apply to Chinese businesses operating in Canada, the question of temporary foreign workers, China’s dismal human rights record, the concept of a foreign business suing its host country, the controversial and unresolved Enbridge pipeline proposal (a pipeline / supertanker combination intended to feed China’s growing appetite for oil)—sparked a flurry of concerns both in the business world and among anti-oilsands people.
The NDP and the Greens were quick to condemn; why talk business when you can just milk the taxpayers? The Liberals, who apparently never met a foreign investor they didn’t like, seemed quick to support the concept—if not the broker—of the deal. To the concerns already raised by many others, I add the following:
- Early in the development history of the Alberta oilsands, the economic indicators for the successful and profitable extraction of oil were not always positive. Middle Eastern turmoil, the booming of Asian economies and the general focus on dwindling natural resources have pushed oil prices to levels where profitability seems to hinge more on market access, environmental restrictions and successful lobbying for transportation than on technology and the quality of the resource. I am not a proponent of government-owned enterprises, Canadian or otherwise, but if any government should be poised to control and benefit from the rich resources of Canada’s oilsands, it should be the Canadian government, not Communist China. If Nexen needed capital, couldn’t more investment have been encouraged from Canadians? To any one of us, $15.1 billion is a lot of money, but for Canadians who paid $31 billion interest on our $600 billion federal debt in 2011, a one-time dollop of $15 billion may not be a long-term answer to our budget shortfalls. Perhaps if Canadians were paying less in taxes, we might have been able to purchase Nexen ourselves, as individual investors and a nation of freed-slave entrepreneurs.
- A second concern has to do with our much-touted “free trade agreements”. We already are heavily-weighted to purchasing offshore toys, now we want to allow some of the potential profits from our wholly-owned resources to flow to a country which already owns a good chunk of our debt? China is building out a world-class navy fleet on the backs of its slave labour, our “free trade” purchases of toasters and TVs and our interest payments. To give China’s repressive regime the keys to Canada’s unique energy resource seems lazy and irresponsible to me.
But never fear. The PM has assured us that—even though this is a good deal for Canadians; trust me—we will not continue to make this kind of deal going forward. In the future, we will set the bar much higher for SOEs (state-owned enterprises) and will only approve takeovers like this in “exceptional circumstances”. I’m sorry, but with this PM, that gives me no confidence whatever. I guess it was “exceptional circumstances” that caused him to call an early election after his government passed legislation calling for fixed election dates. I guess it was “exceptional circumstances” that caused him to renege on promises regarding income trusts. I guess it was “exceptional circumstances” that caused him to morph from a small-government campaigner to a big-government prime minister. There seem to be a lot of “exceptional circumstances” these days.
Canada should preserve the potential of economic benefit and a secure energy supply by maintaining Canadian ownership of the Alberta oilsands. The world may beat a path to our door, seeking to purchase our products but we don’t need to give them the keys to our house. We have tremendous resources and great innovative people to extract, refine and market them. Let’s stop the lazy practice of letting others cream our raw materials and sell us plastic pacifiers in return. We need to pay off our debts and take control of our future. It is not a time to be careless with our assets.