The realities of foreign investment: bringing in the state
Today we'll look a little deeper, at a theme that is always in the background but rarely mentioned when discussing trade and investment treaties: state power.
While advocates of deregulation and liberalization claim to oppose an activist state, the truth is that liberalized economies require heavy and frequent state intervention. Examples aren't hard to find: Argentina's financial crisis and the US savings and loans fiasco to name two.
The importance of the state holds also for foreign investors. An editorial in the Globe and Mail urges Canadian companies to seek a presence in China so they can "boost their share of China's infrastructure spending". While the business pages often scorn the "nanny state" at home, they almost never mention the fact that the white-hot economy of China owes its functioning to an authoritarian government which seldom leaves decisions to the market. Showing that the Globe editors understand this basic (but unstated) state function, they conclude with some sage and true advice: "Business could boom if governments hustled."
Similarly, the Globe's Steven Chase reported nearly two years ago that: "Ottawa also wants to sell nuclear reactors to electricity-hungry China."
But, there are limits to this sort of thing, of course. One such limit is a certain nation located immediately to the south. Chase continues:
"Beijing is hesitant to approve major investment in Canadian energy assets because of Canada's preferential trade relationship with the United States...potential petroleum investments in Canada could be harmed or forced to take a back seat to U.S. interests in the event of a supply shortage or serious conflict with Washington.
"The North American free-trade agreement gives the United States special access to the Canadian energy sector".
So the US has trapped Canada into a trade regime that hampers our capacity for independent action -- and as we have seen, Canada seems intent on passing on the lessons thus learned.
Perhaps the frankest expression of Canada's true position in international affairs was offered in the Toronto Star's business section (April 8/05). The occasion was the filing of a lawsuit by Scotiabank against the government of Argentina, alleging that the bank had not been fairly treated during the country's financial crisis. This was followed by a short lesson in Realpolitik:
"The news may also serve as a reminder to other homegrown banks that Canada may not have enough political muscle to defend businesses caught up in such situations.
"'When you get into a situation like this, there are going to be losers,' [U of T professor Albert] Berry said. 'The debtor government is going to favour the politically and economically favourable creditors (and) treat the little guys more harshly because you don't have (President George) Bush behind you.'"
by Dave Markland