Protectionism: Is it on the Rise and What Should Canadian Policy Be

Transcription

1 Protectionism: Is it on the Rise and What Should Canadian Policy Be BDO Dunwoody Weekly CEO/Business Leader Poll By COMPAS in Canadian Business For Publication April 24, 2008 COMPAS Inc. Public Opinion and Customer Research April 24, 2008

2 1.0. Introduction The COMPAS panel of CEOs and business leaders was asked if global protectionism was on the rise in the wake of the Canadian government s prohibition on the sale of a Canadian aerospace firm and New Zealand s blocking of Canada Pension Plan Investment Board s $1.8 billion partial takeover bid for Auckland International Airport. Panelists are not entirely sure it s on the rise. As for their judgments, they tend to support the Canadian decision and not the New Zealand one. With regards to future Canadian protectionism, they favour tougher regulations in respect of ownership of resources and energy, possibly softer rules in respect of ownership of financial institutions. Across the board, they favour tougher protectionism when the suitor is a foreign government enterprise. Panelists own protectionist sentiments may be on the rise in some cases when tracking data are compared. These are the key findings from this past week s Internet survey of CEOs and business leaders on the COMPAS panel. The weekly business survey is undertaken for Canadian Business magazine under sponsorship of BDO Dunwoody LLP Protectionism Is It on the Rise and What Should Canada Be Doing The COMPAS panel of CEOs and business leaders was asked if global protectionism was on the rise in the wake of the Canadian government s prohibition on the sale of a Canadian aerospace firm and New Zealand s blocking of Canada Pension Plan Investment Board s $1.8 billion partial 2

3 takeover bid for Auckland International Airport. Panelists are not entirely sure it s on the rise, as shown in table 2a. Sometimes opinion was divided on the specific action. As one CEO put it, In the first case, NO. In the second case, YES. As for their judgments, they tend to support the Canadian decision and not the New Zealand one, as shown in tables 2b and c. Table 2a: (Q3) Would you say that these events are an indication of rising protectionism in world investment practices? % Definitely 15 Probably 51 Probably not 31 Definitely not 1 Don t know or unsure 3 Table 2b: (Q1) As you may know, the federal government blocked the sale of a Canadian aerospace firm to a U.S. company. On a 7 point agreement scale where 1 means disagree strongly and 7 agree strongly, how much do you agree with this decision? Mean DNK

4 Table 2c: (Q2) The New Zealand government recently rejected the Canada Pension Plan Investment Board s $1.8 billion partial takeover bid for Auckland International Airport. On a 7 point agreement scale where 1 means disagree strongly and 7 agree strongly, how much do you agree with this decision? Mean DNK With regards to future Canadian protectionism, they favour tougher regulations in respect of ownership of resources and energy, possibly softer rules in respect of ownership of financial institutions, as shown in table 2d. Across the board, they favour tougher regulations in respect of suitors that are foreign government enterprises, as shown in table 2e. 4

5 Table 2d: (Q4) Restrictions on Foreign Ownership Should Be... 1 (By Sector) Tightened Unchanged Loosened DNK Natural resources in general April August December Energy (oil, gas and hydro) April August Media and Culture April Land April August December April 2008 and August 2006 question wording, (Q1) As you know, there s been a lot of talk about Canadian companies being bought up by foreign enterprises. In each of the following sectors, please indicate if restrictions on foreign ownership should be loosened, tightened, or left unchanged. [ROTATE] CHECK ONE FOR EACH. December 2005 question wording read, (Q1) As you may know, there have been several hostile takeover bids involving foreign investment in Canadian companies over the last year including bids for Hudson s Bay Company, Dofasco Inc., and Vincor International Inc. A prominent corporate leader in the resources sector warned against foreign ownership of mining companies this week. In each of the following sectors, please indicate if restrictions on foreign ownership should be loosened, tightened, or left unchanged. [ROTATE, CHECK ONE FOR EACH]. Question wording in December 2004 read, There s been some talk in the media about foreign companies and governments purchasing or expressing interest in purchasing some Canadian companies. In each of the following sectors, please indicate if restrictions on foreign ownership should be loosened, tightened, or left unchanged. Question wording in October 2002 read, As you may know, there are legal restrictions against foreign ownership in many sectors. In each of the following sectors, please indicate if restrictions should be loosened, tightened, or left unchanged. 5

6 Tightened Unchanged Loosened DNK December October Agriculture and Food April Technology April August Transportation April Banks and financial institutions April August December December October Traditional Manufacturing April

7 Table 2e: (Q5) In assessing proposed foreign takeovers, should Canada take a tougher position, about the same position, or a softer position if the acquiring company is a state owned enterprise rather than an independent corporation? % Tougher position 59 About the same 38 Softer position 1 Don t know or no opinion 3 The following verbatims provide a nuanced sense of opinion: As Canadians we are an overtaxed society. The simplistic arguments used to justify why we are taxed so heavily don t wash. Sure we may not be the highest taxed nation in OECD, but without doubt in terms of value for money we are at the bottom, by a long way. What is more if we did have to pay our full whack to protect our country we would have been bankrupt long ago. As I understand this, the issue with the recent decision not to allow the sale of ADR is linked to concerns with extraterritoriality of U.S. law as it may apply to the ability of Canada to gain access to proprietary data in the Arctic. National security concerns are a valid reason for not transferring sensitive technology to the possible control of a foreign government. Conditions are very different in many countries and essential services should remain in the hands of the country in which they are used. Generally everyone benefits overall by competing in a genuine open free fair trade environment. Protectionism of 7

8 any decision generally does not work and is not ultimately an effective strategy - it ultimately and generally limits everyone's opportunities and thus restricts globally our collective ability to generate wealth and prosperity for all. However, we cannot be "boy scouts" either - e.g. if we just unilaterally just completely without restriction, open up say our banking and finance industries to foreign competition that still restrict access to our companies into their markets - well that's just stupid. Also we should be rightly cautious about industries that are sensitive to our defense or security being owned by potentially hostile powers - that too is just stupid. So, let's try to preserve and expand true free trade opportunities generally all across the board - but let's not be stupid about it. Manufacturing is getting hammered with the rising dollar, now rising steel, we cannot maintain this stance. Cutbacks have to come as our domestic market cannot use all we can produce. The MDA sale was cancelled because of political reasons. All of these should be judged on the long term benefit to Canada. The U.S. takeover of MDA would enable the company to work for the U.S. military which they have difficulty doing now. There needs to be more control where our funds are being invested off shore. Especially funds like the CPP. Small businesses in Canada are struggling to find investment money as the banks are not prepared to finance them yet our money is being spent in New Zealand? What sense does that make? We should not allow any takeovers from those countries that do not reciprocate. 8

9 3.0. Methodology The COMPAS web-survey of CEOs and leaders of small, medium, and large corporations was conducted April 15-17, Respondents constitute an essentially hand-picked panel with a higher numerical representation of small and medium-sized firms. Because of the small population of CEOs and business leaders from which the sample was drawn, the study can be considered more accurate than comparably sized general public studies. In studies of the general public, surveys of 120 are deemed accurate to within approximate 9.0 percentage points 19 times out of 20. The principal and co-investigator on this study are Conrad Winn, Ph.D. and Tamara Gottlieb. 9