The new conservative government of Prime Minister Brian Mulroney today is expected to introduce legislation to end Canada's controversial foreign investment policies in favor of a program that will actively seek capital investment from the United States, Europe and Japan.
The new legislation represents a dramatic reversal of one of the major sources of conflict between the United States and Canada under the government of former prime minister Pierre Trudeau.
Sinclair Stevens, minister of regional industrial expansion, is scheduled to introduce legislation that the new government hopes would transform the current Foreign Investment Review Agency (FIRA) into a booster of foreign investment.
Some opposition critics suggest, however, that although the rhetoric may be changing, there still will be a careful review of proposed investments, a major source of irritation for U.S. corporations. Government experts agree that Canada, like other countries, can't throw the door completely open. "But there'll be a much better balance than before," said a well-placed government official.
Mulroney told a small group of visiting American journalists in Ottawa earlier this week that he will transform FIRA -- which American and other foreign investors consider to be a barrier to investment -- into "New Investment Canada." The new effort is designed to be part of a broad program to deflate Canadian economic nationalism, other officials said.
Mulroney told the journalists: "It's my top priority to refurbish relationships with the United States, our best and closest friend. We want a positive, not a negative, attitude toward foreign investment ."
The Mulroney Cabinet also is planning revisions of Trudeau's controversial National Energy Program (NEP) of 1981 that gave exploration incentives to firms based on their percentage of Canadian ownership, and limited the ability of American companies to develop oil and gas in Canadian federal lands.
"We need 600,000 extra jobs in Canada -- a total of 2 million new jobs by 1990 -- to get unemployment down to the United States' level," Stevens said in an interview earlier this week.
Since 1975, FIRA has screened all new foreign investments, including takeovers, the key idea being to determine whether they would be of "significant benefit" to Canada. Under Trudeau, the restrictions focused on banking, communications, culture, and oil and gas ventures. And although FIRA officials in the former regime contended that 90 percent to 95 percent of applications were approved, American business people argued that increasingly tougher guidelines dissuaded many applications in the first place.
FIRA reportedly attempted to extract concessions as a quid pro quo for approval of investment applications. U.S. companies said they were variously asked to move their operations to Canada, to buy a specific portion of their parts and materials in Canada, and to have their subsidiaries do all their banking in Canada.
Stevens, whose ministry directs FIRA, revealed that the "significant benefit" rule will be dropped from the new legislation. "With us," Stevens said, "the presumption will be that the investment is of benefit to Canada." As further evidence of the change in both mood and substance, the new legislation won't even use the phrase "foreign investment," but will refer to "non-Canadian investment."
Under NIC, according to Stevens, investments in small enterprises that now are painstakingly reviewed by FIRA automatically will get a green light. "Imagine," he said, "having to review an investment in a hamburger stand by the Canadian Cabinet!" His reference was to recent approval of the purchase of a hamburger franchise in Ottawa by a subsidiary of Burger King Corp. of Miami, Fla., one of 22 foreign investments approved by FIRA this week.
A major beneficiary of the new Canadian welcome for foreign business may be energy companies, according to Patricia Carney, minister of energy, mines and resources. The multinational companies in the United States and Europe "have the money to develop resources" needed to boost the Canadian economy and create jobs, she said.
Nonetheless, Carney stressed the fact that Canadian nationals own only 44 percent of Canada's oil and gas resources, a level she said would be politically difficult to "dilute." In a recent speech, she noted that "the big bucks" needed for foreign investment must be balanced "with our desire to develop the home-grown component of the energy industry. These goals are often in conflict, and a delicate balance must be struck."
In effect, Carney expressed a hope in an interview that foreign investors whose interest now is being solicited would be sensitive to this problem and play ball with the new administration by assuring more Canadian participation.
"It should be based on mutual interests," she said. "We'll say, 'If we do this for you, we can only do it if we get reelected.' "
The abandonment of an atmosphere hostile to foreign business is a key element in Mulroney's commitment to generate better political, social and economic relationships with the United States. It rejects the degree of "Canadianization" that marked the latter stages of the Trudeau regime. Carney claimed, for example, that the NEP had virtually "shut down the energy industry in the Canadian West."
The Mulroney government, she said, is "going to world prices for oil, deregulating the oil industry ," and in other ways planning to break with the old policies, "which should benefit U.S.-Canadian relationships."
In general, the new prime minister, who said he admires President Reagan and his emphasis on giving business a free hand, promises that the old confrontation policy is at an end. To be sure, he recognizes that the smaller Canadian economy is heavily influenced by what happens in the far bigger U.S economy. But he and his market-oriented Cabinet believe that Canada's economic future lies in a greater reliance on the private sector.
In turn, Mulroney feels that a stronger Canadian economy will enable Canada to have more clout in its relations with the United States.