The federal government rationale for turning down BHP Billiton Inc.'s prospective takeover of Potash Corp. of Saskatchewan, delivered Sunday night, was both unclear and unconvincing. And that points to the need for better policy, including amendments to the Investment Canada Act.
Tony Clement, the Industry Minister, said that in three respects, the bid was not of "net benefit" to Canada. But he did not comment on three other criteria for approving takeovers under the Act. And it would be easy to point to BHP's public commitments around developing the potash resource, which in general exceed Potash Corp.'s own plans, and draw a very different conclusion.
The Act circumscribes what Mr. Clement can say, but in the absence of good information, it is hard to see the decision as anything other than a bid to keep 13 Conservative seats in Saskatchewan.
Many of the new protectionists called potash a "strategic asset." That was misleading. Potash Corp., the company, was on the block - not potash, the resource, which may well be strategic but would remain provincially-controlled in any scenario.
So the best approach may be to bring some honesty to this question. The federal government should simply state in which markets it does, and does not, want foreign investment - it already does this in some industries, such as banking and transportation.
Alternatively, the onus could be reversed: Instead of applying a net benefit test, there could be a "net loss" test. Or the number of criteria could be reduced, or the test scrapped altogether, since predicting future economic activity as a result of a single transaction is a difficult task, as the latest news about BHP's discussions with the federal government over the Jansen mine project reveal.
The federal government was short-sighted in stopping the takeover, and has not properly justified its decision. With some smart amendments to the Investment Canada Act, the federal government could save itself, and the Canadian economy, a lot of grief the next time around.