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Canada’s foreign investment review policies need to be simplified and streamlined, report says

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The federal government needs to do more to help Canada succeed in the face of intense global competition, and one way to start would be to adopt a more welcoming approach to foreign investment, a new report argues.

Written by Paul Boothe, a former high-ranking federal and provincial government official, the report says that Canada’s foreign investment review policies and practices are currently “in a state of disarray.”

New rules on foreign buyers have added time and uncertainty to the screening process, undermining Canada’s reputation as a destination for investments that create jobs and benefit consumers.

The report says that further reforms to the Investment Canada Act, particularly as it applies to state-owned enterprises, should be near the top of the federal government’s economic priority list.

The report also urges the federal government to take meaningful steps to enhance competition in telecommunications and air transportation. It says the government could improve consumer choice and pricing in both sectors by loosening foreign ownership restrictions and allowing foreign firms to enter the Canadian market on an equal footing with domestic players.

“The government’s policy regarding investments by state-owned enterprises seems arbitrary and confusing,” says Boothe, who is now Director of the Lawrence National Centre for Policy and Management at Western University’s Ivey Business School.

“We cannot afford to be branded as ‘closed for business’ by the big international capital pools, including those with government backing. Simplifying, clarifying and streamlining the review process is an urgent priority.”

The Canadian Council of Chief Executives commissioned the report as a way of assessing the government’s progress in implementing recommendations of the 2007-08 federal Competition Policy Review Panel, chaired by Lynton “Red” Wilson.

In announcing the Wilson panel, then-Finance Minister Jim Flaherty said its role would be to help ensure the country’s competition and investment policies are “modern and flexible”, helping Canada keep pace in the highly competitive global economy.

Boothe begins his report by noting that, in the years since the Wilson panel delivered its recommendations, the pressures on Canada’s economy have not abated. “More than ever,” he says, “we need all the advantages that a competitiveness-focused policy regime can give.”

The report says the federal government deserves high marks for modernizing the Competition Act in ways that make it more flexible and create more certainty for firms undertaking mergers.

Boothe also gives credit to the government for its business-friendly tax regime, reforms to immigration legislation and intellectual property and copyright laws, and efforts to facilitate and expand international trade.

In other areas, however, “work remains to be done”.

“In the critical area of foreign investment review, Canada is decidedly worse off today,” the report says. “Not only did the government fail to implement positive reforms” such as raising the threshold for review of most foreign acquisitions to $1 billion, but the review process itself “has become less certain and more opaque.”

The report also says the government missed an important opportunity by not acting on the Wilson panel’s call to create an arms-length Canadian Competition Council. The council’s role would be to analyze the state of competition in Canada and advocate for reforms to strengthen it. “Given the current government’s increasing reliance on analysis produced by outside groups, Canada needs such a body to provide independent, expert advice on the path forward for economic reform,” the report says.

To download a copy of the report, please click here.

Founded in 1976, the CEO Council is the senior voice of Canada’s business community, representing 150 chief executives and leading entrepreneurs in all sectors and regions of the country. Its member companies collectively employ 1.5 million Canadians and are responsible for most of Canada’s private sector investments, exports, workplace training and research and development.

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