An interesting policy development occurred during my recent trip to China for the Canada China Business Council’s AGM and policy conference held from October 16 to 18. Prime Minister Harper not only signed an agreement with the EU that raised the threshold limits of foreign investment by EU countries to 1.5 billion, but the agreement triggered an obligation to raise the investment threshold for all countries with whom we have a free trade agreement. Apparently there is a clause in all of our other trade agreements stipulating that investment terms automatically mirror the new terms in the event that a more favourable treaty is signed.
The government has been under criticism because of declining levels of foreign investment over the past year. The increased threshold through the EU agreement demonstrates an openness to investment from market-oriented countries. The countries affected include not only the U.S. and Mexico, but also Norway, Iceland, Switzerland, Liechtenstein, Panama, Jordan, Colombia, Peru, Costa Rica, Chile, Israel, and Honduras.
The policy development is meaningful. Currently, for example, U.S.-based Louisiana-Pacific Corp.’s billion dollar acquisition of B.C.’s Ainsworth Lumber Co. Ltd. is going through the Investment Canada review process. Under the terms of the new policy, no investment review would be required.
The irony of all of this is, of course, that the country in the best position to make investments these days is China, a country with whom Canada currently has no trade agreement, and who is now our second largest foreign investor.
So, while the EU trade pact underscores the government’s throne speech commitment to foreign investment, it shines a light on its nervousness regarding state-owned investment, particularly from China. Canadian ministers have been spending an enormous amount of time promoting Canada-China business; indeed, Ministers Baird, Oliver, and Fast, not to mention the governor general, were all in China last week. These efforts to promote Canada-China trade aren’t very consistent with the apparent regulatory blockades that we keep putting up. While it’s fairly easy to red circle state-owned enterprises, it’s not so easy to determine private companies who are treated like an SOE because of regulations that seek to determine the “influence” of home governments.
While at the conference, both Chinese investors and Canadian companies seeking investment chafed at the opacity of the new SOE guidelines. It’s worthwhile pointing out, however, that these rules were not only created because of perceived government concerns, but because of lobbying from members of the Canadian oil and gas community, who were worried about increased foreign competition.
I have a feeling that we will continue to see further refinement and adjustment on investment policy in the months ahead.

Authored by: Mike Coates