By Aaron Rathbone
The union that represented workers at the Electro-Motive Diesel plant in London, Ont. wants a public inquiry to strengthen the Investment Canada Act.
Ken Lewenza, president of the Canadian Auto Workers, says Caterpillar Inc., which recently shut down the plant, will provide the best case for the need to improve the act so that other closings may be prevented.
“We want a public inquiry (into) the Investment Canada Act as it relates to Caterpillar, because if we do then it would come out with clear and precise accuracy, number one why the act didn’t work here. And number two, here’s a corporation that really bought EMD to take the intellectual property to the United States.”
EMD workers had been locked out of the plant since early January after refusing to take nearly 50 per cent cuts to their wages. They recently ratified a severance deal with their former employer.
Lewenza believes this event serves as an example of the risks involved in doing transnational business, especially in the world of foreign mergers and acquisitions.
Often when a foreign corporation wants to acquire a Canadian company, it must meet standards set by the Investment Canada Act. Section 2 of the act states its purpose is to “provide for the review of significant investments in Canada by non-Canadians in order to ensure such benefit to Canada.”
Industry Canada did not reply to an interview request for this story.
Intellectual property is often an important aspect of any company. It’s what makes companies distinct and, in the case of manufacturing sectors, differentiates them from competitors.
Canadian research and development grants allow companies to create some great new innovations, says Lewenza. Once their idea is proven to be successful and there is a chance to make money off of it, foreign companies come in and buy them up, he says. Because of globalization, companies can move those innovative techniques to another country where labour costs are cheaper, Lewenza adds.
But transnational business is a two-way street.
“Companies acquire companies all the time, and I don’t know that companies come to Canada to acquire their intellectual properties more than any other,” says Frank Arnone, a partner at Blake, Cassels and Graydon LLP, a Toronto-based corporate law firm.
“The question we ought to be asking as Canadians is, are we better at buying or selling, or are we benefiting more from what we’re buying or selling?”
The lawyer for one of the country’s most well-established firms in dealing with mergers and acquisitions points to the success of Canadian companies abroad as a sign of their strength as players in the global economy.
“We’ve been doing an awful lot of buying lately in a number of different areas. Look at all of our banks making acquisitions in the United States; look at our gas companies buying all over the world.”
But Lewenza worries about companies coming into the Canadian market and displacing workers and communities.
“Without transparency, without public hearings, without community engagement where those multi-national corporations are, then quite frankly the citizenship and workers are left out of the criteria,” says the union leader.
Lewenza would like to see companies that wish to invest in Canada be upfront with their intentions.
“If the employer says we’re buying it (a company) under these conditions, but by the way, we think the labour contracts are uncompetitive and when that contract expires we’re going to make it competitive then there’s some transparency around it.”
Arnone says that in certain situations specific assurances or undertakings may be agreed upon before a foreign investor is allowed to take over, but it’s unique to each situation.
“I think in a global marketplace you try and strike a fair balance between what you want to do outside your country and what you allow others to do inside your country,” says Arnone. “And in that balance there are winners and losers.”