`Foreign domination' of corporate Canada has sharply decreased
FOR decades, Canadian nationalists have complained about the domination of their country's economy by multinational corporations, especially ones headquartered in the United States. Foreign ownership of Canadian corporate assets was extraordinarily high in manufacturing and the natural resource industries. In the US, similar levels of foreign ownership would undoubtedly have sparked a huge political reaction, with Congress attempting to regain American control.
In Canada, a shift has taken place which has gone largely unheralded. A report released by Statistics Canada last week shows that foreign control of Canadian non-financial corporations has declined steadily since a peak in 1971. The foreign-controlled share of corporate assets declined to 23.4 percent in 1985 (the latest number available), from 37 percent in 1971. The foreign share of total corporate sales dropped to 29 percent in 1985, from 37.6 percent in 1971.
John Crispo, a conservative University of Toronto professor of management, blames the lack of Canadian awareness of this trend on what he terms ``left wing'' media, especially the Canadian Broadcasting Corporation and the powerful Toronto Star.
``That is a fundamental problem,'' he says. ``The nationalists say nothing when things [ownership] tend to go the other way.''
This decline in foreign-controlled ownership is even more pronounced for US-controlled companies. Their share of Canadian non-financial corporate assets fell to 17 percent in 1985, from 27 percent in 1971.
These are large changes. Why have they happened? One reason is national policy. Before the recession of 1982, the Liberal government of Prime Minister Pierre Trudeau adopted a national energy policy intended to Canadianize the American-dominated oil industry. It partly succeeded, at huge expense, as Canadian oil companies, including the government-owned Petrocan, bought out foreign oil concerns. Today, less than 50 percent of the Canadian petroleum industry is Canadian-owned.
Mr. Crispo, however, notes that this trend had started before the liberals adopted their Canadianization policy. Foreign ownership had already slipped from a peak of 72 percent to 62 percent as nimble, small Canadian operators expanded their exploration and drilling activities.
Another reason for the growing Canadian share of corporate ownership is that Canadians own most of the fast-growing small and medium-size companies. The large foreign-owned multinationals grow more slowly, especially in the area of creating new jobs.
There are other relevant points. One is that Canadian-controlled companies, many of them large, are investing much more money in the US in recent years than US-controlled corporations are in Canada.
The big new foreign investor in Canada is Japan, whose new Prime Minister Noburo Takeshita visited with Canadian Prime Minister Brian Mulroney in Toronto after his talks with President Reagan in Washington last week.
Japan has accounted for the bulk of the net inflow of capital to Canada since 1984. Total Japanese investment in Canada reached $30 billion, Canadian (US$23 billion) in 1986, up from $500 million in 1975. Most of this money has gone to Canadian government bonds. The Japanese bought an estimated one-quarter of such paper. But direct investment in plant and equipment exceeded $2 billion in 1986.
Mr. Mulroney's government welcomes foreign investment. The previous Liberal government became more welcoming when the 1982 slump raised unemployment to high levels in Canada.
This report on foreign investment is relevant to the current debate in Canada on the free-trade deal with the US that Mr. Reagan and Mr. Mulroney signed Jan. 2. Nationalists contend it will boost American ``domination'' of the Canadian economy, though they say contrariwise that some American branch plants will be taken home.
Crispo says free trade will be ``relatively neutral'' in regard to investment, with more Canadian companies investing south of the 49th parallel and vice versa for American companies.
Whatever the case, Canadian corporations have reached a stage of maturity, competence, and size which will make them tougher competitors in the North American market than they would have been two decades ago.