Prime Minister on FIPA

December 19, 2012

Reporter: Good afternoon, Prime Minister. Can you explain — can you elaborate a little bit on what you mean by exceptional circumstances? You said that foreign investment by company — by state-owned enterprises in the oilsands would only be allowed under exceptional circumstances. Can you elaborate on exactly what that means? And, secondly, why is it only the oilsands that you’ve decided to apply that designation to?

 

Rt. Hon. Stephen Harper: Both good questions. First on the question of exceptional circumstances, let me just be a little clearer on your preamble. What we’re saying specifically is that a transaction, an acquisition of control, of control, by a foreign state-owned enterprise in the oilsands would only be permitted under exceptional circumstances. We say exceptional circumstances because each case under our legislation has to be evaluated on its own terms. But I think the government is being as clear as we can be that exception for those exceptional circumstances we should not expect to see — except for — further transactions involving controlling interests in the oilsands approved. Why start with the oilsands? Well, obviously because this is the question before us immediately. And the oilsands, this — obviously one of the transactions today speaks directly to that and has put this on the table. The oilsands is in a particular position in that the production in the oilsands is dominated by about 15 companies. At the same time the oilsands is not only a huge portion of the Canadian oil industry, it, in fact, represents 60% of all of the production of oil around the world that is not already in state hands. The government’s concern and discomfort for some time has been that very quickly a series of large-scale controlling transactions by foreign state-owned companies could rapidly transform this industry from one that is essentially a free-market industry, to one that is effectively under the control of a foreign government. And that is obviously not something that we think would be desirable. What I would say is we are obviously through the tests I’m enumerating today and the scrutiny I’m enumerating today, we will watch carefully other sectors of the economy to ensure that this situation does not develop in those sectors as well.

 

Reporter: Prime Minister, I was with you in China in February when you said please buy our oil, we’re open for investment. Minister Oliver has been very clear that the natural resource patch needs $650 billion in investment in the next decade alone and quite a lot of that money will have to come from abroad. One obvious source of this money is China, state-owned enterprises. How then can you attack the investment you say you need by posing such strict conditions on future investments by state-owned enterprises?

 

Rt. Hon. Stephen Harper: We believe there is, first of all, a lot of interest in investing in the oilsands and, of course, more specifically as I indicated in my earlier answer we’re not talking about all foreign investment in the oilsands. We’re talking more strictly and more focused on investments that involve controlling interests in the companies acquired. So to be just brief about it, I think the oilsands remain an extremely attractive investment opportunity, and I am confident that the government, the industry will be able to attract a range of investment to satisfy its needs and the country’s needs over time. But as I said, let me be absolutely clear. The rules we’re putting in place today, we want to see the oilsands develop. The oilsands have to be developed in the interests of Canadians and in a way that preserves the essential market-based nature of that business. We are not interested in investment that would transform the business from one that is a market-based business into one that is quite strictly or quite widely under the control of a foreign government.

 

Reporter: Good afternoon, Prime Minister. What signal will your decision send to the Chinese authorities? How do you think they’ll react? I know that your government is trying to develop closer relationships with China. What will their reaction be?

 

Rt. Hon. Stephen Harper: Well, obviously I’ve spoken to Chinese leadership a number of times, and they have regularly said to the act, and Canada’s reciprocal obligations of reciprocity, as are other countries, are not established by us. They’re established through the various international agreements that Canada is party to. So I just want to be clear on that that these are reviews of transactions taking account the broader interests of the Canadian economy. It remains the goal obviously of the Canadian government through various things that we’re doing to secure greater access, not just to the Chinese market, but various other markets, and this is what I referred to earlier. You know, as I say I do hear these statements from time to time that we’re a tough place to get a foreign investment in. My experience has been it’s a lot tougher for Canadians to invest in most other countries than it is for other countries to invest here. That remains the concern of the government of Canada. Dealing with that issue remains a goal of the government of Canada. But as I say the tests here are the tests prescribed in the act itself. But obviously as I said earlier, you know, to the extent some people say, well, the Chinese or others may not like the situation. The fact of the matter is the Chinese and man others have a — and many others have a situation of trade and investment with Canada that is very much in balance in their favour. And I think they will for that reason they will look at this situation very pragmatically.

 

Reporter: Prime Minister, because this is an SOE, in the lead-up to the decision did you have conversations with the Chinese government about this because it is an SOE? And in that context what was it about this SOE purchase that was okay that is not going to be okay for the next SOE purchase? In other words what was the overriding net benefit of this one that future ones are going to have to have a higher bar to get across?

 

Rt. Hon. Stephen Harper: sure. First of all, it’s important to understand, as I said before, that under the act decisions on individual transactions are taken by the minister of industry. He and his officials dialogue with the proponent, with the for investor that is making the proposal. My discussions with the Chinese government and other governments are obviously at a much broader level. As i said earlier, the Chinese leadership in every meeting with me has affirmed constantly that they seek in their relationship with Canada a win-win situation. They also are very conscious of the fact that the current flow of trade and investment between Canada and China is heavily weighted to the Chinese side. And that is something that certainly i have conveyed to them that we’re interested in seeing change. Once again on the specifics of this transaction, this transaction in and of itself does not raise our fears that we are transforming the Canadian oilsands from what is essentially a free market business operating in a global economy to essentially an control of foreign governments in and of itself. But obviously the nature of the transactions we’ve been seeing in that business and elsewhere where as I said before the proposals are increasingly large, they increasingly involve controlling interests in companies, and they increasingly involve state-owned enterprises that are under pretty direct control by foreign governments, that tendency if it continues would raise enormous concerns, which is why we will make sure we do not find ourselves in that position.

 

Reporter: Prime Minister, what is your message to the Caucus and Cabinet on how you proceeded with this issue. There are concerns in your home province of Alberta. You’ve had ministers express the concerns of their constituents and also just within I guess Caucus and Cabinet. What’s your message to them?

 

Rt. Hon. Stephen Harper: Well, first of all, this is a decision of Cabinet. Let me be clear: we’re enunciating policy today. Policy is a decision of Cabinet. And all Cabinet supports policy. In terms of Caucus, I also think there will be broad understanding and support for this decision. I think our Caucus on many matters, including this matter, reflects the broad views of Canadians. And I think the broad views of Canadians are the following on foreign investment. I think they understand that foreign investment has been historically, continues to be today, and will be in the future an important part of the mix in terms of creating jobs and growth and prosperity for Canadian families. I think they also understand that certain trends in foreign investment, if they were taken to their extreme, would not be of benefit to Canada. I think they understand both things. And so I think they’re looking for the government to have a policy that says we’re open to foreign investment, but we are going to make sure it’s in Canadians’ interests, it’s to the net benefit of Canada, and more importantly we are not going to let extreme and undesirable situations develop. And that’s what we’re seeing today. You know, I would say the same thing if I can broadly on the relationship with China, which has come up in your questions. I think Canadians understand that China is a very large economy. In fact, in the not very distant future China is going to be the largest economy in the world, and, therefore, represents significant opportunities for Canadians. At the same time they understand the Chinese economy, the Chinese political system, and Chinese society is extremely different in a way at that presents significant challenges. And what they expect their government to do is act in a way that will take advantage of the opportunities that are offered to us without exposing us to the risks.

 

Reporter: In terms of your expressions of concern about a wave of buyouts of oilsands’ assets by foreign state-owned companies, are you concerned mainly about China, which obviously exerts more control over its citizens and presumably its state-owned enterprises than some other countries might? And what will you say to people who say the talk and the new rules are just cover for allowing this huge investment in the oilsands by a state-owned Chinese company?

 

Rt. Hon. Stephen Harper: Look, what I would say on the latter question is that — and this was asked a bit earlier. What I say on the latter question is that these were difficult decisions and there will be more difficult decisions in the future. But I think the government is laying out pretty clearly where it wants to see things go. And obviously the proof will be in the decisions we take going forward. You know, when I — when I lay out my criteria, let me just lay them out again — they’re not country specific, but let me lay out the criteria when we deal with state-owned enterprises. They are the degree to which the proposal would take control of a Canadian business as opposed to merely interest. Secondly, the degree to which a transaction would increase control over the sector, the industry more broadly, and, third, they are — and most importantly, as I said — whether the state-owned enterprise in question acts under the direct control of the foreign government.