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Should China Buy Canada’s Nexen? A Rebuttal

Some months ago, a colleague of mine defended the Nexen deal in an article picked up by the Canadian International Council. Alexander Shalashniy staunchly defended the principles of free trade, painting a national picture of the high-ranking economic freedom that fostered an “open for business” environment in Canada – not shared by the extreme ends of the spectrum in Pierre Trudeau and Brad Wall.  Shalashniy believes that the Investment Canada Act has sufficient protections for Canadian companies in terms of ensuring that environmental regulation, community consultation, and other requirements are being met.What Shalashniy mistakes for “fearful rhetoric” and “government intervention” in the recent backlash over the foreign investment review of the Nexen deal is frankly well-deserved caution stemming from the knowledge that we are living in a world with two classes of investors: market-oriented and state-owned. Government sources reveal that a new definition of the net benefit requirement in the Investment Canada Act will be shortly released that will take into account this new systemic reality in the international trade regime.Free trade is certainly a policy that improves the welfare of developed countries engaged in its practices, but there is a necessary element of reciprocity for its full benefits to be enjoyed. The main concern with state-owned enterprises can be summed up in the question: Are they playing by the same rules? Whether we call it “economic statecraft” or “economic bullying”, China and Chinese SOEs have engaged in economic coercion to achieve political goals at the expense of other nations. The most obvious example is China National Offshore Oil Company (CNOOC)’s recent decision to drill for oil in the disputed territory of the South China Sea to assert sovereignty claims, which have inflamed neighbouring countries, Vietnam and the Philippines.The news cycle revolves overwhelmingly around whether China can invest in Canadian… Read More
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