Thursday, April 10, 2008

International Hijinks

So, some coincidences to comment on.

The sale of a satellite technology firm to a US company was blocked by government under the Investment Canada Act, the first time the law has been so invoked - and the law is 23 years old. I won't pretend to understand the business of getting one's hands on high-quality satellite shots, but I imagine there's a market of some kind for this thing.

My gut says there's no reason to block the sale, but what may be a factor is option demand - if we ever really need a lot of satellite services, so might a lot of other countries, and the services will probably not be rationed in a marketplace, but rather under the law of the jurisdiction where the owner/operator is located. The government could understandably see blocking the transaction a cheaper and safer way of ensuring emergency supplies than the alternatives.

In the long-term, of course, you can't legislate the existence of these types of companies, you have to provide a reason for them to set up shop in your own turf.

In similar news, New Zealand blocked the partial buyout of the Auckland airport. This makes somewhat less sense to me. Presumably, regardless of much Canada might want the airport, the CPP (the national pension plan, the buying agent) wouldn't be able to relocate it from Auckland to Ontario. Perhaps my Kiwi readers would care to comment on this?

Third, the American SEC chose Australia instead of Canada with whom to establish if not free trade in securities, at least demilitarized trade. The loss of this benefit is strictly of our own making - since every province and territory has an independent set of securities regulations, integration with the US would have been a hellish logistical problem. Coordinating with the national Australian standards will be much easier.

Of course, Rodrik would have you believe that international flows of capital are a bad thing, so we should celebrate our loss. I don't buy it.


Matt Nolan said...

"Perhaps my Kiwi readers would care to comment on this?"

I believe the correct term is "xenophobia" - it commonly comes out during an election campaign.

The view was that we don't want foreign ownership of our "strategic assets" as there won't be a proper incentive to invest (our railways and telecommunications are supposed to be examples of this).

However, they are confusing the distinction between private and public ownership with foriegn vs local ownership. A private investor in NZ will be interested in profit maximising just like a foreign investor - they seem to think that a local investor will take into account the social benefits associated with the asset.

Another thing that is annoying is that the pension fund was only going to take a 25% voting share (with 40% of the shares) and was obviously in for the long-haul (which implies that they would have been more amiable to infrastructural investment).

However, in New Zealand it appears that winning an election is becoming more important than doing whats good for the country :P

Anonymous said...

The US has laws which ban "American" military technology from being sold to other countries, if the sale had not been blocked it may have been available to Canada.