Seamanship Quotation

“In political activity, then, men sail a boundless and bottomless sea; there is neither harbour for shelter nor floor for anchorage, neither starting-place nor appointed destination.”
— from Michael Oakeshott's
Political Education” (1951)

Monday, December 10, 2012

Harper’s courtesy Waltz with Chinese State Capitalism

Stephen Harper respects the status quo. In fact, he’ll pay $billions to keep it under control. In return, however, he likes to change the future.

Last year, he gave the provinces five years of real increases in health-care funding—$billions more than they yet know how to spend—in return for indexing future financial transfers to economic growth. By giving the premiers tens of $billions, he doesn’t have to go to any more of their fundraising meetings—and just may have secured a long-standing conservative dream: returning accountability for the operation and reform of public health services to the provinces, to be settled in provincial elections.

Most politicians we call pragmatic favor “balanced” policies that keep all vested interests reasonably hopeful, if not entirely satisfied. Harper’s tradeoffs are dynamic: You can keep what’s yours right now, but I’m taking the future. 

Last Friday, Harper took one step back and two forward on foreign investment policy with China. The Chinese government’s oil giant (CNOOC) will be able to complete its $15.1-billion purchase of one significant Oil Sands producer in Alberta. In the future, however, only joint ventures or minority participation by China’s SOEs will be welcome. 

Canada, Harper declared, will remain open for business but not for sale to foreign governments.

They danced together well enough. At the end of a lovely evening, however, Harper went home as a conservative free enterpriser.

His new foreign investment policy framework allows for exceptions, in “exceptional” circumstances. That caveat will keep lawyers, intergovernmental officials, and the deep pockets of prospective investors busy. However, it’s silly for the editorial board of the Globe and Mail to complain that the policy isn’t “very enlightening.”

Harper has replaced the “net benefit” test for future oil sands takeovers by SOEs with a criterion that no Chinese SOE can reasonably count on passing. Remember, the test has to be passed by—and defended by— elected Canadian governments. When the recipient province is happy, Ottawa almost always finds a “net benefit” in a foreign direct investment proposal. Under what likely circumstances, however, could an imitation commercial oil giant, controlled by the government of China, offer anything exceptional about oil extraction that wouldn’t be bad politics?

Almost all speculation has concentrated on how Harper is resetting Canada’s now-precious relationship with China. Harper’s supposed to be looking for win-wins and may have secured one on oil development and marketing.

Nevertheless, a much larger, also fraught, relationship was also in play in designing Harper’s new policy regarding oil sands takeovers by Chinese SOEs. Canada’s relations with the US government, political elite, and vast financial pools were clearly well served by what Harper decided.

Chinese money may be easy. But the capital markets of North America are flush as well. (Together, there’s approximately $2trillion of corporate cash looking for things to do.) By making it clear that America’s global strategic competitor is not going to secure a dominant place in Alberta’s energy sector, Harper has bolstered the odds for further rational market-driven development of North America’s energy resources.

The oil sands industry already has enough problems with environmentalists and nativists in the United States. Harper has, at the very least, eliminated the possibility of facing the slogan: “Boycott China’s Tar Sands Oil.”

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