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Are the Tories bad for business?

The increasingly erratic policies of the Harper government could spell trouble for corporate Canada


 
Bad for business?

Blair Gable/Reuters

The announcement from Canada’s telecom regulator that it would end unlimited-use Internet plans unleashed a populist uprising that swept the nation. Hundreds of thousands of irate Web surfers signed an online petition opposing the decision, and the issue was blogged, shared and tweeted to no end. Amidst all that seething, though, only one opinion really mattered. “I will be reviewing CRTC decision forthwith with a view to protecting Canadians & promoting choice,” federal Industry Minister Tony Clement declared via his Twitter account. And with that, a 98-character missive threw the $60-billion telecommunications sector into chaos.

As the weather vane of public opinion swings, so do Canada’s policies toward business. Over the past two years, there have been repeated cases where Ottawa has stunned investors with populist decisions that took precedence over sound policy. The moves raise the question: is the supposedly laissez-faire government of Prime Minister Stephen Harper actually hurting Canada’s reputation as a stable and open market for business and investment? “No one likes risk and these interventions add yet another source of uncertainty when it comes to investing in Canada,” says Stephen Gordon, a professor of economics at Université Laval. “Clearly we’re not Russia, but then again, we’re not the Canada we used to be, either.”

But while critics like Gordon may be concerned, corporate Canada is mostly silent. With tax cuts on the table, instability is a price executives seem willing to pay. Besides, with federal politicians deep into the business of picking winners and losers, companies are keen to stay on the winning side.

No issue has sparked as much public fury as Internet download limits. In its ruling, the Canadian Radio-television and Telecommunications Commission ordered that major telecoms, which are required to sell Internet capacity to smaller independent providers, can now charge for usage above certain limits. As it is now, the big providers, Telus, Bell Canada, Shaw and Rogers (which owns Maclean’s) all impose download limits, while independents have been free to offer unlimited access. In response to Clement’s knee-jerk statement, the CRTC has delayed the changes for 60 days while it reviews its decision.

It wasn’t the first time Clement intervened in the name of consumers. At the end of 2009, he overturned another regulatory ruling that barred an Egyptian-owned wireless company, Globalive, from setting up shop. In rejecting that decision, Clement said his edict would “enhance competition for the benefit of consumers… by giving more choice at better prices and higher quality.”

The move seemed to send a loud message to the business world: all you coddled industries reaping huge profits thanks to long-established oligopolies, watch out—this is a government willing to stick up for the little guy. So when Emirates Airlines, the flag carrier for the United Arab Emirates, pressed for the right to ?y more planes between Toronto and Dubai, Air Canada might have been in trouble. Not so. Instead, the Tories went to the mat for the airline, which claimed Emirates would undercut it with cheap fares. In other words, intense competition from Emirates, an airline regularly ranked among the top 10 in the world for customer service, would give consumers more choice at better prices and higher quality.

In short, it’s impossible to tell which way the Tories will come down on big issues, says Gordon. “The government should announce what the Prime Minister had for breakfast each day, because it’s probably the best predictor of what the government will decide on a given file,” he says.

The hit-and-run approach to economic policy has left chaos in its wake. Fourteen months after the arbitrary decision to open Canada’s doors to Globalive, that industry and others that are heavily regulated, such as airlines and financial services, remain in the dark as to what the country’s stance on foreign ownership is. Just last week the Federal Court ruled the government’s Globalive decision was “based on errors of law,” throwing the industry even deeper into confusion.

Bad for business?

Peter McCabe/CP; Mark Blinch/Reuters; David Stobbe/Reuters; Pawel Dwulit/CP

It’s possible the Conservatives’ decision on download limits will face a similar court challenge, creating even more long-term uncertainty. “It’s always difficult for businesses to operate when you’re in a policy vacuum and these ad hoc policies aren’t clearly telling anyone what’s going on,” says Adam Fremeth, a professor at the Richard Ivey School of Business. “There has to be a clearly understood framework so if you make an investment, you know how it’s going to be treated for the long term, and that is missing.”

Nowhere is that more apparent than in Canada’s relatively slapdash approach to foreign investment. Many were stunned when the bid from Australia’s BHP Billiton to buy Potash Corp. was rejected, especially since the same government previously allowed companies such as Inco, Falconbridge and Stelco to fall into foreign hands. But after Saskatchewan Premier Brad Wall whipped up opposition to the deal on the grounds Potash is a “strategic asset,” Ottawa put its foot down. The rejection followed a 2008 move in which MacDonald, Dettwiler and Associates was blocked from selling its space division to a U.S. buyer. Lawmakers voted in November to review the Investment Canada Act, but for now, it’s not clear how the government would respond to a high-profile U.S.- or Chinese-led corporate takeover. In a recent report, UBS Investment Research warned of the dangers should Canada become  a “political economy.” Foreign investors “may begin to perceive Canada as not ‘open for business,’ which could potentially have adverse implications for the valuation of Canadian stocks.”

Other businesses could find themselves in Ottawa’s crosshairs. Recent policy changes have broadcast a clear message: gripe loud enough and Ottawa will swing into action. “The more the government reflexively reacts to public pressure by stepping in to placate the disappointed, the more it incents future stakeholders to induce such pressure, thus establishing a political dynamic that will feed on itself,” wrote Richard French, a former vice-chairman of the CRTC and a professor at the University of Ottawa.

The retail sector, for one, appears ripe for a populist revolt. Many consumers are convinced stores in Canada haven’t lowered their prices to reflect the soaring loonie. Finance Minister Jim Flaherty has chastised retailers for their higher prices. Could Facebook groups—such as “Make Retailers Lower Their Prices in Canada and Stop Ripping Us Off!”—spur the next uprising?

A puzzle in all of this is the silence from Canada’s business community. One might expect business groups, such as the Canadian Council of Chief Executives or the Chamber of Commerce, to take a dim view of the corporate activism coming out of Ottawa. Economic policy by Twitter is a recipe for chaos, no? One reason for their muted reaction is that the Tories have positioned themselves as the champions of further corporate tax cuts in the upcoming budget, while the Liberals and NDP have come out against them. Business leaders also generally like what they’ve seen from the Conservatives on issues of free trade with Europe and India, as well as the perimeter agreement with Washington. And with the Conservatives in a minority government, populist gambits are seen as an unfortunate inevitability, so long as an election is always just right around the corner.

But above all, some companies stand to benefit from an activist Ottawa, which invariably translates into more taxpayer money flowing their way. It’s a fallacy that business reflexively opposes government intervention in the economy. Any time politicians pick winners and losers, companies will try to insert themselves into the winning group. And that entails keeping mum.

Observers, however, say the Harper government should tackle uncompetitive industries at the source—by unravelling decades of outdated foreign ownership controls that led to so many entrenched oligopolies in the first place. It should start by dismantling the CRTC, says Herbert Grubel, a senior fellow at the Fraser Institute. “It’s a fatal deceit to think anybody, Tony Clement or the CRTC, knows what’s best for individuals,” he says.

For what it’s worth, renegade Tory MP Maxime Bernier let slip on a Halifax radio show that the Conservative government plans to table legislation to let foreign companies into Canada’s telecom market. Shortly thereafter, Clement’s office said only the industry minister is authorized to speak on the file, and he has nothing to say on the matter.

Should that change, just watch Twitter.


 
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Are the Tories bad for business?

  1. It's not policy that's the problem, it's the likelihood that Harper will change policy on a whim!

  2. "In short, it's impossible to tell which way the Tories will come down on big issues, says Gordon."

    I don't think so… I think they're laissez-faire unless being laissez-faire on a particular issue (like, for example, potash) has the potential of costing them votes. So, next time another one of these big economic issues comes along, try to determine the politically safest route to take. That's the route you can bet the government will take.

    • I gottasay that ain't quite so, or at least it needs to be qualified. For long periods, Harper seems to be very cool and strategic operating according to your logic. However, on odd occasions Harper needs to release his inner Hyde. Some think this is purely strategic to feed his base, but I would argue it is more erratic than that. His base wanted him to go to the mat on the gun registry, instead he whacked the census. His base tolerated big L Liberal economic policy in pursuit of a majority, he pissed it away by pissing off Quebec.

      I am beginning to think that the comparison to Nixon is more than apt. Nixon was a brilliant politician who wouldn't tolerate criticism from within his own ranks. One distinction is that Nixon actually accomplished quite a bit, and was in a sort of equivalent minority situation.

      • test

      • His base wanted him to go to the mat on the gun registry, instead he whacked the census

        Harper has always had 50% of the population supporting the census decision, including his base. I know that has been very difficult for some to understand, but it's true.

        As for the gun registry, they've tried to kill it twice, and they were even running ads in the NDP ridings to pressure for the NDP votes to kill it.

        • Got a citation for that census statistic or is it like most of your other "facts"?

          • No, I'm not. Ever heard of google? Here's a tip for future reference: Aaron Wherry is not a pollster. He's a misleading partisan. Out of 1000 Wherry posts, 999 will have negative comments about Conservatives. The other one will be about something other than politics.

            I know you liberals like to live in your own little bubble.

  3. This is NOT a conservative free-market govt.

    [with apologies to Bev Oda, but it's true]

    • Give them a majority and we'll see what they are.

      • One of the few times that this is a good point to make. Clearly the CPC is worried about losing votes, with a majority they might actually make sense and not change mind depending on how they think it'll reflect on their seats.

      • And let them make a bigger mess out of the country?

        Oh let's not, and say we did.

        • Y ou certainly are consistent with your mind-numbing anti-Harper rodent-like sniping. Have you anything positive at all to say about anything?

  4. Canada has never seen a government that isn't bad for business. The more sheeple want mommy government to control every facet of their lives the more they grind the privte sector into the ground. Couple the myriad of rules with the Cadillac spending and lifestyles of government workers vis-a-vis the private sector 'hosts' and one can see Canada has a 900 pound jockey on a racehorse shrinking to the size of a shetland pony.

    • Yes, that's why Canada is such a wretched poverty-stricken country.

      'Rolls eyes'

    • We're a long way from perfect but, thanks to some Liberal-enacted legislation, we were spared the worst of the hammering of the financial crisis. How many G20 countries can say the same? But I'm sure that greedy Canadians in finance must look south with extreme jealousy – Oh! To fleece the sheeple and abscond with the spoils whilst being appointed to the exchequer royal!

  5. I wish Maxime Bernier was still Industry Minister … he coulda been a contenda

  6. I'm shocked and appalled that you opened this article with discussion about meter based internaet usage and then followed it up this…

    "Ottawa has stunned investors with populist decisions that took precedence over sound policy."

    Sound policy? I think I vomited a little in my mouth.

    • Exactly. While I get the point of the article, this was an example where Clement is on the correct side. I can't believe I just typed that, but it's true. I must clean my typing fingers now.

      • You know what they say about stopped clocks.

        • Since Coyne has gone silent on this issue, (after a twitter flurry) let me take up the unpopular side of this argument.

          First off, my understanding is that the CRTC's original ruling did not stop independent providers from continuing to offer their clients unlimited access. They would however have to reimburse the network provider for that access. While I found the ruling clumsy, (because the carriers request really was to make the ISP clones of themselves) it is also true that in the absence of a financial reward, the necessary investments in hardware will not get made.

          • "it is also true that in the absence of a financial reward, the necessary investments in hardware will not get made."

            To that I ask, what have they done with the billions of dollars they have already collected form Internet subscribers? Did they upgrade and expand their capacity? They just kept selling Internet access to more and more people, and all those people are left to use the same outdated infrastructure. The big ISPs created the problem we have today by not keeping their capacity up with the volume that they have sold.

            Now they come back and cry because "there are too many people using what we sold them all at the same time". The idea seems to have been set up what we can for as little as possible and hen sell it to so many people that it can't sustain itself and then start cutting peoples' usage back but charge the same price (or more) for the degraded service.

            We are being fleeced and you sit there on the side of big business. The big 3 telecoms in Canada seem to want to be as big as their southern counterparts and yet have only approximately 1/3 the resources to do it with.

            Last year alone Bell Canada had $2 Billion cash in the bank. Did they upgrade anything to improve their business and gain customers so improve their stock value? No, they simply used most of the money to buy back stock which artificially drives up the stock price because there are now fewer stocks available. The Bell executives made themselves look better because of increased stock value and Bell customers continued to get fleeced.

            Don't talk to us about money to build out the infrastructure. They have (had) the money and just aren't spending it.

            ps: Don't mention Bell's Fibe (Bell's fibre network) either. It is expensive and only covers about 1% of Bell's territory. It has been available over a year and yet hardly anyone can actually get access to it.

    • Brilliant PR strategy by the Tories. Think about it – the CRTC UBB decision was actually made in the middle of last year yet the Tories remained silent until the OpenMedia petition started to get some traction after Bell's appeal on the UBB wholesale pricing came through from the CRTC a couple of weeks ago. They didn't care one way or the other until they saw the potential to wrap themselves in the consumer protectionist flag – they smelled young voters.

      They just duped an entire generation of internet enthusiasts into thinking that the Tories actually care about what they think. They just bought some votes, that's all.

  7. It's too late to update our foreign ownership policies now – we have already established our reputation as the banana republic of the western world.

    I can't imagine how any foreign company would risk investing in Canada with our government meddling, changing policy, and picking corporate winners and losers on the fly? Look what Globalive has been through in the past year – if Orascom knew then what it knows I suspect they second thoughts about investing in Globalive/Wind. They might have increased their investment in North Korea instead – you may not like the North Korean government and its policies but at least they are predictable.

  8. It's funny sometimes to realize how deeply that corporatism has managed to worm its way into us. In this article, for instance, we have a writer decrying government for providing what the people want. Yet isn't that what a democracy is supposed to provide? Don't we want a goavernment that gives us what the people want, regardless of whether what they want is brilliant or brain-dead?

    Now ideally, government uses its time and resources to not only find out what the people want, but to find out what the science, data, and facts suggest the best course of action is, and then work to lead the people so that what they want is what will be the best for them.

    Unfortunately, the CPC runs into problems with consistency here as well. They aren't consistent on being populist (see Detainee proroguement, fixed-election breakage, and census) and are actively anti-science (see GST, crime-legislation, and census again)

    • Well, leadership is also about convincing people to do things that are not always in their immediate best interest, but are in the long-term best interest of the country. For example, addressing deficits, adjusting healthcare benefits, changing tax rules, etc.

      I've seen none of that sort of leadership coming out of the current government, and the current Liberal party has been no better.

  9. Why am I not surprised that MaClean's (a Rogers company) has such a scathing review faulting the Tories for shooting down UBB. Internet is NOT a fossil fuel, nor a limited resource. THERFORE it SHOULD NOT be treated like a UTILITY! People already pay for ISP (Internet Service Providers) and that should be more then enough to cover the costs of expanding bandwidth with bandwidth costing a 1/4th of a penny! I have never sided with the PC's on anything, but they finally got it right! Canada is already gouged for cellular plans, and now big boy Blue and the Red Monster are scared of the possibility that unlimited services could lead to free internet phone calls, free television, games, and movies online. The word Unlimited means that since the competition is the only one offering it, eventually the front runners are in trouble for everything from mobile phones, satellite, and cable. GET WITH IT OR GET OVER IT!

  10. Let’s hope that the Harper government doesn’t use proposed cuts in corporate taxes as a bandaid for their meddling in the free market. As shown here, there is basically no correlation between joblessness and low corporate taxes, in fact, some EU countries with the highest corporate taxes have the lowest unemployment:



    http://viableopposition.blogspot.com/2011/01/corp

  11. Just another liberal hack/mole doing his darnest to help iggy get thoughs number up.The Conseratives are a grass roots party,a party of the people if you will,they will do what ever is in the best interest of the country,its not party first,its country first. Now look at the liberals,they can't make a buck because bay street can nolonger fund them,the liberals put party first and the country comes somewhere on the list but only because they can use the power of goverment to fill liberal pockets.Anyone how doesn't get it, is simply ignoreing the facts.

  12. Enough with the Big Business BS Rhetoric already! It's about time Harper went back to work for what he was elected for: to work FOR THE ELECTORS, instead of for Big Business and its clique of manipulative lobbyists!!!

  13. Stewart_Smith:
    "it is also true that in the absence of a financial reward, the necessary investments in hardware will not get made."

    To that I ask, what have they done with the billions of dollars they have already collected form Internet subscribers? Did they upgrade and expand their capacity? No, they just kept selling Internet access to more and more people, and all those people are left to use the same outdated infrastructure. The big ISPs created the problem we have today by not keeping their capacity up with the volume that they have sold.

    Now they come back and cry because 'there are too many people using what we sold them all at the same time'. The idea seems to have been to 'set up what we can for as little as possible and then sell it to so many people that it can't sustain itself, and then start cutting peoples' usage back but charge the same price (or more) for the degraded service'. Classic case of bait-and-switch.

    We are being fleeced and you sit there on the side of big business. The big 3 telecoms in Canada seem to want to be as big as their southern counterparts and yet have only approximately 1/3 the resources to do it with.

    Last year alone Bell Canada had $2 Billion cash in the bank. Did they upgrade anything to improve their business and gain customers to improve their stock value? No, they simply used most of the money to buy back stock which artificially drives up the stock price because there are now fewer stocks available. The Bell executives made themselves look better because of increased stock value and Bell customers continued to get fleeced.

    Don't talk to us about money to build out the infrastructure. They have (had) the money and just aren't spending it.

    ps: Don't mention Bell's Fibe (Bell's fibre network) either. It is expensive and only covers about 1% of Bell's territory. It has been available over a year and yet hardly anyone can actually get access to it.

    I wonder what the reaction would be if the government told the big 3 that they cannot sell any more Internet access accounts until they improve their services to the point where the ISPs no longer need to throttle? Things that make you go "hmmmmmmmm".

  14. Harper might have all the savvy to get himself elected, but he never bothers to READ THE FINE PRINT.

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