Trudeau trying to attract foreign capital

Just as it took the hardliner Richard Nixon to go to China, it may be that only Justin Trudeau can dismantle foreign ownership restrictions established by his father in the early 1970s.

A foreign pension fund representative who was in the room with the prime minister and senior cabinet ministers this week said the sales pitch to shift large pools of capital into Canada made a good impression. Yet, there remained concerns about the web of regulations that prevent foreigners from investing in politically sensitive industries like telecommunications and broadcasting.

The Conservatives commissioned a report on competition in 2007 and acted on recommendations to reduce restrictions in some areas, like uranium mining.

But the Harper government did not dare follow the recommendation of the panel chaired by Lynton “Red” Wilson to liberalize ownership in aviation, telecoms and broadcasting.

However, Trudeau still has impeccable cultural credentials, having just boosted funding for the CBC. He has political capital to burn — and it would be no surprise if he did, given the importance of drawing in foreign funds to the entire long-term growth project.

A central plank of his economic plan is to attract investment to Canada from the large pools of international capital seeking attractive returns in an era of low growth and low interest rates.

The long-term investor summit in Toronto Monday brought together the heaviest of hitters in the pension and sovereign wealth fund business. Trudeau pitched Canada as an island of relative stability, as the government seeks to bolster the $35 billion it has committed to its nascent infrastructure bank with foreign investment.

But it sounds like many of the investors are more interested in low-risk, existing assets over higher-risk toll roads and bridges. As a result, there were questions about the layers of regulations designed to protect many Canadian companies from takeover by foreigners.

There are early signs that the Trudeau government is prepared to go where even the Harper Conservatives feared to tread.

While the Tories blocked several prospective takeovers of companies by foreign rivals, the Liberals are intent on making Canada a magnet for foreign capital.

Last month, Ottawa said it plans to raise the cap on foreign ownership of Canadian airlines, in an effort to increase competition and reduce prices.

The government was acting on a recommendation from a review of Canada’s transportation sector, led by former federal cabinet minister, David Emerson.

That panel also recommended the government privatize larger not-forprofit airport authorities in Canada, such as the one that runs Toronto Pearson International Airport, on the basis that the model is “antiquated” and puts cost-competitiveness at risk.

Marc Garneau, the transport minister, made no mention of airports when he unveiled the changes to ownership limits, but referred to “asset recycling” — the process of allowing the private sector to take stakes in existing infrastructure assets — as likely an attractive option for foreign and domestic institutional investors.

Another area where seismic change may come is in the broadcasting and telecoms industries.

The Conservatives had allowed foreign ownership of telecom carriers with less than 10 per cent of the total market, but shied away from the full liberalization recommended in the Wilson report.

Yet Melanie Jolie, the heritage minister, is reviewing all facets of government regulation and says “everything is on the table,” including changes to the Broadcasting Act and the Telecommunications Act.

Even for Trudeau, the prospect of allowing Americans or other foreigners to own more than 20 per cent of our private broadcasters would arch eyebrows among his supporters.

The NDP is already campaigning against the “privatization” of public infrastructure and would be delirious at the prospect of Trudeau undoing many of the regulations put in place by his father when the Foreign Investment Review Agency was established in 1973.

But Trudeau needs projects that stand out from other global assets competing for pension fund cash. New investment opportunities in mature industries that have been ring-fenced to this point might be just the ticket.

It’s conceivable that by dangling changes to foreign ownership rules as bait, the Liberals could land some big financial fish who might be prepared to look at infrastructure projects, too.

Senior Liberals caution that the rod is barely in the water. “We’re not that far down the road,” said one official. “But it’s an interesting idea.”