Statement on the proposed Minmetals Take-over of Noranda/Falconbridge
October 29, 2004
Jointly Issued by the C.A.W. National Union, C.A.W. Local 598 (Falconbridge Sudbury Operations), and C.A.W. Local 599 (Falconbridge Kidd Creek Operations)
October 29, 2004
The bid by the Chinese mining giant China Minmetals Corp. to purchase Noranda Inc. (including Noranda's majority share of Falconbridge Ltd.) has cast a badly-needed spotlight on Canada's rapidly-changing economic relationship with what will soon be the world's largest economy.
In theory under free trade, countries are supposed to specialize in whatever industry reflects their inherent "comparative advantage." In the case of Canada's trade with a developing country like China, that should involve us supplying high-value, high-technology goods and services in return for purchases of basic goods and labour-intensive manufactures.
China's government and industry, however, have not let the "laws" of free trade get in the way of their rapid industrial and economic development. They have implemented powerful, effective state measures to stimulate investment, technology transfer, and productivity in China. They don't leave the future of their country up to free trade. The ironic and dangerous result for Canada is that we are coming to specialize in the production of raw materials and commodities for China's economic juggernaut, even as we import growing volumes of increasingly sophisticated industrial products from China.
Now Chinese officials have indicated their desire to take ownership of vast quantities of Canada's natural resource base, to ensure security of supply for their own industries in future years. The proposed Minmetals takeover of Noranda is just the first chapter in this trend; Chinese officials and economic forecasters alike predict there will be many more. China can use the massive hard-currency reserves it is accumulating through huge trade surpluses to buy an ownership stake in the natural resources of Canada and other resource-dependent countries.
In effect, Canada is becoming a colony once again, and China is the colonizer. Our economic relationship with China is quickly coming to resemble our relationships with previous colonial powers - first Great Britain, then the United States. Overcoming our status as a raw material supplier - a "hewer of wood and a drawer of water" - has been a central economic concern for Canadians since before Confederation. It was already obvious under NAFTA that this historical tendency was reasserting itself, with our energy exports to the U.S. booming, but our rare high-value industrial success stories (like auto and aerospace) facing historic challenges. Now, with China becoming a new and dominant force in our economy, the tendency for Canada's economy to revert to that of resource supplier will be doubly strong.
There is no inherent reason why China's rapid economic development should pose a threat to Canadians. We do not oppose that development in any way, and reject xenophobic and often racist fears that China is somehow poised to take over the world. We express deep solidarity with the hard-working people of China, including for their struggle to win the basic democratic and trade union freedoms that are so lacking there.
In fact, our own government could learn much from the success of China's industrial recipe. The manner in which China deliberately targets and plans the growth of key sectors and industries; the powerful restrictions China places on foreign investors and multinational corporations eager to enter the Chinese market; the active use of monetary and exchange rate policies to stimulate Chinese exports and investment (in contrast to our own government and Bank of Canada, which accept the dominance of private financial markets over our currency, regardless of the consequences for Canadians). These have all been key factors in China's economic success, and we suggest that Canadian officials should examine and in many cases emulate those interventionist strategies.
Unfortunately, in a globalized free-trade context, China's industrial take-off is posing significant risks to Canadians. As long as our government adopts a "hands-off" approach to trade imbalances, then China is free to run up a huge trade surplus with Canada: $15 billion annually at last count and growing, equivalent to the loss of at least 50,000 Canadian manufacturing jobs. As long as our government allows multinational companies to close factories and move to wherever labour is the cheapest - even if, as in China, that "cheapness" reflects repressive labour and social practices - then Canadians will face constant economic insecurity and hardship. And as long as our government allows our industrial future to be determined solely by the profit-maximizing actions of global corporations (including Chinese corporations, which will be increasingly powerful players in the decades to come), then Canadians will be once again relegated to a second-class status in the global economy: supplying basic commodities to more advanced and dynamic trading partners.
The problem we face is not China. The problem we face is our own government's acquiescence to the powers of free trade and global business.
From one perspective, there is nothing unique about the proposed Minmetals takeover of Noranda. We reject the notion that the state-owned status of Minmetals makes it somehow more "dangerous" to Canadians than if it were a privately-owned foreign multinational business. Private multinational corporations have proven painfully that they are no more committed to the long-term welfare of Canadians, and no more respectful of our social and economic goals, than is the Chinese government. In the case of any foreign purchase of significant Canadian resource or industrial assets, it is incumbent on the Canadian government to review the purchase to ensure that Canadian interests are promoted, and to attach conditions and performance requirements to the purchase to ensure that the investment makes a tangible, long-term contribution to our economic development, in both quantitative and qualitative terms.
Noranda and Falconbridge own numerous producing properties across Canada, including both mines and secondary processing facilities (mills, refineries, and smelters). Mining activity will continue to depend on the discovery and development of new resources, and the federal government must ensure that the Minmetals purchase of Noranda does not adversely affect the company's level of exploration and development activity within Canada. Secondary or "value-added" facilities, meanwhile, create important jobs and incomes by adding value to basic mined ores and concentrates (including ores purchased from independent mining suppliers). The federal government must put special emphasis on ensuring that Noranda maintains the scale of its secondary operations under its new owners.
The CAW therefore demands:
1. That the proposed Minmetals takeover of Noranda be subjected to a thorough review by Investment Canada, and that Minmetals must enter into binding performance requirements as a condition of having its purchase of Noranda approved.
2. These performance requirements must include a commitment by Minmetals to maintain the full operation of all value-added industrial facilities (including mills, refineries, and smelters) in Canada within the Noranda/Falconbridge network for a period of 25 years. These protections must extend to the Sudbury Nickel Operations and Kidd Metallurgical and Mining Divisions in Ontario; the Horne, General Smelting, CCR, and CEZ smelters located in Quebec; and the Brunswick smelter in New Brunswick. By requiring the full continued operation of these facilities, the Canadian government will effectively prevent the Chinese owners of Noranda from reorienting the company to focus on the export of unprocessed ore and concentrate to Chinese-based secondary facilities.
3. If Minmetals desires the closure or downsizing of any of those value-added industrial facilities within the 25-year commitment period, it must negotiate offsetting value-added investments in alternative industrial facilities with Investment Canada before such closure or downsizing would be permitted.
4. Minmetals must also commit to invest additional funds in new projects to expand the productive capability of Noranda / Falconbridge operations within the next 5 years, including (among others) the development of the Kidd Deep D Mine, additional Nickel Rim mining projects, the Onaping Depth project, and the Fraser Morgan Mine. Minmetals must commit furthermore to retain ownership of the closed Magnola magnesium smelter in Quebec, and commit to negotiate the reopening of that facility with the Minister of Industry contingent upon global market developments in the magnesium business.
These performance requirements are exactly similar to the types of measures which the Chinese government routinely imposes on multinational companies which invest in China. As a condition of such investments in China, foreign companies are regularly required to commit to specific value-added investments; enter into compulsory joint ventures with Chinese firms; agree to compulsory technology-transfer provisions; make binding commitments around export growth; and accept restrictions on the ability to repatriate capital back to foreign homelands. These are the sorts of restrictions on the mobility of private capital which our own government claims are "not possible" under the rules of free-trade and private markets. Yet China, a WTO member, imposes these measures routinely, with great success.
Now that China is investing heavily in our own economy, Canada's government must finally act to protect Canada's social and economic interest. We note that the existing provisions of the Investment Canada Act allow the Industry Minister huge discretion in demanding these sorts of provisions to enhance the net value to Canadians of foreign takeovers of existing Canadian assets, as a condition of allowing the foreign takeover to occur. And this precedent - holding foreign companies to account, in return for the privilege of investing in our economy and selling into our market - is one that should be extended to other foreign investors, Chinese or non-Chinese, privately-owned or publicly-owned
Therefore, in this context we make a fifth and broader demand as a condition of approving the Noranda purchase:
5. The Government of Canada must undertake a thorough review and rewriting of the Investment Canada Act, to ensure that future major foreign takeovers of Canadian resource or industrial assets are subject to binding performance requirements of the type outlined above.
The CAW is Canada's largest private sector trade union, representing over 265,000 (including approximately 1700 employees of Falconbridge Ltd.).
For further information, please contact:
Hemi Mitic, Assistant to the National President of the CAW (cell 416-565-3677)
Rick Grylls, President CAW Local 598, Sudbury (cell 705-665-2138)
Jeff Martin, President CAW Local 599, Timmins-Kidd Creek (705-266-7168)