National Security and Direct Investment — Canadian Style — Same as U.S.?

Petronas, Malaysia’s state-owned oil company, is battling the Canadian government to allow its proposed $5.3bn acquisition of Progress Energy Resolution. Also waiting approval is China’s CNOOC’s proposed $15bn acquisition of Nexen, another Canadian company.
The issues raised by the Canadian government are in many ways similar to those raised by the U.S. government concerning foreign takeovers by Asian companies — there’s a potential risk to national security and economic protectionism.
To me this issue of national security and foreign direct investment raises serious concerns testing the openness of Western economies to foreign investment by foreign state-owned companies or those with ties to a foreign government, particularly those located in Asia.
In part, the answer is for the United States, Canada and others, is to require the boards of the foreign corporations to have independent directors and sufficient regulatory reporting requirements as to corporate policies, finances and identity of shareholders, to provide corporate transparency to the host state.
Trade, direct investment, economic development and jobs are increasingly dependent on these global transactions, especially those emanating from Asia and other emerging markets. They need to be encouraged and not stymied by unnecessary restrictions amounting to economomic protetionism. They  could be addressed by sensible public policies addressing corporate governance and disclosure in today’s global environment.

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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