Ottawa to consider economic security for review of foreign investments

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OTTAWA — Amid the trade war with the U.S., the federal government will now consider Canada’s economic security as a reason to subject a foreign investment in Canada to a national security review that could block or upend the deal.

In a statement Wednesday morning, Innovation Minister François-Philippe Champagne said he made changes to the guidelines in the Investment Canada Act (ICA) that will give the government broader scope to review “opportunistic or predatory” foreign investments.

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Champagne’s statement obliquely referred to Canada’s trade dispute with the Americans as part of the reason the government will review a foreign acquisition, merger or investment that could undermine the country’s economic security.

“As a result of a rapidly shifting trade environment, some Canadian businesses could see their valuations decline, making them susceptible to opportunistic or predatory investment behaviours by non-Canadians,” Champagne wrote.

“When these businesses are important to Canada’s economic resiliency due to their size, their impact on the innovation ecosystem, or their place in Canadian supply chains or those of allies on whom we rely, it would run counter to Canada’s interests to allow them to fall victim to this type of behaviour to the detriment of Canada’s economic security,” he added.

The government has the power to launch a national security review of foreign investments if they had potential effects namely on Canada’s defence capabilities and interests, could transfer sensitive technology or intellectual property outside of Canada, might impact access to critical goods and services or involve critical infrastructure.

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The ICA guidelines state the government can also review any investment that could enable foreign espionage, hinder intelligence collection and foreign relationships or aid criminal actors.

But until now, the minister could not consider the impact on Canada’s economic security as a reason to review a deal. The new guidelines give the government new, broad reasons to review a foreign investment.

In a statement, the department of Innovation, Science and Economic Development (ISED) cited the size of the Canadian business involved in the transaction, the company’s place in the innovation ecosystem and the impact of the foreign investment in Canadian supply chains as factors that could spark a review.

“In an increasingly geopolitically fractured world, Canada is facing more frequent threats to its national security through economic means,” reads the statement from ISED.

“As a consequence, it is important to continuously adjust to threats as they materialize to ensure Canadian interests remain adequately protected.”

The change comes the day after U.S. President Donald Trump put in place sweeping 25 per cent tariffs on all Canadian and Mexican goods, sparking retaliatory tariffs from Canada and launching the U.S. into a trade war with its two closest trade partners.

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Tuesday, Prime Minister Justin Trudeau said Trump’s goal with the tariffs is the “total collapse” of Canada’s economy in order to annex the country.

“The one thing he has said repeatedly that what he wants is to see a total collapse of the Canadian economy because that will make it easier to annex us,” Trudeau said of Trump.

A senior Liberal source in Champagne’s office said the updated ICA guidelines are not a direct reply to the Trump administration’s increasingly aggressive economic actions against Canada, but they’re not unrelated either.

They were granted anonymity as they were not authorized to discuss the changes publicly.

The source cited a foreign company trying to buy multiple electric vehicle battery plants in Canada as a hypothetical example of the new transactions that could be subject to review and potentially blocked under the new guidelines.

Trump has frequently promised to bring back automobile manufacturing entirely to the United States, to the detriment of the Mexican and Canadian industries that are deeply integrated with American supply chains.

National Post
cnardi@postmedia.com