ΕΠΙΣΤΗΜΟΝΙΚΗ ΔΗΜΟΣΙΕΥΣΗ ΓΙΑ ΕΘΝΙΚΙΣΜΟ

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World Development Vol. 6 pp. 837-849 0 Pergamon Press Ltd. 1978. Printed in Great Britain 0305-750X/78/0601-0837 $02.00/O Multinational Corporations and Economic Nationalism: Conflict over Resource Development in Canada JEANNE KIRK LAUX* University of Ottawa and MAUREEN APPEL MOLOT Carleton University, Ottawa Summary. - Faced with rising Third World nationalism, multinational corporations engaged in resource exploitation are turning back to higher cost but apparently politically more secure investments in the industrialized states. To what extent does the dynamic of government- resource industry relations in an industrialized setting differ from the pattern observed in the Third World? To answer this question the article analyses the decision to nationalize the potash industry in the Canadian province of Saskatchewan using models of host governm’ent-MNC conflict developed by Vernon, Mikesell and Moran to study Third World cases. The research suggests that the dynamic logic of government-industry conflict in a developed country setting is very similar to the pattern observed in the Third World. The decentralized Canadian federation, the ideology of the party in power in Saskatchewan and the nature of the potash industry combine to structure a situation in which coercive nationalization of a resource industry was seen as the only policy option. 1. INTRODUCTION ‘The record of past decades’, Vernon argued in 1970, has shown ‘an increasing effort on the part of less developed countries to extend their control over the exploitation of the raw materials that originate in their borders’.’ Economic nationalism takes many forms, but the United Nations reports a clear trend toward the most radical form of state intervention - nationalization.’ Although nationalization of foreign assets rarely took place outside the centrally planned economies before 1960, the UN recorded an average of 45.5 nationaliza- tions annually for the period 1960-69, rising to 93.3 per year during 1970-74 - all in Third World countries. Faced with this rising Third World national- ism, some have argued that the multinational corporations (MNCs) engaged in resource exploitation will increasingly turn back to higher cost but politically more ‘secure’ areas, i.e. the industrialized states, with Canada being an oft-cited example.3 In this context, the recent manifestations of economic nationalism in Canada - for example the Quebec govern- ment’s threat to nationalize the asbestos industry (197 7) or the Saskatchewan govem- ment’s decision to take over mining companies owned by several of the world’s largest multi- national corporations (197.5) calls into question the ‘security’ of resource investments in a developed economy and invites an analysis of host-government-MNC relations in this setting.4 To what extent does the dynamic of govern- ment-resource industry conflict in an indus- * The authors wish to acknowledge the research assistance of Mr. Roger Charles and to thank the Faculty of Social Sciences (University of Ottawa) for granting financial assistance. 837

description

ΕΠΙΣΤΗΜΟΝΙΚΗ ΔΗΜΟΣΙΕΥΣΗ ΕΘΝΙΚΙΣΜΟΥ

Transcript of ΕΠΙΣΤΗΜΟΝΙΚΗ ΔΗΜΟΣΙΕΥΣΗ ΓΙΑ ΕΘΝΙΚΙΣΜΟ

Page 1: ΕΠΙΣΤΗΜΟΝΙΚΗ ΔΗΜΟΣΙΕΥΣΗ ΓΙΑ ΕΘΝΙΚΙΣΜΟ

World Development Vol. 6 pp. 837-849 0 Pergamon Press Ltd. 1978. Printed in Great Britain

0305-750X/78/0601-0837 $02.00/O

Multinational Corporations and Economic Nationalism:

Conflict over Resource Development in Canada

JEANNE KIRK LAUX*

University of Ottawa

and

MAUREEN APPEL MOLOT

Carleton University, Ottawa

Summary. - Faced with rising Third World nationalism, multinational corporations engaged in resource exploitation are turning back to higher cost but apparently politically more secure investments in the industrialized states. To what extent does the dynamic of government- resource industry relations in an industrialized setting differ from the pattern observed in the Third World? To answer this question the article analyses the decision to nationalize the potash industry in the Canadian province of Saskatchewan using models of host governm’ent-MNC conflict developed by Vernon, Mikesell and Moran to study Third World cases. The research suggests that the dynamic logic of government-industry conflict in a developed country setting is very similar to the pattern observed in the Third World. The decentralized Canadian federation, the ideology of the party in power in Saskatchewan and the nature of the potash industry combine to structure a situation in which coercive nationalization of a resource industry was seen as the only policy option.

1. INTRODUCTION

‘The record of past decades’, Vernon argued in 1970, has shown ‘an increasing effort on the part of less developed countries to extend their control over the exploitation of the raw materials that originate in their borders’.’ Economic nationalism takes many forms, but the United Nations reports a clear trend toward the most radical form of state intervention - nationalization.’ Although nationalization of foreign assets rarely took place outside the centrally planned economies before 1960, the UN recorded an average of 45.5 nationaliza- tions annually for the period 1960-69, rising to 93.3 per year during 1970-74 - all in Third World countries.

Faced with this rising Third World national- ism, some have argued that the multinational corporations (MNCs) engaged in resource exploitation will increasingly turn back to

higher cost but politically more ‘secure’ areas, i.e. the industrialized states, with Canada being an oft-cited example.3 In this context, the recent manifestations of economic nationalism in Canada - for example the Quebec govern- ment’s threat to nationalize the asbestos industry (197 7) or the Saskatchewan govem- ment’s decision to take over mining companies owned by several of the world’s largest multi- national corporations (197.5) calls into question the ‘security’ of resource investments in a developed economy and invites an analysis of host-government-MNC relations in this setting.4

To what extent does the dynamic of govern- ment-resource industry conflict in an indus-

* The authors wish to acknowledge the research assistance of Mr. Roger Charles and to thank the Faculty of Social Sciences (University of Ottawa) for granting financial assistance.

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trialized country differ from the pattern natural resources, and generally to determine observed in the Third World? With a view to the conditions under which resource develop- answering this question, we will analyse the ment will take place. In a federation in which decision to nationalize the potash industry in fiscal disputes between the two levels of govern- the Canadian province of Saskatchewan using ment have been complex and heated, access to models of host government-MNC conflict revenue generated by resource taxation has developed by Vernon, Mikesell and Moran to made an important contribution to the study Third World cases. Because, as elsewhere, financial independence of the resource rich the decision to nationalize comes at the end of provinces.’ a long and escalating bargaining relationship, Foreign investment has always been crucial the analysis presented here first seeks to explain to the general growth of the Canadian economy the shift in government-industry relations and, within it, to resource development. Until from collaboration to ‘contention over the the early part of the twentieth century, British division of risks and rewards” and from con- portfolio capital was the main source of foreign tention over rewards to conflict over control. investment in Canada. By the end of World War

We then attempt to identify those condi- I, this capital source had been supplanted by tions under which government in a developed, American dol1ars.s The important difference capitalist setting would opt for the most between the two was that much American extreme form of state intervention - the investment in Canada was direct, carrying with takeover of a profitable industry - in order to it control of the enterprises in which the resolve the conflict over resource development. investment was made. From the outset, The explanation of outcome requires us to American investment in Canada was concen- situate those factors which influence govem- trated in two sectors, raw materials and secon- ment first, to turn to direct intervention in dary manufacturing. The establishment of production (statism), rather than indirect inter- American-owned manufacturing companies was vention (regulation), and second, to undertake designed to permit American firms to supply direct intervention of a coercive (takeover) the Canadian market from inside the Canadian nature rather than enter into a collusive relation- tariff wall, whereas American investment in ship (joint ventures) when cooperation with resources was intended to ensure the export of state capitalism appears to be the new modus vivendi for MNCs in so many countries today.6

unprocessed resources to the United States. After World War II, and in response to new demands for access to secure supplies of strategic natural resources, American investment in the Canadian resource sector rose dramati-

2. THE POLITICAL ECONOMY OF POTASH cally. Prior to 1945, the bulk of foreign IN SASKATCHEWAN resource investment was in Ontario and

Quebec. However, the years since 1945 have The continuing decentralization of the seen the exploitation of mineral resources in

Canadian federation and the division of respon- the Western provinces and the creation of new sibilities under the British North America Act resource-dependent provincial economies. constitute the broader parameters within which The importance of the potash industry to the politics of resource development in Saskat- the Saskatchewan economy is, as we shall see chewan occur. The past two decades in Canada below, a crucial factor in the government- have witnessed a change in the power balance industry conflict. To a proyince whose between Ottawa and the provinces, as the economy had been dominated by and depen- latter, dissatisfied with many federal economic dent upon one major crop, wheat, the discovery and social welfare programmes, have aggres- of natural resources in the 1940s provided sively sought to increase their authority vi&vis much sought after opportunities for secure the central government and to involve them- economic diversification. Of the resources selves actively in the total development of their found in Saskatchewan in the post-World War II jurisdictions. Section 109 of the BNA Act, period, potash has turned out to be the most which gives power over natural resources to the important. The initial development of the provinces, has become a key factor in the potash deposits constituted, in fact, the first augmentation of provincial status, since under major diversification of the province’s it provincial governments have the authority to economy, and the disappointing performance grant licenses for mineral exploration, to of other components of the resource sector demand the payment of royalties for the increased the economic significance of the privilege of

. . exploiting provincially-owned almost limitless supplies of high quality potash

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CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 839

reserves. The discovery of oil and natural gas in Saskatchewan had raised hopes of additional economic development. However, the rather poor quality of the petroleum, plus its clearly finite quantities, meant that its contribution to the provincial economy, though significant in dollar amounts up to the present, would neces- sarily be of short duration. Uranium was also found in Saskatchewan, but the uncertain nature of the international uranium market has kept production of this mineral low; after reduced output for a decade, the 1975 value of Saskatchewan uranium production approxi- mated that of 1965.’

A few statistics will underline the signifi- cance of the potash industry for Saskatchewan in 1975. The potash industry directly employed about 3500 people while the jobs of another 8500 members of the provincial work-force indirectly depended on it.” Potash output constituted about 10% of the net value of total commodity production in Saskatchewan and approximately 41% of the value of all minerals produced in the province.’ ’ The value of 1975 potash production was 355 million dollars. By way of comparison, the value of oil and gas output for the same year was 415.3 million dollars or 48% of total mineral production.” With the introduction of the potash reserve tax, government revenue from the potash sector for 1974-75 amounted to slightly over 53 million dollars; again, by comparison, revenue from petroleum and natural gas taxes was 54 million dollars.’ 3 Since the bulk of potash (90%) is sold outside Canada, potash sales also contri- bute significantly to the Canadian balance of trade. In little over a decade, potash has come to rank fifth among non-mineral fuels produced in Canada.’ 4

The importance of Saskatchewan to the world potash industry is immense. The province contains an estimated 40% of the world’s reserves of potash - a key component (along with nitrogen and phosphates) in commercial fertilizers. Saskatchewan potash reserves are among the highest grade in the world - averaging some 24-30% K7 0 (potassium oxide equivalent) as compared to 15-20% in the United States or Western Europe. In 1975 when the decision to nationalize the potash industry was announced, no other Canadian province had proven reserves of commercial calibre.

Of the nine companies operating potash mines in Saskatchewan in 1975, five were American subsidiaries; two majority-owned by Canadian-based multinational corporations; and two controlled by South African, German and French interests. Their production accounted

for 24% of world potash production (1974/75). Given low domestic consumption (just 1% of world production), the province supplied some 40% of all potash consumed outside Canada. Only seven other countries in the world produced more than they consumed - the most important exporters after Canada being the Soviet Union and the German Democratic Republic. Nearly 70% of Saskatchewan’s potash is sold in the United States which produces only half as much potash as it consumes annually. In 1974/1975 the US consumed 9.3 million short tons of which 6.2 million short tons came from Saskatchewan.’ ’

(a) The pattern.of conflict

In November 1975 the Government of Saskatchewan announced its intent to take control of the potash industry by expropriating the assets of some of the world’s largest multinational corporations. This dramatic decision brought into sharp reliefsbasic conflicts underlying resource development in Canada. As the first instance in which a large, profitable and nonessential industry would be nationa- lized in North America, it also put into ques- tion the presumption that resource investment in the highly industrialized countries offered secure alternatives to the risks of Third World nationalism.

Why should government in an advanced capitalist country choose nationalization as part of its economic strategy? Is it simply, as Mr. Malone, leader of the Saskatchewan Liberal opposition party, argued in the Legislature, that ‘There is one reason and one reason only, Mr. Speaker, that the government is taking over the potash companies - and that is because they believe in socialism - they believe that the means of PEoduction should be controlled by the state’. Or is it rather, as premier Allan Blakeney explained, the inevitable outcome after years of negotiation had failed to achieve the objectives of assured revenues and orderly expansion through normal fiscal and regulatory means - thus leaving his government with ‘little choice but to move into a position of effective control of the potash industry’.” The answer will be found in an analysis of the escalating government -industry conflict over resource development from a comparative perspective provided by using models based on Third World experience.

‘By their very nature’, Mikesell argues, ‘mineral and petroleum production arrange- ments are productive of conflict’.’ a Why

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should this be so? After all, at the initial stage in the development of a resource there is virtually no contentious issue. The state invites in foreign companies to explore and exploit natural resources precisely because it lacks the basic geological or technological knowledge, the capital or marketing resources to do so itself. Concession and licensing agreements set out terms which at the time are mutually accep- table to industry and state. In Saskatchewan it was in fact a socialist (CCF) government which invited private, largely foreign companies to develop potash reserves after having failed in the late 1940s in its efforts to create a provincial potash venture with British backing.’ 9 The CCF government guaranteed low fixed royalty payments (21/S) to the first two potash companies until 1981 and to the latecomers until 1974. Companies benefited from a three-year grace period without federal taxes for start-up and from special defleciation write-off rates for a period thereafter. Models of government-industry conflict drawn from Third World cases suggest that the shift from collaboration to conflict begins once produc- tion is successfully under way:

Rents of various kids are created by the act of production; by almost any concession system prior claims would be established to them, and given any substantial profitability, one party would even- tually begin to feel cheated. Necessarily, it is the host country that develops this feeling and seeks to assuage it by raising the domestic share of profits at the expense of the foreign enterprise.’ ’

With successful production, ‘the perceived level of risk associated with the enterprise declines precipitately’,” and with reduced uncertainty, ‘the bargaining strength inevitably shifts from the foreigners to the host govern- ment’.2 3 Contention over the proper division of risks and rewards stems from a government attempt either to change the original conditions for entry or to impose additional conditions not explicitly precluded ln the agreements, such as a new form of tax.2 4

Thus the two fundamental conditions required for passage from collaboration to contention are reduced uncertainty and profita- bility. Together they alter governmental percep- tions of the proper division of risks and rewards associated with resource development. In Saskatchewan the technical difficulties of sinking deep shafts through high pressure water zones led to the failure of several ventures and stalled successful start up until 1962 when International Minerals and Chemicals began continuous production. Other mines came into commercial production only in the period

1964-70 when it can be said that the condition of ‘reduced uncertainty’ applies. The second condition of ‘profitability’, however, applies only as of 1970-71 when world potash prices began to rise after a four-year decline. It is only then that the New Democratic Party (NDP) government sought to reapportion rents by imposing a new form of taxation in 1972 - the proration fee - which was doubled a year later. Still another form of taxation - the reserve tax - was imposed in 1974.25

The NDP government made its new percep- tions of the risks involved in resource develop- ment very clear in choosing to impose two new taxes which were determined not by a com- pany’s profitability, but by its share of total production (proration fee) or by a composite index ‘based on the selling price of potash and on the amount of capital investment, the rate of production, and the value of the potash reserves of the individual companies (the reserve tax).26 A government publication explained the new view of risks and rewards by using a hypothetical example. If the world price were $10 at the time of start-up, a 50-50 profit split giving government and industry $5 each might be acceptable. But if world prices should then jump to $300 a ton, the same SO-50 split now giving each side $150 would not be viewed as just. ‘Why? Because it is not a cost increase, nor any action by the company which has caused the profit rise. It is simply an increase in the value of the resource itself and that resource belongs to the people . . . This is what happened in Potash’.’ ’

Generalizing from Third World experience with resource industry-host government con- flicts, Vernon and Mikesell assert that there will be an initial inclination on the part of industry to ‘accede to marginal pressure’ - particularly in the raw materials industry where executives are in a sense hosta es of their very large fixed capital investment. fs Nonetheless, once suc- cessful production has changed government perceptions of the acceptable division of risks and rewards, ‘conflict and the evolving claims of government and company have a dynamic logic’.ss In the fist place, government is a political hostage to budgetary commitments needed to assure a level of social services provided in the past. As Vernon concludes, ‘governmental efforts constantly to raise their share of the profits from raw material exploita- tion can be cited as a near-immutable law of governmental behaviour’. After all, ‘once governments have experienced a given level of revenue, the risk of interruption becomes intolerable to bear’.30 In the second place,

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CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 841

there is a point beyond which industry will not tolerate further reduction of its share of the rewards. At this point the logic of conflict could lead either to accommodation or to further escalation depending on company alter- natives and on government perceptions of its economic vulnerability.

Faced with an unacceptable tax burden, industry will, where feasible, look to alternative sources of supply and/or refuse to reinvest. In consequence, ‘output may fall even with a rising world demand for the product’ thus undermining the revenue base for all govern- mental development policies.3 ’ Where govem- ment sees itself as vulnerable - i.e. heavily reliant on the industry in question for revenues - contention over total revenues will lead to conflict over the factors accou$ing for that total such as industry investment, marketing and pricing policies. These disputes over the means of maximizing profits may, in Mikesell’s view, even extend to the objective of profit maximization itself, particularly in the case of multinational corporations which seek to maximize the post-tax revenues of the parent company and may use practices such as transfer pricing to minimize taxes locally.’ 2

In Saskatchewan, contention over the division of rewards and government efforts to control the policies affecting the level of total revenues took place simultaneously rather than sequentially. Given initial industry acquiescence to government demands, however, it would be inaccurate to speak of an escalation of conflict to issues of control before November 1974.33 At the same time as the government introduced its first tax, the proration fee in 1972, it also moved to prod the potash industry to adopt a more aggressive marketing strategy. The NDP government enjoined all companies to become members of the marketing agency set up for overseas sales by the Liberal government and threatened the recalcitrant with a reduction in their state allocated production quota. All complied. In proposing its reserves tax in April 1974, the government simultaneously sought to increase revenues and to influence the means of profit maximation by taking into account such factors as the rate of company production. Negative industry reaction induced the govern- ment to modify the level of the tax by 28% before it was finalized in November 1974 but not to change the basis of its calculation - confirming government intent to influence company behaviour likely to affect future levels of revenues rather than simply to improve its immediate share of rewards.

Exactly where the dynamic logic of company-

-government bargaining over potash develop- ment might have led - ceteris paribus - cannot be known since at this juncture an independent fiscal decision by the federal government in Ottawa radically altered industry perceptions of the tolerable level of taxation in Saskatchewan. As part of a broader struggle over revenues with all ten provincial governments, the federal Liberal government had introduced a provision into its May 1974 budget prohibiting the deduction of provincial mining royalties and taxes when calculating deductions from federal corporate income tax. Despite Saskatchewan’s effort to compensate for federal action by allowing these royalties and taxes as a deduction for purposes of provincial income taxes, the federal Liberals’ re-election and approval of their budget in November 1974 created a situation of double taxation which made the level of Saskatchewan taxes intolerable to the potash industry.

As predicted in the Third World models, perceived tax injustices prompted the potash industry to question the desirability of profit maximization through investment and expan- sion. In November Hudson Bay Mining and Smelting was the first to announce deferment of plans for a $40 million expansion. Central Canada Potash followed suit in January 1975 with an $8 million cancellation after which the Potash Corporation of America shelved its $40 million project. Through the press, industry spokesmen let it be known that, despite the highest world prices on record, the industry was stagnating after postponement of some $200 million of new investment.34 The Saskat- chewan government’s economic vulnerability to shifts in potash company performance was perceived to be very high, given the increasing importance of revenues from potash. The Department of Mineral Resources reported the information which appears in Table 1 (overleaf,J.

Having increased its reliance on revenues derived from potash production, having sought to influence the conditions affecting the total level of those revenues - such as marketing and investment - and now faced with industry refusal to expand despite rising world demand, the Saskatchewan government found itself in conflict with the multinationals over the very objective of profit maximization, a conflict in which ‘the issue of control becomes more important than that of the sharing of the revenues’.3 ’

To this point the pattern of conflict between the government and the potash industry in Saskatchewan - from collaboration to conten- tion over the division of the rewards and from there to conflict over control - largely dupli-

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842 WORLD DEVELOPMENT’

Table 1.

Fiscal Years Potash’

*Source. Department of Mineral Resources, Annual Report 1974-75, p. 7. In terms of the share of Gross Domestic Product at market prices this rise in potash revenues represents a six-fold increase.

cates the experience of Third World countries. Our case study of conflict in a developed country setting thus reinforces the conclusion of others that an inherent contradiction of interests exists between host government and raw materials producers after successful exploi- tation of the resource takes place. Once the point of conflict over control is reached, however, the sparse two-actor bargaining model proves inadequate to an understanding of the outcome in the Saskatchewan case. Why, to use Mikesell’s terminology, should government and industry pursue brinkmanship to a ‘warfare’ outcome (nationalization or industry with- drawal) rather than accommodating to reach a ‘joint maximization’ solution?

Initially, after all, the government in Saskat- chewan did react to industry’s refusal to rein- vest by making an attempt at conciliation. After conferring with executives of several companies, it established a Committee of Industry and Government to discuss alter- natives to the reserves tax and made several short-term tax concessions to enable the industry to cope with the new Federal income tax burden. This joint committee met in May 1975 and adjourned with an understanding on the government’s side that industry would submit written proposals for a revised tax framework as a basis for further negotiations. Why then, just after June elections returned the NDP to power, did all but one potash company join in a court action challenging the legality of the reserve tax and simultaneously announce the withholding of their quarterly tax install- ment? Why should the government, rather than moving to compromise, choose to nationalize? As announced in the speech from the throne in November 1975:

My Government is faced with three options. First, it could retreat from its objectives, accom-

modate its policies to the willingness of the industry to comply, and surrender for future

generations of Saskatchewan people their heritage from this vast resource.

This course is unacceptable. Second, my Government could stand still,

permit present uncertainties to continue and, through attrition, delay the expansion of potash production. This course involves serious risks for Saskatchewan: - a risk of loss of Saskatchewan’s key position in

world potash production, - a risk of huge losses in future tax revenues, - a risk of being ordered by a Court at some time

in the future to repay hundreds of millions of dollars already collected. These are risks my Government is not prepared to take. The third option is to regain provincial control

of our potash resource by taking decisive action. This is the course my Government proposes to

pursue. You will therefore be asked at this Session to

approve legislation which will enable my Govern- ment to acquire the assets of some or all of the producing potash mines in the province.36

(b) The outcome

To explain this ‘warfare’ outcome - coercive nationalization - to the conflict between government and industry over control of potash development in Saskatchewan requires us to extend the model to include those political economy variables which structure perceptions of ‘objective’ bargaining positions.37 Whether or not government will move toward accommoda- tion rather than seek to assume control through direct intervention in production (statism), and whether this direct intervention is collusive or coercive should, we hypothesized, depend on the political salience of the foreign ownership issue, the domestic balance of political forces, the nature of the resource industry (i.e. both the attributes of the resource and the structure of the global industry), and party ideology.

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Whether or not the companies will prefer accommodation or all-out confrontation with government will similarly depend on their appreciation of the dominant party ideology, their assessment of the political balance of forces, and the nature of the resource industry in question.

Can party ideology - democratic socialism - account for the ultimate decision to nationalize the potash industry? Reacting to the press just after the takeover announcement, Premier Allan Blakeney denied it. ‘The reasons are not any devotion to public enterprise. We simply must have control of production and the rate of return to the public treasury’.3s Yet the state in modem capitalist society possesses multiple means of achieving some control over economic development - ranging from fiscal policy to regulation to indirect intervention in production. Even once the state comes to regard indirect intervention as inadequate and chooses to take a direct role in production (statism), there remains a choice of possibilities short of coercive expropriation. The state may establish public enterprises to enter a given industry either by investing alongside private companies or by forming joint state-private ventures which may create new assets or result from divestment - itself either voluntary or mandatory. Have then ideological considera- tions structured the extreme policy choice made in Saskatchewan?

At the level of theory it is clear that the CCF-NDP ideology always promoted public ownership. The 197 1 NDP electoral programme promised that ‘where feasible, we will reclaim ownership and control of foreign-owned resources’. The following year Premier Blakeney reported that public ownership possibilities were under study and in 1973 the Minister of Mineral Resources prohibited any new mining permits until government lans for public participation were finalized. 38 But if theoretical commitment to public ownership is consistent, at the level of practice, experimenta- tion with forms of intervention appears to have been guided by pragmatism. The NDP govern- ment favoured collaborative rather then coercive forms of direct intervention. If we compare the ‘socialist’ NDP performance to the practice of other Canadian governments of more conservative persuasion, party ideology does not appear to be a determining factor in the shift to direct rather than indirect state intervention to influence resource development.

The NDP government experimented with several forms of collaborative statism well prior to the 1975 stand-off with the potash industry

over profit maximization. New provincial crown corporations were established as vehicles for state participation in resource development: the Saskatchewan Mining Development Cor- poration (uranium); Saskoil (petroleum) and the Potash Corporation of Saskatchewan. The government’s April 1974 statement of its potash policy made majority state ownership obligatory for any new mines while, in cases of existing companies planning to expand, the government would offer risk capital in return for equity. Critical industry reaction to these proposals brought clarification in two major areas before the legislation was adopted in October: only where new expansion exceeded an investment of $10,000 would the firm be required to give the government a right of first refusal before going ahead alone; in so far as new mineral exploration ventures were concerned, government participation would be limited to 5O%.4o The Potash Corporation of Saskatchewan began operations in February 1975 with a mandate covering three forms of direct state intervention: ‘to undertake mining developments, joint ventures with others and to acquire interests in potash operations’.4 ’ The crown corporation first sought to develop a new, wholly government-owned potash mine at Bredenbury, but the project was eventually abandoned after feasibility studies revealed the enormous start-up cost.42

If we compare NDP government experimen- tation with collaborative forms of state inter- vention in the potash industry to the practice of governments of different ideological per- suasion elsewhere in the developed world, we have to conclude that NDP practice merely followed already established norms of capitalist development. In all advanced capitalist societies, apart from the United States, there has been an impressive post-war trend towards direct state intervention in production - no longer restricted to salvaging non-profitable, but essential industries such as transport, power or steel.4 3 In Canada, which has a long-standing acceptance of a positive role for the state in economic development, statism is today a trans-ideological practice.44 The federal Liberal government has consolidated diverse state ventures under the wing of a new crown conglomerate, the Canada Development Corporation, able to buy into or buy out foreign-owned companies. (The CDC ranked 38th among the top 200 industrial enterprises in Canada in 1976.) Even the Conservative party in the province of Alberta has turned to direct state intervention - creating crown corporations to participate in joint ventures for

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oil and gas exploration and, in collaboration with Japanese MNCs, for the establishment of a petrochemical complex.45

These comparative observations reduce the potency of party ideology as an explanatory factor in the Saskatchewan case - it alone cannot explain the shift from regulation to direct state intervention in the potash industry. Within the confines of the case study, more over, ideology appears to be a constant. Without variation in other of our conditioning factors, therefore, it cannot account for the outcome of conflict. Nevertheless, we will conclude that party ideology is a necessary, if not sufficient, element in any explanation for the choice to move from collaborative to coercive forms of statism (takeover). Party ideology acted in synergism with perceptions of the balance of political forces so as to affect both industry and government evaluation of the costs and benefits of confrontation versus accommodation in the spring and summer of 1975.

Potash industry perceptions of the NDP as a socialist party hostile to private enterprise meant that a basic mistrust underlay company-government negotiations. This mistrust, combined with industry perceptions of the balance of political forces, contributed heavily to the companies’ collective decision not to seek further accommodation but to push the government to the political brink by public confrontation in the courts and by fiscal blackmail. Already in October 1973, when the government announced regulations requiring detailed company financial statements in order to establish their real earnings for tax purposes (to pre-empt the subsidiaries’ manipulation of pre-tax profits in the province through transfer pricing), companies decided to refuse on the suspicion that the government would use this information to set up a state co oration with

‘g6 an unfair competitive advantage. It was this reluctance that provoked the government to insist upon applying the reserves tax formula in 1974 to circumvent profits as the sole basis for tax calculation. The wrestling over financial data continued throughout 1975 and embit- tered relations, as the President of the Canadian Potash Producers Association later implicitly recognized, saying that ‘In retrospect, perhaps the companies should have disclosed their financial data’.4 7

Given industry appreciation of the NDP ideology, its assessment of the balance of political forces in the province encouraged entrenchment in the hope of political change. In contrast to Third World countries such as

Peru or pre-Allende Chile,48 government pressures on industry were not made more tolerable by the apprehension that more radical political forces were waiting in the wings. On the contrary, the main opposition (Liberal) party in Saskatchewan had been clearly identi- fied since 1945 as a ‘free enterprise party’.4g The possibility of an NDP defeat incited the potash companies to virtually withdraw from negotiations with the government in the month prior to June elections. Nine days after the election confirmed the NDP in power for another four years, the potash industry pushed the NDP government to the political brink by challenging the reserves tax in court and with- holding the quarterly tax installment due.

Retreat from the brink at this juncture would clearly have been awkward for any political leadership. By putting into question government access to some $30 million of expected revenues, and by moving conflict into the public courts, the potash industry had dramatically heightened the political salience of the foreign ownership issue and the role of the state in economic development. The elections them- selves had also altered the government’s percep- tions of the political balance of power in the province, inciting a reassessment of its resource conflict strategy. Although the NDP had been returned to power, nonetheless its number of seats had been reduced in favour of the minority opposition party, the Conservatives, whose share of the popular vote rose from 2 to 28%. This shift in the balance of political forces has been attributed to setbacks in the govern- ment’s programme to control petroleum deve- lopment through joint ventures between private companies and the crown corporation, Saskoil. Conflicts over royalty payments had provoked oil company cutbacks in production, which Saskoil was as yet unable to supplement, and consequent unemployment in the service industry - two of the five constituencies so affected were lost to the Tories.so It is at this moment of crisis that party ideology produces a synergistic effect - acting with changed percep- tions of the balance of political forces and of the political salience of the ownership issue to bring about an unexpected outcome. The con- clusion drawn by the NDP leadership, as we have seen in the throne speech cited above, was not to counsel caution but to advocate radical action in order to assure direct state control of potash production. The government could choose to nationalize rather than compromise because it had the full knowledge that not only was public ownership acceptable to its sup- porters, but that even the coercive takeover of a

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CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 845

profitable industry would be regarded as cause for celebration, the fulfillment of a lo;?- standing mandate, by the NDP rank and file.

The final outcome in the conflict over potash development - threatened expropria- tion and, ultimately, nationalization with compensation - nonetheless contrasts with the same NDP government’s retreat in the case of petroleum or accommodation in the case of uranium during 1975-76. Other multinational corporations operating in the province likewise managed to adjust rapidly to state demands for participation. Thus public-private collabora- tion has proved workable in the uranium industry where some 20 joint ventures persist despite revenue and control conflicts with the government.” These differential outcomes appear to hinge on the attributes of the resource and the structure of the global potash industry which affected both industry and government perceptions of their relative vulnerability to pressures from the other. As Vernon reminds us:

The most important factor determining the effects of any subsidiary or branch of a foreign-owned enterprise . . . is the nature of the multinational system of which it is a part. A foreign-owned copper mine, for instance, is much more than a mining facility; it is a link in an internatidnal system. 1 .53

When we review the principal criteria used by Vernon and others to evaluate the relative vulnerability of an industry to government pressures - both for higher revenues and for control - we find the potash industry to be eminently susceptible to state takeover. These criteria are: (a) degree of vertical integration; (b) stability of technology; (c) availability of alternative sources of supply (d) substituta- bility; (e) price elasticity; (f) significance and locus of barriers to entry. ’ 4

The greater the degree of vertical integra- tion, the greater the invulnerability to govern- ment revenue pressures, since the highly inte- grated companies may ‘shift the greatest bene- fits . . . away from the production stage over which they are losing control to other stages over which they exercise more influence’.” Vertical integration is, however, very limited in the potash industry so that profits must be made at the production stage in Saskatchewan. Volatile technology tends to enhance the power and the perceived indispensability of MNCs which have a near monopoly of the com- mercialization of new industrial technology. In the potash industry, however, ‘the technology necessary to conventional potash mining and refining has not been subject to patents for

quite some time’.*(j Global dispersion of activities gives MNCs the bargaining advantage of being able to shift production to another country when confronted with unacceptable government demands. In the potash industry, however, with half the world’s reserves located in the state socialist economies, with US opera- tions already reduced in the 1960s in favour of investment in Canada after the exhaustion of high caliber deposits, and with potential deposits in other Canadian provinces as yet unexplored, these alternatives did not exist in the short run.

The final three criteria - substitutability, price elasticity, barriers to entry - were favourable to industry in the earlier stages of bargaining over the division of rewards, but after the stand-off on issues of control, these same considerations made nationalization a highly feasible government option. The fact that there is no substitute for potash in the manufacture of commercial fertilizers and the fact that potash demand is usually ‘regarded as an inelastic function of an already inelastic fertilizer demand schedule’,’ ’ means that price increases theoretically can be passed on to the foreign consumer. Likelihood of competition from new entrants to the industry is also improbable given the very high barriers to entry (such as high capital requirement; scarcity of suitable deposits; or government discretion in allocating mineral rights) located at the produc- tion stage.s’

These same considerations reduced govem- ment vulnerability to industry pressures in the event of nationalization, making it highly prac- ticable for the government to contemplate the takeover and future operation of potash mines as state corporations. After a feasibility study for a new state-owned mine had revealed the high barriers to entry, takeover of existing assets became all the more attractive. With few alternative sources of supply, no substitution, inelastic demand, stable technology and insigni- ficant vertical integration, a state corporation would be at one and the same time in an excellent position to take its place among the oligopolists in the international markets and relatively immune to retaliation - provided, of course, that the state possessed two key capa- bilities: the technical personnel and the financial wherewithal.

Saskatchewan did possess both the requisite technical competence and the financial resources to make takeover plausible. The creation of the Potash Corporation of Saskat- chewan served the purpose of training specialized geologists and engineers. The

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846 WORLD DEVELOPMENT

Department of Mineral Resources’ expertise was refined after the creation of a Potash Management Branch to undertake research on the global Industry with two divisions for ‘Production Planning and Development’ and ‘Marketing and Revenue Analysis’. Moran observes that ‘as the host country moves up a learning curve of bargaining skills and operating experience . . . the cost of nationalism diminishes’.s 9

In sharp contrast to the Third WorKd, where nationalization may be foreclosed as an option ‘by the dependence of developing countries upon external public and private capital’,60 Saskatchewan was highly solvent in 1975. The government ran consistent budget surpluses and had also put aside an Energy and Resource Fund amounting to some $400 million.61 Saskatchewan’s international credit rating was excellent - A on the New York money markets - and it had not borrowed abroad on the open market since 1930.62 This enviable financial situation in particular gave the government the foreknowledge that it could offer excellent compensation - thus probably acquiring assets relatively rapidly, without court battles - and that it would avoid retaliation from inter- national financial circles.

The nature of the industry in question - the attributes of the resource itself and the situa- tion of the companies within an international corporate structure - thus critically affected the last minute cost/benefit analyses made by both companies and government and produced a final outcome quite different from the outcome of conflict over petroleum or uranium development in the same political setting. The potash companies, we have seen, had few alternatives if they were unable to recapture adequate post-tax profits within Saskatchewan. Unable to compensate for poor returns either by maximizing profits at a higher stage of production or by relocating outside the province, they opted for all-out confrontation in the courts in June 1975. From the government’s perspective, the particular characteristics of the potash industry made state takeover appear to be highly practicable (given requisite financial wherewithal1 and technical competence).

Any serious assessment of the government’s performance as entrepreneur must await the availability of time series data. Nevertheless the Saskatchewan government’s purchase of an American-owned mining company in 1976, its participation in the producer-run overseas marketing agency Canpotex, and its purchase of two additional foreign-controlled mining companies in 1977 demonstrate that the state

has at least successfully entered the potash industry.6 3

3. CONCLUSIONS

Our analysis of government-resource industry conflict leading up to the nationaliza- tion of potash companies in Saskatchewan has relied on models derived from Third World experience by Vernon, Mikesell and Moran in particular. In a developed country setting, we found the dynamic logic of conflict - leading from collaboration to contention over rewards and from there to conflict over control - very similar to the pattern observed in the Third World. Should we then expect more instances of conflict over control of resource develop- ment in the industrialized world as more MNCs turn to invest in raw materials outside the Third World? Not necessarily. A critical factor contri- buting to conflict escalation, it will be recalled, was government perception of economic vulnerability to changes in MNC performance - given the political need to assure on overall level of revenues to meet policy commitments. Only those economies where the resource industry in question accounts for a politically visible share of revenues would thus be truly comparable to Saskatchewan. This implies an economy with a concentrated production struc- ture - i.e. a resource-specific economy with limited diversification. Outside the Third World, this condition indisputably applies to only two developed countries - Canada and Australia where the peculiarities of decentra- lized federalism, the distribution of natural resources, and the pattern of foreign investment have created resource-specific economies. Canada and Australia are also, as it happens, the two principal countries, outside the Third World and the Soviet Union, which are important net exporters of industrial raw materials with still enormous potential.

Once conflict over resource development escalates to the point of preoccupation with issues of control, we then tried to situate the factors which may explain the outcome of conflict. Will government move to take a direct role in production (statism) and will this statism take collaborative or coercive form? We argued that party ideology cannot explain the choice to intervene directly in production since experimentation with collaborative forms of statism today transects ideological boundaries in advanced capitalist countries. New state enterprises or joint public-private ventures do not necessarily stem from conflict with industry but are vehicles for state economic

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CONFLICT OVER RESOURCE

development policy which are now used simul- taneously with fiscal and regulatory mstru- ments of public policy. In the presence of other factors (see our above discussion on political salience and the balance of political forces), we found that party ideology nonetheless increases the likelihood that coercive statism (e.g. expro- priation) will be considered a viable instrument of economic policy. Ultimately, however, the probability that a government which may not a priori exclude coercive nationalization will actually move to that solution depends on the nature of the resource industry involved - both the attributes of the resource and the structure of the global industry.

DEVELOPMENT IN CANADA 847

After having isolated and analysed the principal factors influencing the nationalization decision in Saskatchewan, we will close with a final question. Is is not possible that radical public policy-making in one case might become part of a learning experience for political elites elsewhere? The Finance Minister for the Government of Quebec has, in a sense, already answered this rhetorical question for us by posing another:

Why, for instance, could Ottawa reasonably embark on the reorganization of the aircraft industry or in Petro-Canada, Saskatchewan in the control of potash mining, while an analogous operation with respect to asbestos in Quebec would be considered as dangerously Bolshevik?64

NOTES

1. Raymond Vernon, ‘Foreign enterprises and deve- lopment in the raw materials industries’, ,bWiCQn

Economic Review, Vol. 60, No. 2 (May 1970), p. 124.

2. United Nations, ECOSOC, A/9716 (1974), Permanent Sovereignty over NQtUrQi Resources. Nationalization does not always conflict with private industry’s interests. The significance of nationalization varies according to the socio-economic setting in which it takes place. Today nationalization of non- profitable but essential industries is accepted in all advanced capitalist countries - either to salvage a vital sector (e.g., steel) or to subsidize services (e.g., hydroelectric power: transport) for the entire private sector. James F. Petras has constructed a helpful typology by ‘determining who controls and benefits from nationalized property’ in his Seminar paper presented to the Institute of International Coopera- tion, Ottawa University, 1976.

3. Vernon, op. cit.

4. ibid.; Theodore H. Moran, Transnational strate- gies .of protection and defence by multinational corporations: spreading the risk and raising the cost of nationalization in natural resources’, International Organization, Vol. 27, No. 2 (Spring 1973), pp. 273-287. Policy-makers have also promoted this strategy. The French Government Inter-ministerial Council, for example, decided to encourage large companies to redirect investment to non-Third World countries such as Canada and Australia: See Le Monde (12 May 1972). The successful exploitation of North Sea oil has encouraged further offshore exploration in Europe and North America (e.g., Canada’s East Coast).

5. Vernon, op. cit.

6. Norman Girvan, ‘Economic nationalists v. multi- national corporations: revolutionary or evolutionary change?‘, in Carl Widstrand (ed.), Multinational Firms in Africa (Dakar and Uppsala: 1975) argues that

security of supplies may override the desire for 100% ownership so that collusion replaces confrontation between MNCs and host governments in several developing countries.

7. For an interesting and important discussion of the implications of resource development for Canadian federalism and for Canada-US relations, see Garth Stevenson, ‘Continental integration and Canadian unity’, in A. Axline et al., Continental Community? Independence and integration in North America (Toronto: M cclelland and Stewart, 1974), pp.194-220.

8. A description, with statistical data, of the early growth of American investment in Canada can be found in Hugh G. J. Aitken, American Capital and Canadian Resources (Cambridge: Harvard University Press, 1961), Chapter 2.

9. Saskatchewan, Bureau of Statistics, &skatchewan Economic Review (1976), Table 24, page 20.

10. Saskatchewan, Department of Mineral Resources, Potash: Challenge for Development (1976), p. 58.

11. Richard Shaffner, New Risks in Resource Deve- lopment: The Potash Case (Montreal: C. D. Howe Research Institute, 1976), p. 11; Saskatchewan, Economic Review, op. cit.

12. Saskatchewan, Economic Review, op. cit.

13. Saskatchewan, Department of Mineral Resources, Annual Report (1974-75), p, 7.

14. Shaffner, op. cit., p. 9, citing Statistics Canada, cbnada’s Mineral Production (Ottawa: Jnformation Canada, 1975).

15. Data on potash production and trade may be found in Saskatchewan, Department of Mineral

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848 WORLD DEVELOPMENT

Resources, op. cit. and in the Canadian Mineral Yearbook.

16. Ted Malone, ‘The Potash Development Act, 1975’ (27 November 1975). mimeograph, p. 12. At the time Malone was Liberal energy critic.

17. GIobeandMail (Toronto), (6 March 1976).

18. Raymond Mikesell, ‘Contlict in foreign investor- host country relations: a preliminary analysis’, in Raymond Mikesell (ed.), Foreign Investmenf in the Petroleum and Mineral Industries: Case Studies of Investor-Host Country Relations (Baltimore: Johns Hopkins Press, 1971), p. 54.

19. Premier Douglas actually received tacit British Labour Government support but it was predicated upon Canadian federal government approval of the project. Both Prime Minister St. Laurent and Mines and Resources Minister Alison Glen opposed the Saskatchewan undertaking with the result that the proposed crown development scheme was abandoned.

20. Saskatchewan, Department of Mineral Resources, op. cit., p. 24.

21. Mikesell, op. cit.

22. Vernon, op. cit., p. 124.

23. Theodore H. Moran, Multinational Corporations and the Politics of Dependence: Copper in Chile (Princeton: Princeton University Press, 1974), p. 161.

24. Mikesell, op. cit., p. 31.

25. The New Democratic Party superseded the CCF in 1961. The NDP was defeated by the Liberal Party in 1964 and regained provincial power in 1971. It is tempting to test the hypothesis that party ideology determined the decision to take over the potash industry by comparing NDP performance to that of the Liberals - a party committed to private enterprise. Unfortunately Liberal tenure corresponds to the period of exploration and start up for most com- panies, rather than successful production, and to a slump in world potash markets, rather than to a time of profitability. Both conditions predicting conflict in Third World models were thus absent. Liberal govern- ment concern, therefore, focused at first on moving companies into production (by threatening to raise royalty schedules) and then, when faced with excess capacity, on salvaging the industry as a whole (by imposing sales quotas and a floor price arranged with the cooperation of the Governor of New Mexico to avoid sabotage of the scheme by US based companies). There is, however, some evidence to suggest that Liberal perceptions of the proper division of risks and rewards also changed after the industry entered profitable production in 1970-71. Liberal leader Dave Steuart, proposing an alternative resource policy while castigating the NDP takeover decision, admitted that even under his governorship, ‘the level of taxation

would, of course, be much higher than it was a few years ago because the ability of the industry to pay is much better than it was then and the resource does belong to the people’. D. G. Steuart, ‘Remarks on the Throne Speech’ (12 November 1975). p. 16.

26. Shaffner, op. cit., p. 15.

27. Saskatchewan, Potash Report, No. 6 (n.d.). This new view of risks and rewards was certainly influenced both by the OPEC’s success and by the challenges to conventional wisdom about resource development coming from newly elected NDP governments in British Columbia and Manitoba.

28. Vernon, op. cit., p. 124: Mikesell, op. cit.

29. Mikesell, op. cit.

30. Vernon, op. cit., p. 124.

31. Mikesell, op. cit., p. 37.

32. Mikesell, op. cit., p. 30.

33. There is one exception to this generalization. Central Canada Potash, minority-owned by C.F. Industries, a grouping of both American and Canadian farmer cooperatives which purchased all of CCP’s potash output, deeply resented NDP adjustments to the Liberal party’s production allotment plan because CCP was thereby prevented from meeting its delivery commitments. CCP went to the courts in July 1972, and although initially unsuccessful, it broadened its case to challenge the constitutionality of the entire production rationing scheme. Court battles with appeals continued into 1977. At the outset, however, no other company shared the CCP’s situation (a captive market for potash) and no other joined in its court action.

34. Financrirl Post (15 February 197.5).

35. Mikesell, op. cit., 30.

36. Saskatchewan, Debates and Proceedings, 18th Legislature, 1st Session (12 November 1975) p. 8.

37. In his study of the nationalization of copper in Chile, Moran, op. cit., demonstrates the limits of the Mikesell bargining model to explain outcomes and supplements it with a more elaborate analysis of domestic and international coalitions. He identifies these three key elements - policy influencers; industry and government cost/benefit perceptions; and the salience of foreign control (both its real size and its political visibility). George Philip, in ‘The limita- tions of bargaining theory: a case study of the International Petroleum Company in Peru’, World Development9 Vol. 4, No. 3 (March 1976), pp. 231-239, singles out the influence of ideology suggesting that Peruvian leaders placed high value on state control versus free enterprise (unlike Mikesell!) and were sensitive to the presence of more radical

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CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 849

political groups anxious to replace them in power. Both studies were extremely helpful to us but we found a different combination of factors best explained the Saskatchewan case.

38. Ottawa Citizen (14 November 1975).

39. Saskatchewan, Department of Mineral Resources, op. cit., p. 70.

40. FinancialPost (8 March 1975).

41. Saskatchewan, Department of Mineral Resources, op. cit., p. 71.

42. Financial Post (24 January 1976).

43. Stuart Holland, ‘State entrepreneurship and state intervention’, in Holland (ed.), The State as Enfre- preneur (London: Weidenfeld and Nicolson, 1972).

44. A classic article on this subject is Hugh G. Aitken, ‘Defensive expansionism: the state and economic growth in Canada’, in Aitken (ed.), The Store and Economic Growth (New York: Social Science Research Council, 1959), pp. 79-114.

45. An analysis of Canadian statism in the 1970s is found in Jeanne Kirk Laux, ‘Global interdependence and state intervention’, in Brian Tomlin (ed.), Canada’s Fore& Policy (Toronto: Methuen, 1978).

46. Shaffner, op. cit., p. 17.

47. Globe and Mail (14 May 1976).

48. Philip, op. cit.; Moran (1974), op. cit.

49. David E. Smith, Prairie Liberalism, The Liberal Parry in Saskatchewan 1905-I 971 (Toronto: Univer- sity of Toronto Press, 1975), p. 17.

50. John Richards, ‘Potash: from the election to nationalization’, The Commonwealth (2 June 1976), p. 8.

51. Those in the Blakeney government represented the dominant, more moderate wing of the New Democratic Party. See Desmond Morton, NDP. the Dream of Power (Toronto: Hakkert, 1974), p. 114.

52. Escalating disagreements over royalty structures and a uranium reserve tax resulted in company refusals to proceed with new investment in February 1976. The solution, however, was accommodation. New private investment has continued alongside state- private joint ventures: most notably a tripartite venture brings together the Saskatchewan government, a German and an American multinational to develop both nickel and uranium near Key Lake. Financial

Times (2 February 1976); Ottawa Journal (29 June 1976).

53. Vernon, Restrictive Business Practices, the Opera- tions of Multinational US Enterprises in Developing Countries, Their Role in Trade and Development (New York: United Nations, 1972), TD/B/399 1.

54. Vernon, ibid.; Moran, ‘New deal or raw dealin raw materials’, Foreign Policy, No. 5 (winter 1971-72), pp. 119- 134; Girvan, ‘Multinational corporations and dependent underdevelopment in mineral export economies’, Social and Economic Studies (December 1970), pp. 490-526; Mikesell, op. cit.

$5. Moran, ibid., p. 121.

56. W. E. Koepke, Structure, Behaviour and Perfor- mance of rhe World Potash Industry (Ottawa: Depart- ment of Energy, Mines and Resources, 1973), p. 52.

57.

58.

59.

60.

61.

62. the

Koepke, ibid., p. 91.

Koepke, ibid., p. 92.

Moran (1974), op. cit., pp. 166-167.

Mikesell, op. cit., p. 54.

Globe and Mail (25 March 1976).

After the nationalization policy was announced, province was reevaluated and its rating on the

New York market raised from A to AA. ln summer 1976 the NDP government floated $50 million in bonds in New York and $75 million on the Eurodollar market. Globe and Mail (28 July 1976 and 12 August 1976).

63. The price was right in all instances - the Saskatchewan government purchased the Duval mine for $118.5 million and $10 million in promissory notes; the Alwinsal mine for $56.5 million, $20 million in promissory notes and $10 million tax credit while it paid $144 million entirely in cash for the Sylvite mine. Duval’s President Attwood concluded that ‘negotiations were conducted in an amicable and highly professional business-like way, and under the circumstances I am satisfied with the outcome’. Financial Post (21 August 1976).

64. Speech to the Board of Trade of Canada and to the Empire Club of Canada as reported in the Globe and Mail (18 March 1977). Indeed, in October 1977 the Quebec Government announced its plan to buy up the 54.6% of public shares in Asbestos Corp. Ltd. now held by the US firm, General Dynamics Corp., and to move to expropriation if unsuccessful (ibid., 25 October 1977).