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Time for federal government to get tough on multinationals: Investment Canada Act needs serious overhaul says Canadian Labour Congress

Posted: Tuesday, 3 January 2012

As nearly 500 workers in London, Ontario are locked out by Electro-Motive – a subsidiary of US multinational giant Caterpillar – the Canadian Labour Congress reiterates its call for a serious overhaul of the Investment Canada Act.

The Canadian government needs to get much tougher on foreign multinationals who buy Canadian companies and fail to live up to their promises, CLC president Ken Georgetti writes in a letter to Prime Minister Stephen Harper. The Investment Canada Act must be changed to allow for an open and transparent process when reviewing proposed foreign takeovers.

The CLC supports the CAW's call for the government to disclose the terms and commitments made by Caterpillar for government approval of their purchase of Electro-Motive in 2010. Caterpillar is just another in a long line of foreign multinationals, like Vale S.A., Xstrata, and US Steel, that have bought up Canadian companies in recent years only to demand massive wage and benefit concessions, layoff workers, or even close their Canadian acquisitions in violation of their commitments made under the Investment Canada Act.

Electro-Motive (Caterpillar) tabled a final offer to the London workers that would slash wages in half, eliminate the defined benefit pension plan and drastically cut benefits. Caterpillar bought Canada's only locomotive manufacturing plant, Electro-Motive, in 2010 through its wholly-owned subsidiary Progress Rail Services. Electro-Motive benefited from tax measures to increase deductions for locomotive buyers estimated to be worth $5 million, by the Harper government in 2008.

Read Ken Georgetti's letter to the Prime Minister here:

January 3, 2012

The Right Honourable Stephen Harper
Prime Minister of Canada
House of Commons
Ottawa, Ontario
K1A 0A6

Dear Prime Minister:

I am writing to bring your attention to a labour dispute in Ontario that began January 1 – a lockout of nearly 500 workers (represented by the CAW) by Electro-Motive (Caterpillar) which is a wholly-owned subsidiary of US-based Caterpillar. The circumstances of this lockout once again illustrate the shortcomings of the Investment Canada Act in protecting Canadian workers in foreign takeovers of Canadian companies.

Foreign multinationals have routinely broken promises made to Canadians and their governments under the Act. Recent examples include Vale, which purchased Inco, and Xstrata which bought Falconbridge laying off hundreds of workers in the steel industry across the country in 2009. US Steel shut down its Southern Ontario operations in 2009 prompting your government to take it to court for violating the terms of the government’s approval of the purchase of Stelco. To add further insult to injury, US Steel locked out Stelco workers in Hamilton in 2010 with those workers only returning to work after eleven long months in October 2011.

Now, we have the example of Electro-Motive (Caterpillar) that has locked out its workers just eighteen months after the company was purchased by Caterpillar, through its wholly-owned subsidiary Progress Rail Services – a purchase approved by your government in September 2010 under the Investment Canada Act. And once again, Canadian workers with decent-paying jobs vital to the health and growth of the Canadian economy are being betrayed by the weakness of the Act.

When you visited Electro-Motive in 2008 you unveiled tax incentives for the purchases of locomotives geared to the economic health of this company in Canada’s industrial heartland. But under Caterpillar’s management, Electro-Motive is seeking to gut the essence of jobs that build a healthy middle-class and vibrant community like London, Ontario. Electro-Motive is demanding wage concessions from the workers that would reduce wages by over $18 an hour for half the workforce, eliminate the defined benefit pension plan, implement drastic health care benefits cuts, and eliminate retiree benefits.

Yet Caterpillar’s purchase of Electro-Motive, and its subsequent actions against its workforce, is only the most recent example of why the Investment Canada Act must be overhauled. The Canadian government needs to get much tougher on foreign multinationals who buy Canadian companies and fail to live up to their promises. The Investment Canada Act must be changed to allow for an open and transparent process when reviewing proposed foreign takeovers.

The Canadian Labour Congress supports calls for the government to disclose the terms and commitments made by Caterpillar for government approval of their purchase of Electro-Motive in 2010.

We note with deep disappointment your government’s decision to abandon its legal proceedings against US Steel in December 2011, in return for a murky promise from US Steel to maintain an undefined level of operations in Canada for four years. Your government gave up an opportunity to demonstrate to foreign multinationals there will be a serious price to pay for the economic damage they cause to workers, their families and their communities when they do not live up to the commitments they make to gain approval to purchase Canadian companies.

The Investment Canada Act needs a serious overhaul to protect Canadian workers, to protect decent paying jobs, from predatory foreign multinationals that receive government approval to purchase Canadian companies. The Act fails to ensure that foreign-owned takeovers of Canadian businesses have a “net benefit” to Canada that includes commitments to maintain current employment levels and job creation. Reviews are not transparent. The CLC calls on your government to strengthen the Investment Canada Act through various measures, including lowering the threshold for public review, ensuring public hearings are held in affected communities, and requiring publication of the reasons for decisions and conditions to be met by foreign-owners. I attach the CLC's 2011 policy brief to the House of Commons Standing Committee on Industry, Science and Technology for more detailed information on the CLC's position on the Investment Canada Act.

Sincerely,

Kenneth V. Georgetti
President

Read the CLC's policy brief to the House of Commons Standing Committee on Industry, Science and Technology here.