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Sadly, the federal government’s decision to block the purchase of Potash Corporation by BHP Billiton Ltd. is likely to hurt the future competitiveness of Canadian companies.

This does not imply that Canada has no right or cause to challenge foreign takeovers of Canadian companies. Far from it. The problem is with the “net benefit” theory and rationale used by our government to block the takeover.

This approach to foreign direct investment is in stark contrast to the approach to merchandise trade, the traditional focus of trade policy, where the theory is reciprocity: you let us send you our BlackBerrys without tariffs or restrictions and we will let in your GE MRI machines.

We need to move policy from net benefit to reciprocity as the defining criterion.

If net benefit was used in merchandise trade, there would never be a lowering of trade barriers because every single industry or company that is adversely affected would wrap itself in the protective flag of net benefit.

Quebec textile makers would declare there to be no net benefit to allowing free trade in textiles and Washington State sawmills would declare there to be no net benefit in allowing free trade in softwood lumber, etc instant payday loans no faxing.

The world has gotten to freer trade only by way of utilizing broad reciprocity: we will open our markets broadly to your imports if you open yours broadly to our exports. Nations understand that there will be some net beneficiaries and net benefactors but that overall there will be an efficiency gain for both economies, so it is sensible to put up with the minuses.

We are in the middle of an historic 50-year reshuffling of the ownership of the world’s business assets, making international capital flows centrally important to long-term country competitiveness.

Around the world, national franchise companies (such as Labatt’s) are being bought up by global players (e.g. Interbrew). And smaller or narrower global players (Zenon Environmental or Falconbridge) are being bought up by bigger and/or broader global players (GE and Xtrata respectively).

For this reason, Canada needs to bring the sophistication of the long-established thinking from merchandise trade to the realm of foreign takeovers.

We need our Canadian companies to globalize without being hobbled by government policies related to foreign takeovers. And we can’t be naïve boy scouts while this is all transpiring. Basing our policy on reciprocity, not net benefits, is essential to the desired outcome.

If our policy remained based on net benefits, other countries will start using net benefits logic against Canadian companies when they attempt to grow globally through foreign acquisition. And unfortunately, net benefits is such a vague and subjective concept that every single foreign takeover here or abroad can be struck down if the government in question wants to show that there aren’t net benefits.

It wasn’t at all pleasant to have RTZ buy our wonderful Alcan and turn it into a tightly-managed subsidiary. But it was critical that the U.K. allow Thomson to buy their Reuters.

It wasn’t a highlight to have America’s AMD buy our ATI, but our Couche Tard needed to be allowed to buy their Circle-K to become an international heavyweight in C-store retailing. That is reciprocity in action.

But it is not reciprocity to allow Vale to buy Inco. The Brazilian government has the absolute right to stop any takeover of Vale. Reciprocity would mean that if Vale has the right to buy Inco, then Inco would have the right to buy Vale.

Similarly, it is not reciprocity to allow BHP to buy Potash no teletrack payday loan lenders. As part of the BHP-Billiton merger, the Australian government imposed draconian restrictions on BHP, meaning that BHP can go hunting internationally but it can never be hunted.

The approach that would have protected Canadian competitiveness would have been to allow the Potash takeover with two conditions:

First, that the Australian government remove all restrictions on the foreign takeover of BHP – and prove it by allowing a subsequent standstill period that would enable Potash to put together a consortium to bid for BHP.

And second, that it also signs an agreement binding it to not to block any acquisition of an Australian company by a Canadian company. In addition, there could be mutual agreement to exclude certain sectors or to enforce certain requirements post-acquisition, just as we would find in merchandise trade agreements.

That would be the first of what would hopefully become a series of free Foreign Direct Investment agreements.

Roger Martin is dean of the Joseph L. Rotman School of Management at the University of Toronto and chairman of the Institute for Competitiveness & Prosperity.

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Hewlett-Packard’s new CEO started work this week, but there’s one important thing he probably won’t be doing: testifying live in a corporate-espionage trial involving his former employer.

Apotheker was formerly CEO of SAP AG, the business software maker now on trial over millions of customer support documents stolen from SAP’s archrival, Oracle Corp.

A trial started this week.

Oracle wants Apotheker to testify about what he knew about the now-shuttered subsidiary payday loans. The testimony would have served another purpose beyond stinging SAP: allowing Oracle to pillory the leader of Oracle’s new friend-turned-rival, HP.

But Oracle says HP is refusing a subpoena. HP says Oracle is harassing Apotheker and already has a sworn deposition from him.

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As Industry Minister Tony Clement prepares to provide an update on Canada’s digital economy strategy later this month, the state of competition within the Canadian wireless sector promises to play a prominent role. Consumers have bemoaned the dominance of the big three carriers for years, leading to complaints about limited choice and high prices.

In recent years, however, the government has begun to map out a strategy to address the competitiveness concerns. The 2008 spectrum auction opened the door to new competitors, with many launching over the past year. Moreover, the prospect of removing foreign ownership restrictions is gaining traction and there are indications that additional spectrum will soon be made available.

While these changes have established a market with more providers, the ability for consumers to take advantage of greater competition remains a work-in-progress.

From a pricing perspective, the incumbent providers maintain important advantages, particularly the ability to bundle wireless, landline, Internet and television services into a single package featuring discounted prices that any new entrant would be hard-pressed to match.

Beyond pricing, consumers face other barriers. Many are locked into long-term contracts that far exceed the norm in other jurisdictions. Establishing term limits would require provincial intervention and would likely raise objections over interference with consumer choice.

The Quebec government recently implemented an alternative approach by establishing legal limits on cancellation fees. The provincial consumer protection law now limits the fee to the actual discount received by the customer. Moreover, if there was no inducement or discount to enter into a contract, the fee cannot exceed 10 per cent of the value of the unpaid services or $50, whichever is less.

Assuming consumers can get out of an existing contract, they still face the challenge of transferring or “porting” their number to their new provider. In theory, this should be easy since Canada implemented wireless number portability, which allows consumers to keep their existing cellphone numbers as they change providers, in 2007.

However, a new report from the Commissioner for Complaints for Telecommunications Services, which addresses consumer complaints about wireline and wireless services, finds that there are significant problems with portability in practice.

The CCTS says it often receives complaints from consumers who have asked to port their number to a new provider, but encounter inaccurate billing or service errors along the way.

The report identifies a host of problems, including providers submitting the wrong customer information or wrong dates for porting orders as well as numbers being ported without the correct services. The CCTS notes that the mistakes often result in delays in porting the number or in billing errors, including customers being billed by both providers for the same service.

The problems associated with number portability are not easy for an individual consumer to address, since it is not always obvious whether the error lies with the old provider or the new one. Regardless, the CCTS sternly notes that “when completing requests to port telephone numbers, service providers have an obligation to ensure a seamless transition and must therefore ensure that all related systems are accurate and up to date.”

Fostering a competitive wireless environment in Canada requires attention to both the provider and consumer perspectives.

New spectrum and removing foreign ownership restrictions should help increase provider choice, but there is work to be done by federal and provincial governments to ensure that consumers have the ability to take advantage of greater competition.

Michael Geist holds the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa, Faculty of Law. He can reached at or online at www.michaelgeist.ca.

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Private-sector employers added jobs for the fourth month in a row in May, according to a survey released Thursday by a payroll processor.

Automatic Data Processing, which processes paychecks for one in every six U.S. employees, said private-sector employers added 55,000 jobs to their payrolls in May, down from a upwardly revised 65,000 increase in April.

The May increase fell short of the 60,000 jobs economists surveyed by Briefing.com forecasted for the report.

From February to May, the report has shown a monthly average increase of 39,000 jobs, in line with a slow recovery economists are seeing from other surveys. Friday’s government jobs report is also expected to show modest job growth, after economists account for a large boost from temporary census hires, said Tim Quinlan, an economist with Wells Fargo Securities.

"It is a very slow recovery, but a recovery nonetheless," he said. "We’re growing jobs at a fast enough pace to keep unemployment rate where it is, or slightly lower, but we’re not looking at a quick, snapback recovery that many people were hoping for."

According to ADP, the service sector reported an increase of 78,000 jobs, its fifth consecutive monthly gain, while manufacturing payrolls grew by 15,000 jobs. Those gains were offset by losses in the goods-producing sector, which declined by 23,000 jobs.

Construction and financial services jobs showed big monthly declines, as they have for more than two years.

ADP breaks out job trends across categories for small, medium and large businesses — all three of which showed job growth in May.

The ADP report follows on the heels of a separate jobs number released Wednesday by outplacement firm Challenger, Gray & Christmas Inc.

According to Challenger, planned job cuts inched 1.3% higher in May, driven by shrinking government payrolls, but the pace of downsizing continued to slow. Employers announced plans to cut 38,810 jobs in May, up from April’s four-year low of 38,326.

Many economists view the Challenger and ADP reports as a preview of things to come from the government’s national unemployment number due on Friday. Economists are forecasting the government’s report to show employers added 500,000 jobs in May after expanding payrolls by 290,000 jobs the month before.

Unlike the ADP report, that number also includes government census hires, not just jobs created by private employers.

The national unemployment rate, based on a separate survey, is forecast to ease slightly to 9.8% from 9.9%. 

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Revenue took a 26 percent dive to $261 million at equipment rental firm RSC Holdings Inc. during the first quarter.

The Scottsdale company (NYSE:RRR) reported a first-quarter net loss of $38 million, or 37 cents per diluted share, compared with a loss of $14 million, or 13 cents, for first-quarter 2009. The bottom line primarily reflects a decline in business activity and the resulting impact on volume and pricing, although that impact was partially offset by cost-cutting initiatives, officials said in announcing financials Thursday.

“While operating in a still-challenging economy, we drove utilization up with momentum building throughout the quarter. Our industrial diversification strategy and transition to playing offense enabled us to meet or exceed our first quarter revenue, adjusted EBITDA, and free cash flow expectations,” said CEO Erik Olsson in a statement. “To build on this momentum, we continued to position the company for the future with five new location openings, selective investment in our rental fleet and further investment in our sales and marketing organization with an emphasis on key account management.”

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Greek central bank Governor George Provopoulos said he’s confident the government will meet its “very ambitious” deficit-reduction goals and ward off any further credit-rating downgrades.

Rating agencies “want evidence that the plan is implemented on target” and “some time will need to elapse before they can form a better judgment,” Provopoulos, also a European Central Bank council member, said in an interview in Athens on Feb. 19. “I have full confidence” in the government meeting its goals, he said. “They have to succeed. And they will, I’m sure of that.”

Greece’s financial distress could be exacerbated at the end of this year when the ECB is due to revert to old collateral rules that were loosened during the global recession. If Moody’s Investors Service cuts its Greek credit rating to the same level as the other major ratings companies, Greek government bonds would no longer be eligible as collateral at the ECB, making it more difficult for the nation to borrow.

“The government has said already on several occasions that it will take any additional measures required in order to achieve its goal,” Provopoulos said. “This gives me comfort. Even if some risks materialize — like growth — the government is prepared to take immediate corrective action.”

Skeptical Investors

Investors are skeptical that Greece can cut its budget deficit from 12.7 percent of gross domestic product to under 3 percent by 2012. The government’s plan assumes the economy will contract 0.3 percent this year before growing 1.5 percent in 2011. It shrank 2 percent last year, compared with the government’s forecast for a 1.2 percent contraction.

The premium investors charge to hold Greek 10-year bonds instead of the German benchmark soared to 396 basis points on Jan. 28, the most since 1998. The cost of insuring Greek bonds against default jumped to a record high, exceeding the rates in emerging Asian economies such as Vietnam, Indonesia and the Philippines.

Markets are overreacting, Provopoulos said.

“They take advantage of the weak link to make profits,” he said. “It’s clear that there is a certain degree of overshooting. Given the high degree of uncertainty in the markets, one should not expect that the situation will normalize overnight.”

If Greek debt were no longer eligible as ECB collateral, the government would find it harder to find buyers for its bonds and yields would probably rise.

‘Exactly As Promised’

The ECB currently accepts bonds rated BBB- by at least one rating agency as collateral for loans. Under the old rules, due to be reinstated on Jan. 1 next year, A- is the minimum rating required. Standard & Poor’s and Fitch Ratings cut Greece’s credit grade to BBB+ in December.

Moody’s has said it may lower its A2 rating two steps to Baa1 if Greece only partially implements its deficit-cutting plans. That would render Greek bonds ineligible at the ECB.

ECB President Jean-Claude Trichet said on Jan. 14 that the Frankfurt-based central bank won’t make allowances “for the sake of any particular country” and Greece won’t win “any special treatment.”

The ECB will continue its enhanced credit support to the banking system, Provopoulos said, suggesting it may continue lending banks as much cash as they want at its benchmark rate, at least in weekly refinancing operations.

“The ECB never said ‘we have reached the end of the road’,” he said. “Of course there are signs of normalization of the situation, of an improvement. This will be taken into account” when policy makers decide in March on the next steps in the exit from emergency lending measures, Provopoulos said.

Under Pressure

European finance ministers turned up the pressure on Greece last week to rein in the region’s largest budget gap. The country might be asked to raise its value-added tax, introduce a levy on luxury goods and cut capital spending if it fails to show sufficient progress by mid-March, when the European Commission is due to review the government’s progress.

While European leaders on Feb. 11 pledged to take “determined and coordinated” action to support Greece if the need arose, they left open how they would respond to a fresh wave of speculative attacks against Greece or other countries such as Spain and Portugal, which are also struggling to cut their budget deficits.

Provopoulos said he takes the commitment of European governments to stand by Greece “at face value.” The lack of a detailed rescue plan isn’t disappointing, he said.

“Everybody knows how critical the situation is. Of course, an expression of willingness and readiness from the European family, the euro zone, to help in case it’s needed is quite reassuring and understandable.”

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The German government may offer an aid package to Greece and other debt-ridden European nations in an effort to stave off the default concerns that have stunted global markets, according to reports.

The Wall Street Journal, citing unnamed sources, said a loan guarantee plan would be led by Germany but completed along with European Union partners.

The threat of a default in Greece has given investors pause, as the effect would likely ripple to other members of 16-nation euro zone. Other debt-choked nations in the bloc include Portugal, Spain, Ireland and Italy.

European Union officials are set to meet Thursday to discuss the economy, and Greece is expected to be a major topic on the docket.

In December, Greece’s credit rating was downgraded. S&P’s move came after health care companies complained that the country was behind on payments related to its public health system.

Investors across the globe have been trying to digest what impact such a crisis would have on the nascent signs of recovery, and ripple-effect fears have sent worldwide markets lower payday loans.

The WSJ article said Germany’s finance minister, Wolfgang Schaeuble, has discussed the aid idea in with European Central Bank President Jean-Claude Trichet.

But earlier Tuesday, Reuters reported that German government spokesman Ulrich Wilhelm called reports that a decision was already in effect "unfounded."

A bailout of Greece would mark the first time any EU country rescued a euro zone member.

The U.S. stock market was cheered by the reports of possible Greek aid, as the blue-chip Dow index (INDU) added almost 2% with less than 2 hours left in the session. The euro also rose in late trading. 

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Fairfax-based SRA International has completed its acquisition of Perrin Quarrels Associates Inc. for an undisclosed sum.

Charlottesville, Va.-based PQA specializes is environmental programs like air quality and climate change. The Environmental Protection Agency is among its biggest customers.

The acquisition adds $6 million to the balance of SRA’s current fiscal year. The company will report fiscal second quarter results this month.

SRA International’s (NYSE: SRX) first quarter revenue was $417.5 million, up from $392.4 million in the same quarter a year earlier.

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Houston Public Radio and the Bauer College of Business at the University of Houston have joined together to launch a weekly business radio feature.

KUHF business reporter Ed Mayberry will host Bauer Business Focus each Friday morning at 8:35 a.m., starting Jan. 29.

"There's a lot of change taking placing in business today, and we're pleased to be able to provide a forum on public radio to discuss those changes and what's happening in the local business community," said Debra Fraser, station manager. "I think Bauer Business Focus will appeal even to people who wouldn't normally think of listening to a business program, because it's really about issues that impact all of us fast cash online."

Topics of the program will range from big-picture issues, job growth, economic diversification and entrepreneurship and innovation in emerging industries.

"We can't wait to explore trends and issues weighing on the minds of the business community," said Arthur Warga, dean of the Bauer College, and the first scheduled interview.

The program is available on 88.7 FM, HD Digital Channel 1 and streaming online at www.kuhf.org.

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The U.K.’s inflation rate probably jumped the most in at least 12 years in December as the economy shook off the recession and oil prices rose, economists say.

Consumer prices climbed 2.6 percent from a year earlier, compared with a 1.9 percent gain the previous month, according to the median forecast of 30 economists in a Bloomberg News survey. The 0.7 percentage-point jump would be the most since comparable records began in 1997. The Office for National Statistics will publish the data at 9.30 a.m. today in London.

The data would be the first since May showing inflation above the Bank of England’s 2 percent target, presenting a challenge to officials as they assess when to start raising interest rates from a record low. Gordon Brown’s spokesman said last week that the prime minister, who faces an election by June, is confident the economy has returned to growth.

“While the economy has been in recession the Bank of England hasn’t been focusing on inflation but it will become more of a concern,” Michael Saunders, chief economist for western Europe at Citigroup Inc, said in an interview. “I think they’ll hike rates in the second or third quarter.”

Saunders predicts the Bank of England will raise the benchmark interest rate to 1.5 percent by the end of the year. Officials makers have kept the rate at 0.5 percent since March. He says January data for inflation due next month will breach the government’s 3 percent upper limit, and it will reach 4 percent by the middle of the year.

Inflation, which troughed at 1.1 percent in September, has accelerated since then as energy costs increased and the economy recovered from the slump.

Producer Prices

Crude oil has doubled in the past 12 months, raising consumer gasoline costs. Producer prices jumped 0.5 percent in December, more than twice as much as the median forecast of economists in a survey by Bloomberg News.

The factory-gate data in part reflect the weakness of sterling. The pound has dropped by about a quarter in the past two years against a trade-weighted basket of currencies, raising the cost of imports for manufacturers.

Finance Minister Alistair Darling’s temporary 2.5 percentage-point reduction in sales tax in December 2008 to stimulate the economy will drop out of the annual comparison in the data for December 2009 and also raise the inflation rate, Saunders said.

For now, Bank of England officials say inflation will accelerate before dipping below the target later this year because of slack in the economy after the recession. Policy makers are showing few signs of unwinding emergency measures designed to fight deflation after they pledged to buy 200 billion pounds ($327 billion) of bonds. The bank will release new forecasts on Feb. 10.

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