Nexen sale to China approved...

[TimG]

Arent' there other investors who could buy in?

Other investors? Who exactly?

[TimG]

Protectionism is never a good thing. We're all connected, whether we like it or not. Borders are imaginary lines through the eyes of money.

When it comes to resources borders mean something because borders control who owns the resource. Canada owns the resource and Canada should seek to maximize the value they get for that resource. Canada cannot maximize that value if it blocks all foreign investment nor can it maximize that value if it simply gives the resources away to whoever asks with no conditions attached. Edited December 9, 2012 by TimG

[kward]

When it comes to resources borders mean something because borders control who owns the resource. Canada owns the resource and Canada should seek to maximize the value they get for that resource. Canada cannot maximize that value if it blocks all foreign investment nor can it maximize that value if it simply gives the resources away to whoever asks with no conditions attached.

No, land ownership controls who owns the resource. The best thing the government can do is to lift the designation of so-called "Crown" lands, and sell them off to the highest bidder. Then resources can be owned and controlled privately and they can in turn sell or lease their resource-rich land to the highest bidder - and the regional economy makes more money in the process; a lot more money than it otherwise would with Canada's top-down management style of "Crown" lands.

[TimG]

No, land ownership controls who owns the resource.

Nonsense. The right to extract non-renewable resources has always been separate from ownership of the land. More importantly, resource extraction requires the payment of royalties to the government that owns the resource. It makes no sense to simply give away non-renewable resource to private corporations. If they invest capital corporations are entitled to a profit but the ownership of the resource they exploit rests with the country where the resources reside.

The payment of royalties is an important part of the value that must be maximized which is why these royalties must be linked to the market price for the resource and government needs to prevent companies from using accounting tricks to reduce the royalties owed.

Edited December 9, 2012 by TimG

[Michael Hardner]

Other investors? Who exactly?

Well, that was my question to you exactly.

[TimG]

Well, that was my question to you exactly.

Canada is a tiny part of the global capital markets. If you think that Canada could finance these developments without foreign capital then you must make the case. I simply assume that it is not practical given how little global capital is Canadian.

[kward]

Nonsense. The right to extract non-renewable resources has always been separate from ownership of the land. More importantly, resource extraction requires the payment of royalties to the government that owns the resource. The payment of royalties is an important part of the value that must be maximized which is why these royalties must be linked to the market price for the resource and government needs to prevent companies from using accounting tricks to reduce the royalties owed.

The government receives and spends "royalties" into the economy more efficiently than a private citizen?

You know what can't be tricked away with fancy accounting? An actual physical, productive private-sector job. One whose proceeds get spent into the economy right away without having to pass through umpteen bureaucratic channels, and pay an endless amount of middlemen before we all derive some kind of benefit in the private sector...y'know, where real economic growth takes place.

[TimG]

The government receives and spends "royalties" into the economy more efficiently than a private citizen?

The government pays for essential services. It needs money. Royalties are a way to get that money that reduce the tax burden elsewhere in the economy. This leaves more money in the hands of Canadians and Canadian businesses.

An actual physical, productive private-sector job. One whose proceeds get spent into the economy right away without having to pass through umpteen bureaucratic channels, and pay an endless amount of middlemen before we all derive some kind of benefit in the private sector...y'know, where real economic growth takes place.

Except if a company digs up a resource and ships it to another country for processing then those physical, productive private-sector jobs are benefiting another country. That is why the wealth needs to be captured when the resource comes out of the ground.

[kward]

The government pays for essential services. It needs money. Royalties are a way to get that money that reduce the tax burden elsewhere in the economy. This leaves more money in the hands of Canadians and Canadian businesses.

Except if a company digs up a resource and ships it to another country for processing then those physical, productive private-sector jobs are benefiting another country. That is why the wealth needs to be captured when the resource comes out of the ground.

Royalties is not some magical parcel of money the government receives. It's the same money that would be paid to a private land owner, and to private individuals who do the work extracting or helping to extract the resource. Filtering the money through an expensive government apparatus uses up a good chunk of the money earned from the exploited resource BEFORE it reaches all of us.

You know what really reduces the tax burden? Getting rid of that royalty filtering government apparatus and the hefty salaries, benefits, and pensions that go with it.

And what about that digging and shipping? Where are those jobs created? And what happens when those paid to dig and ship in turn spend their wages into the economy? Does that in turn grow more jobs, and create new demand for production and the productive jobs that go with it?

[Michael Hardner]

Canada is a tiny part of the global capital markets. If you think that Canada could finance these developments without foreign capital then you must make the case. I simply assume that it is not practical given how little global capital is Canadian.

But are there not other investors other than China?

[TimG]

You know what really reduces the tax burden? Getting rid of that royalty filtering government apparatus and the hefty salaries, benefits, and pensions that go with it.

Except that is a general criticism of government - not a specific criticism of royalties. Even if you assume that the scope of government is reduced as much as possible it is still better for the economy to collect some taxes as royalties instead raising taxes on everyone. There is no scenario where raising general taxes on people is better than raising royalties.

And what about that digging and shipping? Where are those jobs created? And what happens when those paid to dig and ship in turn spend their wages into the economy?

Sure. But that that does not change the fact that much of the value of the resource will benefit other countries if the government did nothing. Royalties are a good way to capture that value and ensure that Canada benefits - not other countries.

[TimG]

But are there not other investors other than China?

There are other things to consider. Canadian businesses want to invest in China. Convincing the Chinese to allow that requires quid pro quo from Canada.

[dre]

Canada is a tiny part of the global capital markets. If you think that Canada could finance these developments without foreign capital then you must make the case. I simply assume that it is not practical given how little global capital is Canadian.

I dont see any big rush... oil will cost twice as much in 10 years than it does now, and the pace at which we are developing domestic oil resources seems decent.

And if we DO want outside investment then theres western oil companies out there. It seems like selling them to a communist government might not be such a good idea.

[TimG]

And if we DO want outside investment then theres western oil companies out there. It seems like selling them to a communist government might not be such a good idea.

The original question was 'why do we need foreign investment'. You are changing the question to 'why do we need Chinese investment' and I am inclined to agree with you - with one caveat: Canadian companies want to get into China. We should allow Chinese investment if and only if it gives us leverage to get the Chinese to allow Canadian firms into China. Edited December 9, 2012 by TimG

[kward]

Except that is a general criticism of government - not a specific criticism of royalties. Even if you assume that the scope of government is reduced as much as possible it is still better for the economy to collect some taxes as royalties instead raising taxes on everyone. There is no scenario where raising general taxes on people is better than raising royalties.

Sure. But that that does not change the fact that much of the value of the resource will benefit other countries if the government did nothing. Royalties are a good way to capture that value and ensure that Canada benefits - not other countries.

Raising taxes? Raising royalties?

Royalties is just another word used to describe money earned off resources. I'm saying the most direct "royalty" available is money spent into the economy without passing through an expensive bureaucracy first. That is done when those employed in exploiting those resources spend their wages into the economy. And they'll have more to spend when you ditch the income tax altogether.

Value is an arbitrary thing, it is one thing to one party, and something else entirely to another.

Royalties that capture value are ways in which people in Canada can derive a monetary benefit from having a resource extracted on Canadian owned land. The land owner makes money, and that circulates through the economy, the people employed there also earn money and put that into the economy. The people who use the resource for fuel or some other means, spend money into the economy, and it circulates around. The government does nothing to help any of this process...the only thing they do is to remove some of this circulating money from the equation, they do nothing to add or increase value.

[Topaz]

Here's a question....how is China going to transport the oil to the coast, if B.C. and the First Nations say no pipeline? Is this where China can sue Canada for billions because they are stop from transporting?

[Michael Hardner]

There are other things to consider. Canadian businesses want to invest in China. Convincing the Chinese to allow that requires quid pro quo from Canada.

That's a lot more clear - thank you. How about some more specifics about how that helps Canada ?

[TimG]

Royalties is just another word used to describe money earned off resources.

A royalty is a tax charged by the governments who own non-renewable resources for the privilege of exploiting these resources. As with all taxes charging too much will ultimately reduce revenues but charging too little means the public does not get a fair return on the resource they own.

[TimG]

Here's a question....how is China going to transport the oil to the coast, if B.C. and the First Nations say no pipeline? Is this where China can sue Canada for billions because they are stop from transporting?

First, the SCC of Canada has made it clear that First Nations cannot veto resource development. So it is necessary to consult with them, it is necessary to accommodate them when possible, but it is not necessary to obtain their consent. That said, if public opinion in BC is against the pipeline then politicians wishing to be elected will likely look for other alternatives.

Second, oil is a fungible commodity - if it can't get shipped to the west coast it will be shipped to the gulf or the great lakes. It can also be put on trains that follow tracks that are already built. The main disadvantage is it costs more to ship these other routes which means there will be less oil revenue left over for social programs.

Edited December 9, 2012 by TimG

[TimG]

That's a lot more clear - thank you. How about some more specifics about how that helps Canada ?

Here is an example of Canadian investment in China being held up by the Chinese government:

In the same vein, it won’t have a legal bearing on current efforts by Canadian companies—such as Manulife and Scotiabank—to have their investments in China approved. Scotiabank’s purchase of a 19.9% stake in the Bank of Guangzhou, which is run by the Chinese government, for about $719 million, has been held up for a year.

http://www.canadianbusiness.com/article/102020--canada-s-fipa-treaty-with-china-and-what-it-means

[Michael Hardner]

How about going the other way? We would never be allowed to purchase a company in China.

http://www.canadianb...d-what-it-means

See TimG's Link above -> Scotiabank is doing this.

[wyly]

The original question was 'why do we need foreign investment'. You are changing the question to 'why do we need Chinese investment' and I am inclined to agree with you - with one caveat: Canadian companies want to get into China. We should allow Chinese investment if and only if it gives us leverage to get the Chinese to allow Canadian firms into China.

it's the way they(the Chinese) play the game...we accept the rules they play by, they're not forcing us to do it...

[TimG]

it's the way they(the Chinese) play the game...we accept the rules they play by, they're not forcing us to do it

What leverage could we possibly gain by refusing all deals?

[Topaz]

Out of curiosity, I like to see the list of shareholders, just to make sure there's no "conflict of interest".

[Rocky Road]

The fact is the USA is broke and China is itching to trade its reserves of Us dollars before the buffoons in office down there destroy their value of their currency.