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Commentary: THE TASK FORCE REPORT ON FOREIGN OWNERSHIP A. E. SAFARIAN The Report of the Task Force on the Structure of Canadian Industry was completed on January 12, 1968 and tabled in the House of Commons on February 15. Attention in the first instance, inevitably , was concentrated on the 20 pages of fairly general policy proposals. Before the other 400 pages of fairly specific analysis received much consideration, the dramatic issues of the past few months intervened, or restricted such consideration to largely political terms. In this paper I want to direct attention to this underlying analysis. My thesis is straightforward the analysis suggested a policy approach which attempts to do three things: first, to maximize the net economic benefits; second, to minimize certain political costs; and third, to consider ways and means of improving the Canadian capacity - both public and private - to undertake more of the future Canadian ventures. The analysis also leads away from other approaches to policy, such as buying back foreign-owned enterprises, and also away from limitations on the inflow of capital. The Report is as significant for what it did not recommend as for what it did recommend by way of policy. Let me say a few words first on the organization of the Task Force. Our terms of reference suggested we consider the structure of Canadian industry with special reference to the effects of foreign ownership, including both political and economic effects. Appointments to the Task Force were made by a Ministerial Committee under the chairmanship of the Hon. Mr. Walter Gordon and further consisting of the Hon. Mr. Sharp, the Hon. Mr. Marchand, the Hon. Mr. Teillet, and the Hon. Mr. Turner. Eight academic economists were appointed by this committee . There was also a Committee of Senior Officials which acted in a consultative role with the Task Force. It should be emphasized that the 50 Task Force was given complete freedom to report what it wished, and that none of the Ministers or officials need accept any responsibility for anything in the Report. As to our actual procedures, these were conditioned by the fact that the Report was completed in just under one year. In the circumstances , it was necessary to rely heavily on data and studies, both private and public, which had already been completed. The members of the Task Force and a number of research associates undertook a series of short-term studies and background papers, which they are free to publish independently subject only to the necessary constraint of confidentiality of material. In view of the limitation of time involved and the complexity of the topic, no one should be surprised that we recommended that more research was necessary on some topics. The early parts of the Report consider possible benefits and costs, when examining the multinational corporation in the context of national welfare. I shall not deal with this section, which is simply a framework for discussion, a set of hypotheses, rather than actual empirical or theoretical evidence - as is made clear in the Report. It is a difficult technical exercise to measure at the macro level the impact on economic growth of the inflow of capital and technology. The available studies suggested a significant positive net impact, but also suggested Canada was not maximizing that impact. The extent of net benefits depends on several factors. It depends on the extent to which competition diffuses the impact of direct investment in general productivity improvement and price decreases, rather than in extended monopoly profits. The extent of net benefits depends also on the effects of public policies on the efficient organization of production , on the general orientation of policy to growth, and on the extent to which the recipient country collects its appropriate share of tax revenue from firms. It is a tricky, but not impossible, task to establish the a'ccretion of capital to Canada from foreign investment and the associated outpayments to service that capital. The much more difficult task is to measure the extent to which the broader developmental benefits which Revue d'etudes canadiennes go with capital accrued to Canada rather than abroad, or were simply dissipated in a relatively inefficient structure. of secondary manufacturing...

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