1 For an analysis of statism in Canada see Laux, Jeanne Kirk, “Global Interdependence and State Intervention,” in Tomlin, Brian (ed.), Canada's Foreign Policy: Analysis and Trends (Toronto: Methuen, 1978), 110–35Google Scholar.

2 Laux, Jeanne Kirk and Molot, Maureen Appel, “Multinational Corporations and Economic Nationalism: Conflict Over Resource Development in Canada,” World Development 6 (1978), 837–49CrossRefGoogle Scholar.

3 We have addressed some of these questions in a preliminary way in a study of the Potash Corporation of Saskatchewan done for the C. D. Howe Research Institute. Laux, Jeanne Kirk and Molot, Maureen Appel, “Natural Resources in U.S.-Canada Relations: The Potash Case” in Hero, Alfred O. Jr. and Beigie, Carl (eds.), Natural Resources in U.S.-Canada Relations, Vol. II (Boulder: Westview Press, forthcoming 1979)Google Scholar.

4 Energy, Mines and Resources Canada, Canadian Minerals Yearbook, 1974, 1975 and 1976.

5 Saskatchewan, Bureau of Statistics, Saskatchewan Economic Review, 1977: Saskatchewan, Department of Mineral Resources, Potash: Challenge for Development, 1976.

6 Shaffner, Richard, New Risks in Resource Development: The Potash Case (Montreal: C. D. Howe Research Institute, 1976), 9Google Scholar.

7 Saskatchewan, Debates and Proceedings, 18th Legislature, 1st Session, 8. See Laux and Molot, “Multinational Corporations and Economic Nationalism,” for a detailed discussion of the nationalization decision.

8 Ottawa Citizen, November 14, 1975.

9 Koepke, W. E., Structure, Behaviour and Performance of the World Potash Industry (Department of Energy, Mines and Resources, Ottawa, Mineral Bulletin MR 139, 1973), 27–28Google Scholar.

10 Richards, John, “Potash: the road to takeover,” The Commonwealth, Vol. 36, No. 10, May 19, 1976, 8Google Scholar.

11 See Boyd, B. W., “Potash,” in Energy, Mines and Resouces, Canadian Minerals Yearbook 1976, No. 38, Table 2, p. 4Google Scholar (prerelease data) for the output capacity of the potash mines. The lineage of the companies is often ambiguous. We refer to Hudson Bay Mining and Smelting Inc., owner of the Sylvite Mine, as a Canadian company, and so it presented itself, but a controlling 38.5 per cent interest was held by Anmercosa, the giant South African conglomerate, through its North American subholding company,

12 Koepke, Structure, Behaviour and Performance, 40. See also n. 84 below.

13 Almost all of Central Canada Potash's output is purchased by the regional farm cooperatives which own CF Industries, Inc., of Chicago. CF Industries Inc. owns 49 per cent of CCP. The remaining 51 per cent is owned by Noranda Mines Ltd.

14 Financial Times, August 28, 1972.

15 Globe and Mail, November 19, 1976.

16 Richard Shaffner, New Risks in Resource Development, 15.

17 Financial Post, February 15, 1975.

18 The foregoing paragraph in based on Shaffner, New Risks in Resource Development, 17–18, Wall Street Journal, September 22, 1975, and Financial Post, October 11, 1975.

19 The Potash Corporation of Saskatchewan, PCS, purchased the assets of the Vada Mine (owned by Duval Corporation of Texas, a subsidiary of Pennzoil) in November 1976, the Sylvite Mine (owned by Hudsons Bay Mining and Smelting, ultimately controlled from South Africa) in April 1977 and the Alwinsal Mine (a joint venture owned by German and French interests) in November 1977. In January 1978 PCS purchased control of the AMAX potash reserves and 60 per cent of the Allan mine. PCS and Texasgulf were unable to agree on an acceptable acquisition price for the latter's 40 per cent of the Allan facility. By the end of April 1978, the Potash Corporation of Saskatchewan had taken over five potash mines, and, as a result, controlled slightly over 40 per cent of the industry.

20 In the early 1970's some 70 per cent of potash consumed in the United States came from Saskatchewan mines, Canadian Mineral Yearbook, 1974, “Potash,” 5.

21 Lipson, Charles H., “Corporate Preferences and Public Policies, Foreign Aid Sanctions and Investment Protection,” World Politics 28 (1976), 398, 413CrossRefGoogle Scholar.

22 John H. Ashworth “Inside the Labyrinth: The Treatment of Canadian Raw Materials Within the U.S. Decision-Making Process,” unpublished paper, 30.

23 The aide-memoire is noted in International Canada, December 1975,291 and March 1976, 93–94.

24 New York Times, December 16, 1975.

25 Speech to the Men's Canadian Club of Ottawa, March 23,1976, USIS, Ottawa 76–13.

26 Burton, John S., “International Aspects of Saskatchewan Potash,” A Presentation to the Regina Branch,Canadian Institute of International Affairs,May 18, 1977, 14Google Scholar.

27 Ottawa Citizen, May 27, 1976.

28 Globe and Mail, July 31, 1976. The arrangement for potash imports from the Soviet Union had in fact been made by a private company well before direct state intervention in the Saskatchewan potash industry became a possibility 29 November 26, 1975. Cited in Ashworth, “Inside the Labyrinth,” 34.

29 November 26, 1975. Cited in Ashworth, “Inside the Labyrinth,” 34.

30 Ottawa Journal, December 17, 1975.

31 Ibid., March 12, 1976.

32 Globe and Mail, April 1, 1976.

33 New York Times, December 1, 1975.

34 Ashworth, “Inside the Labyrinth,” 32–33.

35 Care was taken in drafting Saskatchewan's potash expropriation legislation and in preparing associated public statements to avoid conflicts with international law. Among the points considered were nondiscrimination in the purchase of companies, adequacy and promptness of payment. Saskatchewan officials involved with the potash question also discussed these international law problems with a Washington, DC, law firm. The government retained the firm for advice and assistance in monitoring developments in the United States during 1976. Burton, “International Aspects of Saskatchewan Potash,” 5–6, 12.

36 The last publicized reference to the takeover policy would seem to be President Gerald Ford's conversations with Progressive Conservative Leader Joe Clark. See the Ottawa Journal, June 29, 1976.

37 Lipson, “Corporate Preferences and Public Policies,” 401–11. Survey data and personal interview data support Lipson's assertion.

38 This is not to underestimate the role of the American government in pushing for proper compensation. See Litvak, I. A. and Maule, C., “Nationalisation in the Caribbean Bauxite Industry,” International Affairs 51 (1975), 43–59CrossRefGoogle Scholar. Saskatchewan officials were well aware of compensation problems and consulted with their Washington counsel on the question. Interviews, Regina, November 1977.

39 Lipson, “Corporate Preferences and Public Policies,” 403–12.

40 Ashworth, “Inside the Labyrinth,” 32.

41 In 1969 anti-dumping proceedings were launched against potash producers in Canada, France and West Germany after a ruling by the US Treasury's customs bureau. In Congress, Senator Montoya (Dem. New Mexico) put forward a bill to impose annual quotas on potash imports—his state, the major location of US potash mines, suffered high unemployment at a time of slump (Financial Post, October 4, 1969). No concrete actions followed these initiatives. See Koepke, Structure, Behaviour and Performance, 40 and Shaffner, New Risks in Resource Development, 13, for further analysis.

42 See the interpretation of the Department of Justice's antitrust investigation in the Financial Post, February 15, 1975 and a detailed report on the indictment by the Chicago Grand Jury in the same paper on July 24, 1976.

43 Ottawa Journal, March 12, 1976, and Financial Post, June 21, 1976.

44 Financial Post, April 3, 1976.

45 Globe and Mail, April 1, 1976.

46 Ibid., October 9, 1976.

47 Quoted by N. Hills, Ottawa Citizen, March 29, 1976.

48 Mikesell, Raymond F., “Conflict in Foreign-Investor-Host Country Relations: A Preliminary Analysis,” in Mikesell, R. F.(ed.), Foreign Investment in the Petroleum and Minerals Industries (Baltimore: Johns Hopkins University Press, 1971), 32Google Scholar.

49 Fred Lazar, “The Real Crisis in Foreign Debt,” Globe and Mail, October 21. 1977.

50 Financial Times, December 8, 1975.

51 Globe and Mail, July 28, 1976.

52 Ibid., August 18, 1976.

53 Ibid., August 12, 1976 and October 20, 1976. The Financial Post (June 4, 1977) published the announcement of sale. By early 1977, of course, Saskatchewan had proved its intent to compensate companies generously and the Quebec elections, bringing the separatist Parti quebecois to power, contributed to making Saskatchewan's investment climate appear relatively favourable. See interviews with investors in the Financial Post for February 5, 1977, “Wall Street Reply.”.

54 Letter from R. W. Neal, president of the Canadian Fertilizer Institute, to the deputy minister of Agriculture Canada, dated December 4, 1975 (as quoted in Mr. Neal's talk to the Agricultural Outlook Conference, Ottawa, December 6, 1976 [author's copy]). See also “The Real Issues in the Saskatchewan Government's Takeover of the Potash Industry,” an address by John L. Carpenter, president of the Canadian Potash Producers Association, to the Regina Chamber of Commerce, December 3, 1975, and Carpenter's “Notes for Address to the 105th AIME Annual Meeting,” February 25, 1976.

55 Financial Post, February 14, 1976, and Financial Times, February 2, 1976. The survey by Contemporary Research (Toronto) showed 52 per cent opposed to takeover; 26 per cent nonresponse; 22 per cent in favour.

56 Financial Post, January 24, 1976.

57 Financial Post, August 21, 1976. Head office in Houston grumbled somewhat in the 1976 Annual Report that payment’ ‘was substantially less than Pennzoil's estimate of the replacement cost“(30) but another US parent company reported that “the province acquired its first mine at terms considered favourable by the potash industry.” Esmark 1976 Annual Report, 12.

58 Interview with PCS official. For additional information on how PCS decided which mines it would purchase see the Laux and Molot potash study in Hero and Beigie, (eds.), Natural Resources in U.S.-Canada Relations..

59 Smith, D. N. and Wells, L. T. Jr. “Mineral Agreements in Developing Countries: Structures and Substance,” American Journal of International Law 69 (1975), 572CrossRefGoogle Scholar.

60 Ibid., 590.

61 Moran, T., “New Deal or Raw Deal in Raw Materials,” Foreign Policy 5 (1971–1972), 121Google Scholar.

62 Koepke, Structure, Behaviour and Performance, 28. The exception is the solution mining technique used by Kalium Chemicals Ltd.'s Belle Plaine Mine. This was one of the mines PCS did not evaluate for possible purchase.

63 It was not until October 1977 that one of the three companies exploring in New Brunswick—Potash Corporation of America—signed an agreement to develop a $106 million potash mine near Sussex, NB. Reportedly the provincial government pledged not to nationalize the mine! See the Globe and Mail, October 18, 1977.

64 The intensity of industry-government conflict over potash development and the ultimate recourse to nationalization contrast with the evolution of conflict over petroleum or uranium development in the same province in the same time period. The government retreated in its conflict with the oil industry while in the uranium industry, after royalty and taxation disagreements provoked company refusals to proceed with new investment, accommodation was reached and some twenty joint private-state ventures were created.

65 Content of industry annual reports permits us to summarize the articulated perceptions of top management. We were able to obtain the Annual Reports (1976) for 10 of the 14 corporations with mining facilities in Saskatchewan. We could not obtain reports for three overseas companies—Rio Tinto Zinc (UK); Entreprise Minére et Chimique (France) and Basf Aktiengesellschaft (Germany)—or for the minority US owner of Central Potash—C.F. Industries Inc.

66 1976 Annual Report, 6.

67 1976 Annual Report, 10.

68 Ideal Basic Industries, 1976 Annual Report, 13.

69 1976 Annual Report, 2.

70 Ideal Basic Industries, owner of the Potash Corporation of America, is the outstanding exception. Originally a potash mining company, it merged with Ideal Cement Company in 1967 to form a two-division corporation with operations limited to the United States and Canada. Potash remains important as well to IMC, the province's largest producer, which did not volunteer, and was not invited by the government, to undergo evaluation for eventual sale.

71 1976 Annual Report, 2.

72 1976 Annual Report, 3.

73 1976 Annual Report, 2–3.

74 Reporting procedures vary, but here are some sample figures. Cominco: potash accounted for 3 percent of 1976 sales and pre-tax earning, a loss for post-tax earning. Texasgulf: 4 percent of 1976 sales; 2 percent of 1975 sales; AMAX: 5 percentof 1976 sales and 7 percent of pre-tax earnings; Pennzoil (Duval Corporation): 4.2 percent of gross revenues in 1975; IMC 7 per cent of 1976 sales and 7 per cent of post-tax income. As noted above, Ideal Basic Industries is an exception—potash accounted for 18 per cent of 1976 sales and operating revenues although only 5.3 per cent of potash profits came from Saskatchewan operations (the rest from New Mexico operations.)

75 Financial Times, November 17, 1975.

76 Burton, “International Aspects of Saskatchewan Potash,” 8.

77 Globe and Mail, April 1, 1976.

78 Department of External Affairs, Communique No. 25, “Potash: Text of Canadian Note to the U.S. Embassy, March 23, 1976.” Reprinted in part in International Canada, March 1976, 93–94.

79 IT“surprised” by the extent of concern in France over Saskatchewan nationalization intentions while Minister of Energy, Mines, and Resources Allistair Gillespie claimed, after talking with EEC President Ortoli, that the Saskatchewan action “has damaged Canada's reputation abroad and frightened off foreign investors…,” Globe and Mail, February 26, 1976.

80 Speech to the Men's Canadian Club of Ottawa, March 23, 1976, 3.

81 As reported in the New York Times, November 19, 1975.

82 Richards, “Potash: the road to takeover,” 8.

83 Testimony to this effect is quoted extensively in the case of Central Canada Potash Co. Ltd. v. Saskatchewan (1975), 5 W.W.R. 193, at 231–237, 259–60, 278–80.

84 The Potash Conservation Regulations were supported by those multinationals with production facilities in Saskatchewan and New Mexico and opposed by those with Canadian operations only.

85 For a detailed discussion of changing government attitudes toward the resource sector and areas of conflict flowing therefrom, see Burns, R. M., Conflict and Its Resolution in the Administration of Mineral Resources in Canada (Kingston: Queen's University, Institute of Intergovernmental Relations, 1975)Google Scholar.

86 It is more common for the federal government to “intervene” in cases in which there is a constitutional issue at stake than to participate as a co-plaintiff, that is, a party to the original action. However, the Saskatchewan rules of court procedure permit only the provincial government to intervene. Since it was provincial and not federal legislation that was being challenged, the federal government decided, on the advice of its Saskatchewan counsel, to become a co-plaintiff. The other alternative was for Ottawa to apply to the Saskatchewan court as an interested party to be added to the suit against the Saskatchewan government. Although the case was an important one, Ottawa's participation with CCP as a co-plaintiff should be interpreted in procedural, rather than substantive terms.

87 This proceeding focussed on one section of the Saskatchewan Proceedings Against the Crown Act which provided that taxes paid the province under a law subsequently found to be ultra vires could not be recovered in an action against the province. The federal government argued that this section undermined a fundamental constitutional principle, and, if it were upheld, would enable provinces to pass unconstitutional legislation with financial impunity. In October 1976, the Supreme Court of Canada found the challenged section ultra vires, AMAX Potash Ltd. v. Saskatchewan (1977) 2 SCR 576. The federal government is not expected to join the main action. The companies, uncertain of the outcome of this case, have been moving slowly on it.

88 For a discussion of this issue see Lederman, W. R., “The Constitution: A Basis for Bargaining” in Scott, Anthony (ed.), Natural Resource Revenues: A Test of Federalism, (Vancouver: University of British Columbia Press, 1975), 52–60Google Scholar.

89 For arguments presented by both sides see Central Canada Potash Co. Ltd. v. Saskatchewan (1978), 23 N.R. 481.

90 Canadian Industrial Gas & Oil Ltd. v. Saskatchewan (1978) 2 S.C.R. 545.

91 Quoted in “Remarks by Finance Minister Donald S. Macdonald to the Saskatchewan Board of Trade, Sheraton Cavalier Hotel, Saskatoon,” December 5, 1975, 2.

92 Shaffner, New Risks in Resource Development, 35–36.

93 “Remarks to the Saskatoon Board of Trade,” 4. See also Globe and Mail, February 26,1976, for a report on Energy, Mines and Resources Minister Gillespie's speech to the Mining Association of Canada expressing similar fears.

94 Stevenson, Garth, “The Process of Making Mineral Resource Policy in Canada,” in Hero, and Beigie, (eds.), Natural Resources in U.S.-Canada Relations, Vol. 1 (Boulder: Westview Press, forthcoming 1979)Google Scholar

95 Litvak and Maule, “Nationalization in the Caribbean Bauxite Industry.”.

96 Macdonald, “Remarks to the Saskatoon Board of Trade,” 1–2.

97 “No Lands or Property belonging to Canada or any Province shall be liable to Taxation.”.

98 Globe and Mail, April 7, 1976.

99 Perry, David B., “The Federal-Provincial Fiscal Arrangements Introduced in 1977,” Canadian Tax Journal 25 (July-August 1977), 430Google Scholar.

100 Ibid., 439, Table 6.