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If Brookfield does make a bid, the CPR board of directors is expected to initiate a full-scale auction for the company by canvassing for other potential buyers. The most likely strategic buyer is Union Pacific Corp., the largest U.S. railway.

Australia's Macquarie Bank Ltd., a heavyweight in the world of infrastructure investments, has modelled a possible CPR transaction and is said to be interested in the company, according to investment bankers, although it has not formally made an approach.

Sources said Brookfield was working on a plan that would split the 120-year-old railway operator into two separate entities: an operating company that actually runs the trains, and a real estate company that holds the tracks and rail yards. CPR operates a 22,000-kilometre rail network that stretches from Montreal to Vancouver, and includes branches in the midwestern United States.

This buyout should bring to the surface other issues that will impact more than the delivery of freight in Canada.

More and more, the decisions that control Canadian resources, exports and imports coming into this country are being made by entities, primarily corporations outside of our borders.

All of this for the sake of development and corporate expansion, however within the turmoil or corporate takeovers, little is ever said about the impacts of expansion on the environment and local communities.

This latest CPR takeover is a classic example of how globalization requires Canada to feed the world its resources and to provide transportation networks that link Asia with the Eastern US.

In fact, a report released this past year provides forecasting for surface freight demand in Canada. It’s here that we can discover just how much Canada is really going to grow in the wake of a developing China. Of course our economy will truly fizzle if we don’t have freight infrastructure to meet export and import demands.

For example, increased world steel production, primarily in China, which will account for 60% of the increase in world steel production will result in 2000 to 2600 additional coal trains per year to be servicing west coast terminals by 2015.

Canada is the second largest producer of metallurgical coal required for making steel. When the world demands is their for resources, Canada seeks to be quick to deliver regardless of environmental impacts.

We have become trade dependent as world trade growth outpaces general economic growth as China is able to provide low-cost manufacturing and we have been eager to buy those low-cost goods, couple this with our own government increasing interests rates and allowing our dollar to rise means that our products produced here in Canada will not be able to compete, so our future will continue as consumers of products made elsewhere.

Transportation infrastructure throughout North America is growing in order to handle freight demands, but it appears that given the degree of growth we will not be able to keep up with demands.

The bottom line is that we will be using a lot of energy to ship and receive goods within this global marketplace whether it be by super tanker, truck, rail or air, which is a difficult pill to swallow when the people of Canada are trying to reduce harmful emissions and tackle global warming.

On one level, there seems to be no stopping the powerful forces of globalization.  Not only has the world just completed four years of the strongest global growth since the early 1970s, but in 2006, cross-border trade as a share of world GDP pierced the 30% threshold for the first time ever ---almost three times the portion prevailing during the last global boom over 30 years ago.

On another level, however, there seems to be a growing crack in the hull.

That’s because of a striking asymmetry in the benefits of globalization.  While living standards have improved in many segments of the developing world, a new set of pressures is bearing down on the rich countries of the developed world.  Most notably, an extraordinary squeeze on labor incomes has occurred in the industrial world -- an outcome that challenges the fundamental premises of the “win-win” models of globalization.

This past December, Stephen Roach of the financial services giant Morgan Stanley wrote about the wins achieved as a result of globalization , “The first win goes to low-wage workers in developing economies who enter the global economy -- initially through their involvement in export production and eventually as a new class of consumers.  The second win is presumed to benefit the rich nations of the developed world -- where consumers can expand their standard of living by buying low-cost, high-quality goods from poor countries and where workers can ultimately gain from being involved in the production of more sophisticated products exported to increasingly prosperous developing economies”.

It is a great theory -- but it’s not working as advertised.

The first win is hard to dispute.  China has led the way, with more than a quadrupling of its per capita GDP since the early 1990s.  India, Eastern and Central Europe are following.

In the Middle East, a 2.7% trend in the growth of per capita output in the decade ending 2007 would be nearly double the 1.5% pace of the previous 10 years.  Asia stands out from the rest of the pack, with a 6.2% average annual increase in per capita GDP estimated over the 1998 to 2007 period -- little changed from the vigorous 6.3% trend over the 1988-97 interval. 

Moreover, the first win hasn’t just gone to labor.  Four years of extraordinary returns for emerging market stocks and bonds underscore impressive returns to capital, as well.

The problem lies with the second win -- the supposed benefits accruing to the rich countries of the developed world.  And that’s where the going has gotten especially tough.  In recent years, the benefits of the second win have accrued primarily to the owners of capital at the expense of the providers of labor.

How does this hand play out in Canada?

Much of our organized labour is playing in the field of corporate investment through pension funds. Also, many such workers are part of the middle class driving the very consumer trends that are dictating corporate economies.
I like to call this “Imbedded Labour” or workers that are very different that the workers you would find filling those minimum wage positions. It’s the Imbedded Labour that has the voice within our economy, while that other labour doesn’t have bargaining power and has more in common with marginalized workers around the globe, which are in fact the majority of workers.

This has resulted in a serious loss of confidence in the second “win” of globalization -- in effect, shattering the illusion that trade liberalization would be the cure-all for the imbalance in the global economy.
In fact, we have learned once again, greed rules. Even Morgan Stanley suggests “that the pendulum has swung from the theoretical promises of globalization to the self-interest of individual countries -- in essence, a “localization.”

An era of localization will undoubtedly have some very different characteristics from those of the recent past.  The most obvious -- wages could go up and corporate profits could come under pressure. Moreover, localization could also spell heightened protectionism -- especially if the global economy slows and unemployment starts to rise in 2007, as anticipated.

But there’s another layer of “localization” that linked to neighborhoods and communities, and very little statistical or political analysis exists to understand this dynamic. When a government decides that it wants to slow development to bring about more of a sustainable economy less reliant on a global economy, we would still find hundreds of communities across Canada seeking to attract the next big employer, building industrial parks and trying to grow their own local economy through globalization.

Whether it’s dealing with poverty or climate change need to make a significant shift in how we develop our communities at a local level through “economic localization”.


Globalization vs. Localization?
By Don Elzer

Sometimes one has to wonder if our country isn’t more like a big service provider to a globalization network, rather that a confederation of communities that serves its people.

A private equity consortium led by Brookfield Asset Management Inc. is preparing a takeover offer for Canadian Pacific Railway Ltd. that, if successful, would represent one of the largest leveraged buyouts this country has seen, according to the Report on Business.

Sources said Brookfield, in partnership with Goldman Sachs & Co. and the Caisse de dépôt et placement du Québec, had expressed interest in a possible acquisition bid in April, but those advances were rebuffed. Instead, the board of the Calgary-based railway operator authorized a massive buyback of up to 10 per cent of its stock that some observers interpreted as an attempt to thwart a takeover, but by Wednesday trading had been halted on CPR stock and it appears as though takeover efforts have heated up.
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