The branch-plant economy is breaking in Canada. Now what?

Arthur Lam is a founding partner of Nexus Strategic Consultants. He was a former senior adviser in the federal trade and industry ministers’ offices.

Late last month, Cleveland-Cliffs Inc. began laying off up to 500 workers at Stelco’s Hamilton and Nanticoke plants, blaming U.S. tariffs and weak demand, even as the Ohio-based parent posted its strongest quarter in three years, with US$5.61-billion in revenue.

Ottawa alleges that Cleveland-Cliffs made those cuts in breach of the binding commitments it signed under the Investment Canada Act when it bought Stelco in 2024, promising to keep Canadians employed and maintain production to 2029. As recently as this Monday, the company reiterated its belief that it is complying with its promises to the federal government.

Stellantis NV is also shifting production out of Canada, a decision that Ottawa asserts is in violation of the company’s investment agreement with the federal government, under which it received more than $220-million. It is relocating production of the next-generation Jeep Compass from Brampton, Ont., to Belvidere, Ill., and selling the Ontario plant. Late last year, the Netherlands-based company denied that it had breached its contract.

Meanwhile, Stellantis paid almost €15-billion in dividends to shareholders between 2022 and 2025, the same period in which it received Canadian public support. That raises a fair question: What did Canadian taxpayers get in return for their investment, and why don’t the commitments attached to it seem to be enforceable?

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Stelco and Stellantis are just two examples of multinationals accused of breaking their Canadian commitments to pursue their own financial interests. This trend undermines a central tenet of the federal government’s approach to jobs and economic development: branch-plant economics, where Canada hosts factories and offices owned by foreign-headquartered corporations.

For more than three decades, the federal government has relied on two laissez-faire mantras to safeguard Canadian jobs amid globalization and foreign acquisitions of Canadian companies. First, multinationals can buy Canadian companies and assets, but under the Investment Canada Act approval process, they must keep jobs, headquarters and production in Canada for a set period.

Second, because the government assumed Canadian companies struggle to stay globally competitive, Ottawa decided it was politically expedient to subsidize multinationals to keep supply chains in Canada and preserve Canadian jobs.

In what Prime Minister Carney has called a “rupture,” countries have pulled back from globalization and rapidly reshored their core technologies and production. Companies take their cue from political leaders and the industrial incentives of their home countries, including government investments and tariffs. Cleveland-Cliffs, in many ways, is simply acting in its financial self-interest: optimizing its U.S. plants and closing almost 25 per cent of its Canadian operation.

Canadians should be upset not only that these multinationals took Canadians’ hard-earned taxpayer dollars and enriched their foreign shareholders, but that governments encouraged this unsustainable model of economic development.

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By giving in to foreign ownership of prized Canadian assets – from steel, nickel and copper to semiconductor designers and manufacturers to our robotics and aerospace companies – we degraded our productivity and made ourselves economically vulnerable.

Last Thursday, Industry Minister Mélanie Joly gave Cleveland-Cliffs 15 days to reverse the Stelco layoffs or face legal action, including monetary penalties and a possible forced divestiture under the Investment Canada Act. The minister’s action is necessary, but the larger problem is that we are not recognizing what’s at the core of foreign ownership: Foreign owners must answer first to their own shareholders and governments, and their interests are not always aligned with Canadians’.

We need to build resilient industries that safeguard Canadian jobs, prosperity and trade leverage at home. Yet, the government continues to co-invest in multinational projects and allow unfettered foreign buyouts of Canadian companies, hoping the storm that is U.S. President Donald Trump will simply blow over. Meanwhile, newly laid-off Stelco workers struggle to pay their bills while watching their specialized skills atrophy in real time, with no certain recall date.

One solution is to direct public dollars – federal and provincial – toward Canadian-owned or controlled industries and companies. This is straight forward in principle, but governments hesitate because it risks upsetting established interests and trading partners. Government support, such as procurement, subsidies and patient capital, should go to firms that commit to lasting jobs, ownership and commercial benefits in Canada.

We should not subsidize companies that put foreign shareholders and governments ahead of their commitments to Canadian communities, businesses and workers. Canadian-owned companies tend to have a deeper stake in how this country turns out, and our industrial policy should reflect that.

The reshoring trend is here to stay, in Canada and elsewhere. Now is the time to rethink how we support and build Canadian businesses so they can succeed here and globally. However, as long as our federal and provincial governments rely on courting foreign buyers of domestic companies and paying them to host jobs, Canadians will continue to depend on other countries for the privilege of earning a living in Canada.