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Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick

Author

Listed:
  • Philippe Bergevin

    (C.D. Howe Institute)

  • Daniel Schwanen

    (C.D. Howe Institute)

Abstract

During the past 30 years, Canada’s share of world foreign direct investment (FDI) has been subject to a secular decline. Further, according to various measures of openness to foreign investments, Canada does not rank favourably against many of its peers. One of the culprits is Canada’s foreign investment review process, imposed pursuant to the Investment Canada Act. Before any foreign investment over a certain threshold is approved, Canada imposes a test of its “net benefit to Canada,” including such things as its potential effect on Canadian employment, exports, and productivity. The current test is highly subjective and unpredictable, and does not necessarily cover many situations where Canada’s interests might be involved beyond the calculation of a “net benefit.” Furthermore, the test might be detrimental to the economy’s long-run growth. This Commentary recommends scrapping the current test and replacing it with a national interest test.

Suggested Citation

  • Philippe Bergevin & Daniel Schwanen, 2011. "Reforming the Investment Canada Act: Walk More Softly, Carry a Bigger Stick," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 337, December.
    • Handle: RePEc:cdh:commen:337
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    File URL: https://www.cdhowe.org/reforming-the-investment-canada-act-walk-more-softly-carry-a-bigger-stick/15896
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    Citations

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    Cited by:

    1. Ake Blomqvist & Colin Busby, 2012. "Better Value for Money in Healthcare: European Lessons for Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 339, January.
    2. Daniel Schwanen, 2018. "Foreign Direct Investment in Canada – The Case for Further Openness and Transparency," e-briefs 280, C.D. Howe Institute.
    3. Christopher Ragan, 2012. "Financial Stability: The Next Frontier for Canadian Monetary Policy," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 338, January.
    4. A. E. Safarian, 2015. "Simplifying the Rule Book: a Proposal to Reform and Clarify Canada’s Policy on Inward Foreign Direct Investment," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 425, May.
    5. David R. Percy, 2012. "Resolving Water-use Conflicts: Insights from the Prairie Experience for the MacKenzie River Basin," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 341, February.
    6. Adam Aptowitzer & Benjamin Dachis, 2012. "At the Crossroads: New Ideas for Charity Finance in Canada," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 343, March.

    More about this item

    Keywords

    International Economic Policy; foreign direct investment (FDI); Investment Canada Act;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General

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