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Do Investment Agreements Necessarily Cause Offshoring? The Canada-Peru Case

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  • Stephanie Houle

Abstract

This paper studies firm offshoring behaviour following the Canada-Peru Foreign Investment Protection Agreement (FIPA) enactment in 2007. This is achieved by using confidential Statistics Canada firm tax filing microdata merged with raw firm-level import microdata. While in the aggregate data, there is a large increase in Foreign Direct Investment (FDI) by Canadian firms and a change in the composition of Canadian firm imports from Peru from raw unprocessed ore to manufactured metals, the microdata show that the change is not simply offshoring by individual firms. FDI into Peru was in mining as opposed to manufacturing. Moreover, firms that increased their Peru investment did not reduce their Canadian employment, nor were they the same firms with large increases in imports. Hence, these findings in the microdata show that the large increase in investment to Peru was not associated with offshoring of Canadian firms.

Suggested Citation

  • Stephanie Houle, 2018. "Do Investment Agreements Necessarily Cause Offshoring? The Canada-Peru Case," Department of Economics Working Papers 2018-08, McMaster University.
    • Handle: RePEc:mcm:deptwp:2018-08
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    File URL: http://socialsciences.mcmaster.ca/econ/rsrch/papers/archive/2018-08.pdf
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    References listed on IDEAS

    as
    1. John Baldwin & Wulong Gu, 2003. "Export-market participation and productivity performance in Canadian manufacturing," Canadian Journal of Economics, Canadian Economics Association, vol. 36(3), pages 634-657, August.
    2. Antrà s, Pol & Yeaple, Stephen R., 2014. "Multinational Firms and the Structure of International Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 55-130, Elsevier.
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    More about this item

    Keywords

    Investment Agreements; Multinational Firms; Offshoring; Foreign Direct Investment;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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