Canada has a good track record of attracting FDI – but this could change if its US neighbour carries out protectionist threats, says Gregg Wassmansdorf.

Speaking to the Washington Press Club in March 1969, the then Canadian prime minister, Pierre Trudeau, described how challenging it can be for Canada to have close ties and physical proximity to the US. “Living next to [the US] is in some ways like sleeping with an elephant,” he said. “No matter how friendly or even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt.”

Nearly 50 years later, his son, current Canadian prime minister Justin Trudeau, is challenged with plenty of 'twitching and grunting' south of the border. Renegotiation of the North American Free Trade Agreement (Nafta) is in full swing. And while Canada is the US’s second largest trading partner (after China), US president Donald Trump has criticised it and threatened to terminate the agreement completely.

FDI into Canada arrives for six broad reasons: access to natural resources; access to government contracts; access to national consumers; access to the whole North American market via Nafta; access to the entire EU market via the new CETA trade agreement; and, increasingly, access to the talents, infrastructure and innovations of the Canadian market with a goal of delivering high-value goods and services globally.

The Canadian challenge is to keep as many of these market entry pathways open in order to continue attracting FDI. This is made harder, of course, when the US government creates disruption and uncertainty regarding access to the US market, and seems intent on reducing or abandoning various business, social or environment regulations and taxes in favour of an explicitly protectionist stance. In the face of these competitive threats, Canada must continue to build and promote a strong value proposition for business investment. 

Global Affairs Canada has just published its 2017 'Invest in Canada' business promotion guide in which 20 independent sources are cited, each demonstrating a key economic indicator in which Canada ranks first among G7, G20, OECD or other countries. This includes, for example, the 'most cost-competitive country' compared with eight advanced economies (KPMG, 2017); the 'best country for doing business' within the G20 (Bloomberg, 2017); and the 'best global reputation' among the world’s 55 largest economies (Reputation Institute, 2017). 

For the 10-year period ending in 2016, Canada had the world’s second highest level of inbound FDI as a share of GDP, and the highest level of FDI per capita. It clearly outperforms on FDI attraction. The question is, can it keep this up if the elephant next door loses its temper?

Gregg Wassmansdorf is senior managing director, consulting, at Newmark Knight Frank, a global real estate services firm. He is a member of the Site Selectors Guild. E-mail: 

This article is sourced from fDi Magazine
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