Canada’s FDI (Foreign Direct Investment) policy is not as open as its attitude to exports and imports. However, inward FDI can help improve productivity and have a positive impact on the standard of living. This is made possible by the spillovers from multinationals to local enterprises. For example, inward FDI may improve competition on local markets and give access to new markets for local enterprises due to relationships with multinationals.
These spillovers have been observed in many countries. For it to happen, inward FDI cannot be hindered by major restrictions.
An analysis of the Restrictiveness Index on inward FDI in the service sector revealed that Canada ranks among the most restrictive countries in the OECD. From this perspective, one may wonder whether Canada, by maintaining FDI restrictions, is failing to reap some of the potential benefits of international trade. More specifically, would it be possible to accelerate Canada’s productivity growth by opening the door further to FDI?
This publication is available in two versions:
Short version:
Audet, K. and Gagné, R., Openness to Foreign Direct Investment and Productivity in Canada, Centre for Productivity and Prosperity, HEC Montréal, October 2010.
Detailed version (available in French only):
Audet, K. and Gagné, R., Ouverture aux investissements directs étrangers et productivité au Canada, Centre for Productivity and Prosperity, HEC Montréal, November 2010.
