America's Shifting Politics Could Harm Canadian Foreign Direct Investment

NKF Senior Managing Director, Gregg Wassmansdorf, recently authored his second of six annual editorials for fDi Intelligence, part of fDi Magazine, providing industry-leading insight into globalization and foreign direct investment (FDI). In this article, Mr. Wassmansdorf explains that Canada's longtime ability to outperform in FDI is in jeopardy and the United States' shifting political climate might be to blame.

Excerpt below.

"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."

Read the full article, View from the Americas: Canada's elephant next door.

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