Canadian policy toward foreign direct investment in an age of globalization

• Main Author: Malminen, Johannes.
• Format: Others
• Language: English
• Published: 2009
• Online Access: http://hdl.handle.net/2429/6518

The process of globalization has, since World War II, transformed relations between states, and between states and multinational enterprises (MNEs). Canada was one of the first countries to be transformed by this process - a trail-blazer particularly with respect to foreign direct investment (FDI). This thesis argues that Canada consciously took a globalist approach in its economic development via its openness toward, and active encouragement of, FDI. Canada's approach was facilitated by many factors, notably its cultural and historical ties to the U.K. and the U.S., its immigrant citizenry, and its muted nationalism. This approach, while novel at the time of its institution, has been replicated by states around the world in the last twenty-five years as globalization of the world market has accelerated. The Canadian case is of interest, however, because just at the time when other countries were shifting towards the more liberal and globalist approach to FDI that Canada had championed, Canada changed course and implemented stringent restrictions on FDI. Then, hardly a decade later, Canada returned to a more liberal and open approach to FDI regulation. This thesis argues that Canada turned away from the globalizing trend because foreign penetration of the Canadian economy had become, by far, the highest in the world. This fact, united with anti-American sentiments and a Trudeau-inspired rise in nationalism, set the stage for a dramatic increase in protectionist restrictions, in particular the creation of the Foreign Investment Review Agency (FIRA) in 1974. The election victory of the Conservatives in 1984 and the subsequent abolishment of FIRA symbolizes Canada's return to a globalist approach to its economic well-being. This thesis will argue that Canada's lapse into protectionism collapsed because Canada was out of step with liberalizing global trends and the costs of this, in terms of general welfare, were too high to be borne by a small country, particularly one whose economy had historically relied so heavily on foreign investment. === Arts, Faculty of === Political Science, Department of === Graduate