Foreign Ownership is No Longer Controversial

The old cliché about the Canadian economy is that it comprises the hewers of wood and drawers of water. This notion of an economy dominated by extracting natural resources is itself often paired with another old cliché: the notion of the foreign boss or paymaster running the show.

Though it has been less salient in the past twenty years, debates over foreign control of the Canadian economy used to pervade federal politics. Many major debates took place on this issue, from the establishment of the Foreign Investment Review Agency in the 1970s to the enormously controversial National Energy Policy of the early 1980s. Since the CUSFTA (later NAFTA, now CAMUS USMCA) was negotiated in the mid-80s, it has generally died down, though it occasionally flares up during Chinese or American corporate takeover attempts of strategic resources.

High-level debates have disappeared, but the old concern remains. Many Canadians remain apprehensive of the apparently high level of control foreign interests exert over Canadian enterprises.

But how much foreign control actually exists among Canadian enterprises in recent times? Below are charts showing data from Stats Canada. The data includes proportions of assets as well as proportions of operating revenues held by foreign interests. The data only runs from 2007 to 2019, so pandemic effects aren’t shown. It is worth noting that the data doesn’t include numbers on corporate management. With that in mind, here is the data for foreign control of assets[1]:

Source: Statistics Canada Table 33-10-0084-01, 2022

Not all of the data is displayed. The percentage of foreign-controlled Canadian assets by investors in Oceania, Africa, or the rest of the Americas are negligible, at under 0.1% each.

Proportionally, foreign control of assets has been dropping for years now. Total Canadian control of business assets has actually grown from 78.4% in 2007 to 85.2% in 2019. A partial explanation may be that foreign investment of all types has been dwindling in recent years, though this requires its own investigation. The only major investment region to show growth is Asia, but it has only grown from 1.6% to 2% between 2007 and 2019. European and American control have both dropped by almost half.

So much for assets. How much of corporate revenues do foreign investors control? Here is data from the same chart[1]:

Source: Statistics Canada Table 33-10-0084-01, 2022

Interesting contrast. Foreign control of operating revenues is roughly twice foreign control of assets. It has not dropped in line with foreign control of assets. At 29.6% in 2007, it was 27.4% in 2018. Investment regions show the same pattern. America is by far the most significant source of foreign ownership, at 15.4% in 2018. All of Europe sits at 8.1%, and all of Asia at 3.4%. It would make sense for foreign investors to want to hold onto their most lucrative Canadian operations, whilst perhaps divesting the rest when the investing climate doesn’t look so good.

It is worth noting that in the late 1950s, when this issue became politically salient, foreign ownership was estimated by the Gordon Commission at roughly 40%[2]. Both foreign controlled assets and foreign controlled operating revenues are considerably below that now, if still quite high for a G20 country. So hewers of wood and drawers of water? Maybe, but largely of our own accord, whatever that is worth.

References

[1] “Table 33-10-0084-01: Foreign-controlled enterprises in Canada, by financial characteristics and selected country of control,” Statistics Canada. DOI: 10.25318/3310008401-eng [Accessed: Jul. 06, 2022]

[1] Rotstein, Abraham. “Economic Nationalism,” The Canadian Encyclopedia, Feb. 07, 2006[online]. Available: https://www.thecanadianencyclopedia.ca/en/article/economic-nationalism [Accessed Jul. 06, 2022].

Published by The Last Tory

Some random shmuck, no one important. Last of the old school Tory tradition, and chronicler of the kingdom's demise.

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