Canada Is Missing Out On Global Capital Market Integration

Recent foreign takeovers of significant companies, including Alcan, Falconbridge, Inco, and Four Seasons Hotels, have grabbed Canadians ’ attention, raising fresh worries over whether Canada is being “hollowed out. ” Does the pace of foreign direct investment threaten our economic independence? Unlike portfolio investment, whereby stocks and other financial securities trade across national boundaries, foreign direct investment (FDI) places control and ownership of assets in the hands of multinational enterprises. Thus, a rise in FDI sometimes attracts questions about whether foreign businesses might make choices that are contrary to the host country’s interests. Certainly, both outbound and inbound FDI flows have picked up in Canada since 2004. It is also true, however, that, since the mid-1990s, Canada has become a net investor abroad — in effect, a hollower-out of other countries. Surprisingly, Canada’s record as a host to global companies, whether Canadian or foreign controlled, is generally dismal. In international business, the trend is toward consolidation, with multinationals becoming more adept a