Canada and the United States have one of the largest and most comprehensive investment relationships in the world. U.S. investors are attracted to Canada’s strong economic fundamentals, proximity to the U.S. market, highly skilled work force, and abundant resources. Canada encourages foreign direct investment (FDI) by promoting stability, global market access, and infrastructure. The United States is Canada’s largest investor, accounting for 46 percent of total FDI. As of 2021, the amount of U.S. FDI totaled USD 406 billion. Canada’s FDI stock in the United States totaled USD 528 billion.
Canada averaged an inflation rate of 6.8 percent in 2022, a 40-year high, though inflation decelerated steadily in late 2022 and early 2023. The high rate was attributed in part to increased energy, food, and commodity prices resulting from Russia’s war of aggression against Ukraine.
The United States-Mexico-Canada Agreement (USMCA) came into force on July 1, 2020, replacing the North American Free Trade Agreement (NAFTA). The USMCA supports a strong investment framework beneficial to U.S. investors. Foreign investment in Canada is regulated by the Investment Canada Act (ICA). The purpose of the ICA is to review significant foreign investments to ensure they provide an economic net benefit and do not harm national security. In October 2022, the Canadian government issued a new policy under the ICA to significantly restrict investments in Canada’s critical minerals sector and critical minerals supply chains by foreign State-Owned Enterprises (SOEs) and private investors with close ties to foreign governments. In December 2022, the Canadian government introduced legislation to modernize the ICA.
Despite a generally welcoming foreign investment environment, Canada maintains foreign investment prohibitions in the residential real estate, telecommunication, airline, banking, and cultural sectors. A two-year prohibition on the purchase of residential property by non-Canadians came into force on January 1, 2023. The prohibition follows the implementation of the Underused Housing Tax in 2022. Ownership and corporate board restrictions prevent significant foreign telecommunication and aviation investment, and there are deposit acceptance limitations for foreign banks. Investments in cultural industries such as book publishing are required to be compatible with national cultural policies and be of net benefit to Canada. In addition, non-tariff barriers to trade across provinces and territories contribute to structural issues that have held back the productivity and competitiveness of Canada’s business sector.
Canada has taken steps to address the climate crisis by establishing the Canadian Net-Zero Emissions Accountability Act that enshrines in law the Government of Canada’s commitment to achieve net-zero greenhouse gas emissions by 2050 and issuing the 2030 Emissions Reduction Plan that describes the measures Canada is undertaking to reduce emissions to 40 to 45 percent below 2005 levels by 2030 and achieve net-zero emissions by 2050. Canada announced USD 61 billion in tax credits for investments in clean electricity, clean tech manufacturing, carbon capture, hydrogen, and critical minerals.
Country Links
Office of the Superintendent of Financial Institutions
Financial Transactions and Reports Analysis Centre of Canada (FINTRAC - CANAFE)
Detailed company search - Canadian Company
Canadian Securities Administrators (CSA)
Investment Industry Regulatory Organization of Canada (IIROC)
Mutual Fund Dealers Association (MFDA)
Ontario Securities Commission (OSC)
Financial Services Commission of Ontario
Autorité des marchés financiers (Québec)
British Columbia Securities Commission (BCSC)
Financial Institutions Commission - Province of British Columbia
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Now, let's delve into the key concepts mentioned in the provided article about the investment relationship between Canada and the United States:
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Investment Relationship Overview:
- Canada and the United States boast one of the world's most significant and comprehensive investment relationships.
- U.S. investors are drawn to Canada due to its robust economic fundamentals, proximity to the U.S. market, highly skilled workforce, and abundant resources.
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FDI Statistics:
- The United States is Canada’s largest investor, accounting for 46 percent of total Foreign Direct Investment (FDI).
- As of 2021, U.S. FDI in Canada totaled USD 406 billion, while Canada's FDI stock in the United States reached USD 528 billion.
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Inflation in Canada:
- Canada experienced a 40-year high inflation rate of 6.8 percent in 2022.
- Inflation decelerated in late 2022 and early 2023.
- Increased energy, food, and commodity prices were attributed to Russia’s war of aggression against Ukraine.
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USMCA (United States-Mexico-Canada Agreement):
- Replacing NAFTA on July 1, 2020, USMCA supports a strong investment framework beneficial to U.S. investors.
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Investment Regulation in Canada:
- Foreign investment in Canada is regulated by the Investment Canada Act (ICA).
- The ICA aims to review significant foreign investments to ensure economic net benefit and no harm to national security.
- In October 2022, new ICA policies significantly restricted investments in Canada’s critical minerals sector by foreign State-Owned Enterprises (SOEs) and private investors with close ties to foreign governments.
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Legislative Changes:
- In December 2022, Canada introduced legislation to modernize the ICA.
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Foreign Investment Prohibitions:
- Canada prohibits foreign investments in residential real estate, telecommunications, airlines, banking, and cultural sectors.
- A two-year prohibition on non-Canadians purchasing residential property came into force on January 1, 2023.
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Climate Crisis Measures in Canada:
- Canada addresses the climate crisis through the Canadian Net-Zero Emissions Accountability Act, committing to achieving net-zero greenhouse gas emissions by 2050.
- The 2030 Emissions Reduction Plan outlines measures to reduce emissions by 40-45% below 2005 levels by 2030.
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Tax Credits for Clean Investments:
- Canada announced USD 61 billion in tax credits for investments in clean electricity, clean tech manufacturing, carbon capture, hydrogen, and critical minerals.
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Financial Regulatory Links:
- Various regulatory bodies in Canada oversee financial transactions and investments, including the Office of the Superintendent of Financial Institutions, FINTRAC (Financial Transactions and Reports Analysis Centre of Canada), Canadian Securities Administrators, and others.
In conclusion, this comprehensive overview demonstrates the intricate dynamics of the economic relationship between Canada and the United States, encompassing investment trends, regulatory frameworks, legislative changes, and climate crisis initiatives.
