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Chapter 11

POLS 1400 Chapter Notes - Chapter 11: Orio, Foreign Investment Review Agency, Vale Limited

Political Science
Course Code
POLS 1400
Nanita Mohan

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Chapter 10 – Canada’s External Environment: The United States and the World
- The U.S is obsessed with international terrorism
- Canada merged into a sovereign state
- Canada is subject to a wider variety of international multinational and supranational
pressure, which can be subsumed under the heading of globalization
The Global Setting: Foreign Governments
- Foreign government decisions can have an effect on Canada
oSometimes deliberate them but often unintentional
oThe U.S is more likely to impact Canada than anywhere else
- Major area of conflict between countries is the arctic
International Organization
- Canada has joined a lot of international organizations with the aim of taking advantage
of opportunities to influence the policies of other countries
oThe UN (united nations)
oWTO (world trade organization)
- More suasion from other countries from the UN is sometimes enough to make Canada
change its policies
- WTO can require members to change their trading practices
- WTO ordered Canada to discontinue a federal excise tax and postal subsidies to protect
domestic magazines
- IMF (international money find) also puts pressure ono countries like the WTO does
oCut income taxes and debt
International Agreements
- Canada signs international agreements with one or more foreign governments
- Usually presents both opportunities and obligations
- Provide a certain amount of constraint on domestic policy making
- Canada – U.S Free Trade Agreement is a major one
Transnational Corporations and Globalization
- Pressures by foreign governments are made on behalf of corporations with head offices
in the country
- International agreements are about removing government controls on corporate
National Policy if 1879
- Put a tariff on imported manufactured goods
- Rather than export to Canda from the U.S and pay the tariff, American companies set up
branch plants within Canada behind the tariff wall
- This created employment in Canada and contributed to general prosperity of Canada
oEspecially benefitted Ontario
- Other foreign companies moved into exploit Canadian natural resources
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o"A large proportion of the investment in resource exploitation reflected the needs
of the United States investors for raw materials for their processing and
manufacturing plants in the United States”
oReduces the likelihood of processing activity of Canadian natural resources in
oMany aspects of manufacturing, mining, forestry, and petroleum industries have
becomes characterized by a high degree of foreign ownership
Especially true for the U.S
- Critics worry that if layoffs/shutdowns are necessary, there are usually slated for branch
plants first
oA high degree of U.S ownership perpetuates the resources-export orientation of
the Canadian economy
- Companies may also occasionally choose or be required to conform to the laws of the
country in which their parent is located, rather than those of Canada
oExtraterritorially: extensions of U.S laws to branch plants located in Canada
- The proportion of foreign control has declined between 1971 and 1984
oThis has increased since – 19.6 percent of the totally economy
oU.S is the parental home to half of the foreign ownership in Canada
- Canadian manufacturing industry is characterized by greater foreign ownership than any
other sector
- Four main categories of policies that Canadian governments have adopted to counter
threat of U.S or other foreign ownership
oCrown corporations – ensure that the company involved remains in Canadian
Atomic Energy of Canada Ltd. And Petro Canada
oRegulatory agencies
Foreign Investment Review Agency (FIRA) screened foreign takeovers,
approving the deal only if it involved significant benefit to Canada
Cause proportion of foreign ownership in Canadian industry to
Became a major irritant to the U.S
FIRA was replaced with investment Canada
Investment Canada – restricted screening acquisitions of firms with a
value of over $150 million and could not impose any performance
oOwnership restriction and tax incentives
Maximum foreign ownership limits exist in certain fields such as
broadcasting, financial institutions, newspapers and publishing
oFunding agencies
Example: business development bank of Canada – encourages Canadian
entrepreneurship when the commercial banks are not interested
oMany of these policies were half-hearted and others were diluted under U.S
Many were withdrawn to increase foreign investment and remove irritants
of Canada-U.S relationship
- Foreign takeovers raised increased concern among economic nationalists
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