Foreign ownership is a tangible sign of the globalized world in which we live. It has been a controversial political issue in Canada, but today trade and investment across national boundaries is not only the norm but also binds together national economies so that fluctuations in one have repercussions far away.
Research recently released by Statistics Canada reveals some trends in foreign ownership. Most foreign investment in Canada is concentrated in energy, mining and manufacturing, but agrifood is an important sector. Today’s blog post focuses on food manufacturing.
Last month, Employment of foreign majority-owned affiliates in Canada: Regional data, 2013 was released by Statistics Canada. According to this data:
- 12% of all jobs in Canada were with foreign-controlled firms
- In food manufacturing, the share is twice as high, equaling 25% in 2013 (Table 1);
- Across the regions of Canada, this share varies from a high of 36% in Ontario and in Alberta to a low of 16% or 17% in British Columbia and in Manitoba and Saskatchewan;
- At the Canada level, for all firms, employment increased from 2010 to 2013 at a faster rate within foreign-controlled firms (up 8.8%) compared to a 4.1% increase for Canadian-controlled firms.
- For food-manufacturing establishments from 2010 to 2013, employment in foreign-controlled establishments increased 1.2% and decreased by 1.2% in Canadian-controlled firms.
- Across the regions, employment in foreign-controlled food manufacturing establishments increased more (or decreased less) in Quebec, Alberta and British Columbia. Employment in Canadian-controlled food manufacturing firms increased more (or declined less) in Ontario and in Manitoba and Saskatchewan.
- At the Canada-level for foreign-controlled “enterprises” with a food manufacturing “establishment”,
- the 2013 operating profit was $2.9 billion (Table 2);
- merchandise imports were $7.8 billion; and
- merchandise exports were $10.3 billion.
Foreign ownership in perspective
Canada ranked 11th in a survey by the United Nations Conference on Trade and Development of global executives’ favoured destinations for their capital, according to an article in The Globe and Mail. Yet Canada’s levels of investment and ownership in foreign companies have been larger than foreign investment and ownership in Canada. Given the reciprocal nature of foreign investment in the Canadian context, the Canadian public has grown less politically concerned about foreign investment within Canada.
Foreign investment is a significant component of the Canadian economy. According to Statistics Canada research (2013),
“foreign majority-owned affiliates in Canada accounted for over half of total international trade in goods and commercial services (exports plus imports), and represented nearly one in eight jobs in Canada in 2013.”
Much of this activity was controlled by US corporations.
Is foreign investment good or bad?
Today, most foreign investment is linked to something called “global value chains,” according to Marcelo Giugale of the World Bank. Most consumer products are multinational, with parts and designs produced in different countries and shipped across borders to a final assembly site. (And what does it mean to own an “American car” when parts are made in Canada and Brazil, it is assembled in Mexico, and corporate headquarters are in Michigan?) Value chains force manufacturers in different countries to meet a more-or-less common standard of efficiency. This is a real benefit of foreign investment, but also a danger if you are not able to keep pace.
Ray Bollman, Economic Statistician
Sarah Wayland, Principal Investigator