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The foreign direct investments in Canada (2007)

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  1. Abstract.
  2. Canadian's inward FDI.
    1. Definition.
    2. Figures.
  3. Costs and benefits of FDI.
    1. Assessment methods.
    2. Results.
  4. Policies implications.
  5. Bibliography.

Multinational enterprises (MNEs) interact in the global market, creating lots of jobs all around the world. Foreign Direct Investments (FDI) is the way by which they interact, investing abroad until representing the largest source of external finance for developing countries for instance (United Nations Conference on Trade And Development). No need thus to explain the importance of those FDI in the business world, which is growing more and more. Developing countries' inward stock of FDI currently corresponds to nearly one third of their GDP, whereas it was only 10% in 1980. According to the UNCTAD statistics, 53 million jobs are directly provided by the Transnational Corporations (TNCs) all around the world. Still, this amount does not take into account all the indirect jobs created, as well as the technological and managerial changes these companies bring to their host countries.

[...] Because foreign MNEs in Canada tend to have a global vision and often have a larger view than the domestic markets in which they operate, their inward FDI works to then build export growth by transforming domestic operations into their worldwide operations. Considering this, majority owned foreign affiliates are dominant players in Canada's trade, accounting for nearly the half of Canadian manufactured exports. Canada is finally not only dependant vis-à-vis the United States, but concerning MNEs in general; they account for an essential part of Canadian's economy. [...]

[...] This amount of foreign investment permits to Canada to rank 5th of the FDI flows' recipient in 2005. Considering the figure 2., it is not a surprise to notice that these biggest FDI recipient, which are part of the more active countries concerning FDI, are thus also the biggest Canada's contributors, like the United States, the United Kingdom, France, the Netherlands or Germany. The United States, mainly for geographic reasons, and probably because of the cultural similarity between the two neighbour countries as well, is contributing to 64% of Canadian's inward FDI stock. [...]

[...] But as the country is involved in the NAFTA, MNEs could decide that a country like Mexico, for example, is more attractive if Canada decides to augment its border taxes, and it would finally attract more trade (which would furthermore be tax free for the companies settled in Mexico) than FDI. As a consequence, this measure is to consider carefully. Moreover, providing aftercare support to foreign firms to help them to integrate in the local economy can help Canada ensure their retention and future expansion. It may be easier to attract foreign firms that have already established operations elsewhere in Canada, as these firms are more familiar with the national business climate and culture. [...]

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