A paper released this week by a trio of Statistics Canada researchers suggests that levels of foreign ownership in Canada of non-financial industries is at its highest level since the 1960s.
During recent years, there has been a sizable increase in the share of non-financial corporate assets controlled by foreign firms, up from 25.4% in 2000 to 29.3% in 2003. This represents a continuation of the upward trend in foreign control apparent since the mid 1980s. Foreign control of Canada’s non-financial assets has thus returned to levels witnessed in the mid 1960s . . .
The two industries with high levels of foreign control in 2000 also experienced relatively large increases in multinational activity. Foreign control of manufacturing assets grew by 14% from 2000 to 2003 (from 45.0% of assets to 51.3%). Oil and gas extraction and support activities9 saw the asset holdings of foreign firms increase by 18.0% . . .
The tighter investment restrictions of the 1960s and 1970s were predicated on a widely held view that multinationals truncate their activities in host markets, concentrating low-value activities abroad while locating high-value activities in home economies. On this view, multinationals were often portrayed as bringing little benefit to host markets, in that many of the economic rents associated with these foreign operations were transferred from affiliates to parent companies. Many recent studies, drawing from new business
surveys and administrative data on economic performance, paint a decidedly different view of multinational operations, arguing that foreign-controlled businesses located in Canada tend to be well developed firms—productive and high paying relative to their domestic competitors, with relatively sophisticated innovation and technology activities.12 And there is some evidence that these foreign-controlled businesses transmit positive externalities, in the form of productivity gains, to domestic businesses . . .