Executive Summary

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, its proximity to the U.S. market, its highly skilled work force, and abundant resources.  Canada encourages foreign direct investment (FDI) by promoting its stability, global market access, and infrastructure. The United States is Canada’s largest investor, accounting for 47 percent of total FDI. As of 2019, the amount of U.S. FDI totaled USD 402 billion, a 9.2 percent increase from the previous year. Canada’s FDI stock in the United States totaled USD 496 billion, a 12 percent increase from the previous year.

Initial reports indicate Canada suffered a significant decrease in FDI due to the ongoing COVID-19 pandemic. Data from Canada’s national statistical office show inward investment flows decreased by roughly 50 percent in 2020 as compared to 2019.

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 March 2021, the Canadian government announced revised ICA foreign investment screening guidelines that include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines follow an April 2020 ICA update, which provides for greater scrutiny of foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services.

Despite a generally welcoming foreign investment environment, Canada maintains investment stifling prohibitions in the telecommunication, airline, banking, and cultural sectors. 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.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 11 of 175 http://www.transparency.org/research/cpi/overview 
World Bank’s Doing Business Report 2020 23 of 190 http://www.doingbusiness.org/en/rankings 
Global Innovation Index 2020 17 of 131 https://www.globalinnovationindex.org/analysis-indicator 
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $402,255 https://apps.bea.gov/international/factsheet/ 
World Bank GNI per capita 2019 $46,370 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD 

Policies Towards Foreign Direct Investment

Canada actively encourages FDI and maintains a sound enabling environment (23 out of 190 countries on the World Bank’s 2020 Doing Business Report). Investors are attracted to Canada’s proximity to the United States, highly skilled workforce, strong legal protections, and abundant natural resources. Once established, foreign-owned investments are treated equally to domestic investments. As of 2019, the United States had a stock of USD 402 billion of foreign direct investment in Canada. U.S. FDI stock in Canada represents 47 percent of Canada’s total investment. Canada’s FDI stock in the United States totaled USD 496 billion.

The USMCA modernizes the previous NAFTA investment protection rules and investor-state dispute settlement provisions. Parties to the USMCA agree to treat investors and investments of the other Parties in accordance with the highest international standards, and consistent with U.S. law and practice, while safeguarding each Party’s sovereignty and promoting domestic investment.

Invest in Canada is Canada’s investment attraction and promotion agency. It provides information and advice on doing business in Canada, strategic market intelligence on specific industries, site visits, and introductions to provincial, territorial, and municipal investment promotion agencies. Still, 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.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investment in Canada is regulated under the provisions of the Investment Canada Act (ICA). U.S. FDI in Canada is also subject to the provisions of the World Trade Organization (WTO), the USMCA, and the NAFTA. The ICA mandates the review of significant foreign investments to ensure they provide an economic net benefit and do not harm national security.

Canada is not a party to the USMCA’s chapter on investor-state dispute settlement (ISDS). Ongoing NAFTA arbitrations are not affected by the USMCA, and investors can file new NAFTA claims by July 1, 2023, provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force. An ISDS mechanism between the United States and Canada will cease following a three-year window for NAFTA-protected legacy investments.

The Canadian government announced revised ICA foreign investment screening guidelines on March 24, 2021. The revised guidelines include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines are aligned with Innovation, Science, and Economic Development Canada’s April 2020 update on greater scrutiny for foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services.

Foreign ownership limits apply to Canadian telecommunication, airline, banking, and cultural sectors. Telecommunication carriers, including internet service providers, that own and operate transmission facilities are subject to foreign investment restrictions if they hold a 10 percent or greater share of total Canadian communication annual market revenues as mandated by The Telecommunications Act. These investments require Canadian ownership of 80 percent of voting shares, Canadians holding 80 percent of director positions, and no indirect control by non-Canadians. If the company is a subsidiary, the parent corporation must be incorporated in Canada and Canadians must hold a minimum of 66.6 percent of the parent’s voting shares. Foreign ownership of Canadian airlines is limited to 49 percent with no individual non-Canadian able to control more than 25 percent by mandate of the 2018 Transportation Modernization Act. Foreign banks can establish operations in Canada but are generally prohibited from accepting deposits of less than USD 112,000. Foreign banks must receive Department of Finance and the Office of the Superintendent of Financial Institutions (OSFI) approval to enter the Canadian market. Investment in cultural industries also carries restrictions, including a provision under the ICA that foreign investment in book publishing and distribution must be compatible with Canada’s national cultural policies and be of net benefit to Canada.

Other Investment Policy Reviews

The World Trade Organization conducted a trade policy review of Canada in 2019. The report is available at: https://www.wto.org/english/tratop_e/tpr_e/tp489_e.htm  . The Organization of Economic Development completed an Economic Forecast Summary and released the results in March 2021. The report is available at: http://www.oecd.org/economy/canada-economic-snapshot/ 

Business Facilitation

Canada ranks 3 out of 190 countries on starting a business in the 2020 World Bank’s Ease of Doing Business rankings. The Canadian government provides information necessary for starting a business at: https://www.canada.ca/en/services/business/start.html . Business registration requires federal or provincial government-based incorporation, the application of a federal business number and corporation income tax account from the Canada Revenue Agency, the registration as an extra-provincial or extra-territorial corporation in all other Canadian jurisdictions of business operations, and the application of relevant permits and licenses. In some cases, registration for these accounts is streamlined (a business can receive its business number, tax accounts, and provincial registrations as part of the incorporation process); however, this is not true for all provinces and territories.

Outward Investment

Canada prioritizes export promotion and inward investment. Outward investment has been identified as a tool to enhance future Canadian competitiveness and productivity. Canada does not restrict domestic investors from investing abroad except when recipient countries or businesses are designated under the government’s sanctions regime.

Canada is a party to 14 free trade agreements (FTAs) covering 51 countries and 37 foreign investment promotion and protection agreements (FIPAs). Canada’s multi-party free trade agreements include: USMCA, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Canada-European Union Comprehensive Economic and Trade Agreement (CETA), and the Canada-European Free Trade Association. Canada has bilateral free trade agreements with Ukraine, Peru, Panama, South Korea, Jordan, Israel, Honduras, Costa Rica, Colombia, and Chile.

Canada maintains FIPAs with: Uruguay, Ukraine, Venezuela, Trinidad and Tobago, Thailand, Slovakia, Tanzania, Serbia, Senegal, Russia, Romania, Poland, the Philippines, Peru, Panama, Mongolia, Mali, Lebanon, Latvia, Kuwait, Kosovo, Jordan, Hungary, Hong Kong, Guinea, Egypt, the Czech Republic, Croatia, Côte d’Ivoire, Costa Rica, China, Cameroon, Burkina Faso, Benin, Barbados, Argentina, and Armenia.

Canada is exploring or negotiating FTAs with Turkey, Thailand, the Philippines, Singapore, Morocco, Japan, India, the Dominican Republic, Guatemala, Nicaragua, El Salvador, the ASEAN, Mercosur, the Caribbean Community, and the Pacific Alliance. Canada is exploring or negotiating FIPAs with: Tunisia, Rwanda, Qatar, Pakistan, Mozambique, Mauritania, Macedonia, Kenya, Kazakhstan, India, Ghana, Georgia, Gabon, and the Democratic Republic of Congo. Canada began discussions with the People’s Republic of China related to a FTA in 2016, but then-Foreign Minister Champagne told media in 2020 he did not see “conditions being present for those discussions to continue.”

Canada has a bilateral tax treaty with the United States and 93 other countries.

Transparency of the Regulatory System

Canada’s regulatory transparency is similar to the United States. Regulatory and accounting systems, including those related to debt obligations, are transparent and consistent with international norms. Proposed legislation is subject to parliamentary debate and public hearings, and regulations are issued in draft form for public comment prior to implementation in the Canada Gazette, the government’s official journal of record. While federal and/or provincial licenses or permits may be needed to engage in economic activities, regulation of these activities is generally for statistical or tax compliance reasons. Under the USMCA, parties agreed to make publicly available any written comments they receive, except to the extent necessary to protect confidential information or withhold personal identifying information or inappropriate content.

Canada publishes an annual budget and debt management report. According to the Ministry of Finance, the design and implementation of the domestic debt program are guided by the key principles of transparency, regularity, prudence, and liquidity.

International Regulatory Considerations

Canada addresses international regulatory norms through its FTAs and actively engages in bilateral and multilateral regulatory discussions. U.S.-Canada regulatory cooperation is guided by Chapter 28 of the USMCA “Good Regulatory Practices” and the bilateral Regulatory Cooperation Council (RCC). The USMCA aims to promote regulatory quality through greater transparency, objective analysis, accountability, and predictability. The RCC is a bilateral forum focused on harmonizing health, safety, and environmental regulatory differences. Canada-EU regulatory cooperation is guided by Chapter 21 “Regulatory Cooperation” of the CETA and the Regulatory Cooperation Forum (RCF). CETA encourages regulators to exchange experiences and information and identify areas of mutual cooperation. The RCF seeks to reconstitute regulatory cooperation under the previous Canada-EU Framework on Regulatory Cooperation and Transparency. The RCF is mandated to seek regulatory convergence where feasible to facilitate trade. CPTPP Chapter 25 “Regulatory Coherence” seeks to encourage the use of good regulatory practices to promote international trade and investment, economic growth, and employment. The CPTPP also established a Committee on Regulatory Coherence charged with considering developments to regulatory best practices in order to make recommendations to the CPTPP Commission for improving the chapter provisions and enhancing benefits to the trade agreement.

Canada is a member of the WTO and notifies draft technical regulations to the WTO Committee on Technical Barriers to Trade. Canada is a signatory to the Trade Facilitation Agreement, which it ratified in December 2016.

Legal System and Judicial Independence

Canada’s legal system is based on English common law, except for Quebec, which follows civil law. Law-making responsibility is split between the Parliament of Canada (federal law) and provincial/territorial legislatures (provincial/territorial law). Canada has both written commercial law and contractual law, and specialized commercial and civil courts. Canada’s Commercial Law Directorate provides advisory and litigation services to federal departments and agencies whose mandate includes a commercial component and has legal counsel in Montréal and Ottawa.

The judicial branch of government is independent of the executive branch and the current judicial process is considered procedurally competent, fair, and reliable. The provinces administer justice in their jurisdictions, including management of civil and criminal provincial courts.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Canada is regulated under the provisions of the ICA. U.S. FDI in Canada is also subject to the provisions of the WTO, the USMCA, and the NAFTA. 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.

Canada relies on its Invest In Canada promotion agency to provide relevant information to foreign investors: https://www.investcanada.ca/ 

Competition and Antitrust Laws

Competition Bureau Canada is an independent law enforcement agency charged with ensuring Canadian businesses and consumers prosper in a competitive and innovative marketplace as stipulated under the Competition Act, the Consumer Packaging and Labelling Act, the Textile Labelling Act, and the Precious Metals Marking Act. The Bureau is housed under the Department of Innovation, Science, and Economic Development (ISED) and is headed by a Commissioner of Competition. Competition cases, excluding criminal cases, are brought before the Competition Tribunal, an adjudicative body independent from the government. The Competition Bureau and Tribunal adhere to transparent norms and procedures. Appeals to Tribunal decisions may be filed with the Federal Court of Appeal as per section 13 of the Competition Tribunal Act. Criminal violations of competition law are investigated by the Competition Bureau and are referred to Canada’s Public Prosecution Service for prosecution in federal court.

Competition Bureau Canada assumed the rotating one-year presidency of the International Consumer Protection Enforcement Network (ICPEN), a global consumer protection law enforcement network, starting July 1, 2020. The Bureau has focused the ICPEN on COVID-19, artificial intelligence, digital platforms, and environmental issues during its presidency. As part of these efforts, the Bureau hosted the first annual Digital Enforcement Summit to share best practices, and explore new tools and strategies for tackling emerging enforcement issues in the digital era with international counterparts.

The Bureau announced a USD 6.7 million penalty settlement in May 2020 with A major U.S. social media company after the Competition Tribunal agreed with the Bureau’s claim the company made false or misleading claims about the privacy of Canadians’ personal information on its platform.

In September 2020, the Bureau signed the Multilateral Mutual Assistance and Cooperation Framework for Competition Authorities (MMAC) with the Australian Competition and Consumer Commission, the New Zealand Commerce Commission, the United Kingdom Competition & Markets Authority, the U.S. Department of Justice, and the U. S. Federal Trade Commission. The MMAC aims to improve international cooperation through information sharing and inter-organizational training.

Expropriation and Compensation

Canadian federal and provincial laws recognize both the right of the government to expropriate private property for a public purpose and the obligation to pay compensation. The federal government has not nationalized a foreign firm since the nationalization of Axis property during World War II. Both the federal and provincial governments have assumed control of private firms, usually financially distressed companies, after reaching agreement with the former owners.

The USMCA, like the NAFTA, requires expropriation only be used for a public purpose and done in a nondiscriminatory manner, with prompt, adequate, and effective compensation, and in accordance with due process of law.

Dispute Settlement

ICSID Convention and New York Convention

Canada ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention on December 1, 2013 and is a signatory to the 1958 New York Convention, ratified on May 12, 1986. Canada signed the United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (known as the Mauritius Convention on Transparency) in March 2015.

Investor-State Dispute Settlement

Canada accepts binding arbitration of investment disputes as obligated under its bilateral and multilateral agreements. As part of the USMCA, the United States and Canada agreed to phase out NAFTA’s investor state dispute settlement procedures over a three-year period. Under the USMCA, U.S. and Canadian investors rely on domestic courts and other mechanisms for dispute resolution. Ongoing NAFTA arbitrations are not affected by the USMCA and investors can file new NAFTA claims by July 1, 2023 provided the investment(s) were “established or acquired” when NAFTA was still in force and remained “in existence” on the date the USMCA entered into force.

Over the history of the NAFTA, 28 disputes have been filed against the Government of Canada. For more information about cases filed under NAFTA Chapter 11, please visit https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/disp-diff/gov.aspx?lang=eng 

International Commercial Arbitration and Foreign Courts

Provinces have the primary responsibility for regulating arbitration within Canada. Each province, except Quebec, has legislation adopting the UNCITRAL Model Law. The Quebec Civil Code and Code of Civil Procedure are consistent with the UNCITRAL Model Law. The Canadian Supreme Court has ruled that arbitration agreements must be broadly interpreted and enforced. Canadian courts respect arbitral proceedings and have been willing to lend their enforcement powers to facilitate the effective conduct of arbitration proceedings, by requiring witnesses to attend and give evidence, and to produce documents and other evidence to arbitral tribunals.

Bankruptcy Regulations

Bankruptcy in Canada is governed at the federal level in accordance with the provisions of the Bankruptcy and Insolvency Act (BIA) and the Companies’ Creditors Arrangement Act. Each province also has specific laws for dealing with bankruptcy. Canada’s bankruptcy laws stipulate that unsecured creditors may apply for court-imposed bankruptcy orders. Debtors and unsecured creditors normally work through appointed trustees to resolve claims. Trustees will generally make payments to creditors after selling the debtors assets. Equity claimants are subordinate to all other creditor claims and are paid only after other creditors have been paid in full per Canada’s insolvency ladder. In all claims, provisions are made for cross-border insolvencies and the recognition of foreign proceedings. Secured creditors generally have the right to take independent actions and fall outside the scope of the BIA. Canada was ranked 13th for ease of “resolving insolvency” by the World Bank in 2020.

Investment Incentives

Federal and provincial governments offer a wide array of investment incentives designed to advance broader policy goals, such as boosting research and development, and promoting regional economies. The funds are available to qualified domestic and foreign investors. Export Development Canada offers financial support to inward investments under certain conditions. The government maintains a Strategic Innovation Fund that offers funding to firms advancing “the Canadian innovative ecosystem.” Canada also provides incentives through the Innovation Superclusters Initiative, which is investing more than USD 700 million over five years (2017‑2022) to accelerate economic and investment growth in Canada. The five superclusters focus on digital technology, protein industries, advanced manufacturing, artificial intelligence, and the ocean. Foreign firms may apply for supercluster funding. A 2020 Canada Parliamentary Budget Office report concluded Supercluster Initiative spending lagged budgetary targets and the Initiative was unlikely to meet its ten-year goal to increase GDP by USD 37 billion.

Several provinces also offer incentive programs available to foreign firms. These incentives are normally restricted to firms established in the province or that agree to establish a facility in the province. Quebec is implementing “Plan Nord” (Northern Plan), a 25-year program to incentivize natural resource development in its northern and Arctic regions. The program provides financing to facilitate infrastructure, mining, tourism, and other investments. Ontario’s Jobs and Prosperity Fund is providing USD 2 billion from 2013 to 2023 to enhance productivity, bolster innovation, and grow Ontario’s exports. To qualify, companies must have substantive operations (generally three years) and at least USD 5.6 million in eligible project costs. Alberta offers companies a provincial tax credit worth up to USD 220,000 annually for scientific research and experimental development, as well as Alberta Innovation Vouchers worth up to USD 75,000 to help small early-stage technology and knowledge-driven businesses get their ideas and products to market faster.

Incentives for investment in cultural industries at both the federal and provincial level are generally available only to Canadian-controlled firms. Incentives may take the form of grants, loans, loan guarantees, venture capital, or tax credits. Provincial incentive programs for film production in Canada are available to foreign filmmakers.

Foreign Trade Zones/Free Ports/Trade Facilitation

Under the USMCA, Canada operates as a free trade zone for products made in the United States. Most U.S.-made goods enter Canada duty free.

Performance and Data Localization Requirements

As a general rule, foreign firms establishing themselves in Canada are not subject to local employment or forced localization requirements, although Canada has some requirements on local employment for boards of directors. Ordinarily, at least 25 percent of the directors of a corporation must be resident Canadians. If a corporation has fewer than four directors, however, at least one of them must be a resident Canadian. In addition, corporations operating in sectors subject to ownership restrictions (such as airlines and telecommunications) or corporations in certain cultural sectors (such as book retailing, video, or film distribution) must have a majority resident Canadian director.

Data localization is an evolving issue in Canada. The federal government introduced draft privacy legislation (Bill C-11) in Parliament November 17, 2020 to modernize data protection and privacy standards. The provincial government of Quebec introduced draft privacy legislation (Bill 64) in June 2020, and the provinces of Ontario and British Columbia are in the early legislative processes of developing privacy legislation. Privacy rules in two Canadian provinces, British Columbia and Nova Scotia, mandate that personal information in the custody of a public body must be stored and accessed only in Canada unless one of a few limited exceptions applies. These laws prevent public bodies such as primary and secondary schools, universities, hospitals, government-owned utilities, and public agencies from using non-Canadian hosting services. Under the USMCA, parties are prevented from imposing data-localization requirements.

The Canada Revenue Agency stipulates that tax records must be kept at a filer’s place of business or residence in Canada. Current regulations were written over 30 years ago and do not consider current technical realities concerning data storage.

Real Property

Foreign investors have full and fair access to Canada’s legal system, with private property rights limited only by the rights of governments to establish monopolies and to expropriate for public purposes. Investors under the USMCA have mechanisms available for dispute resolution regarding property expropriation by the Government of Canada. The recording system for mortgages and liens is reliable. Canada is ranked 36 out of 190 countries in the World Bank’s “Ease of Registering Property” 2020 rankings. Approximately 89 percent of Canada’s land area is government owned (Crown Land). Ownership is divided between by federal (41 percent) and provincial (48 percent) governments. The remaining 11 percent of Canadian land is privately owned.

British Columbia and Ontario tax foreign buyers of real property. In British Colombia, foreign buyers of real property in Metro Vancouver, the Fraser Valley, the central Okanagan regional district, Nanaimo, and the Capital Regional District are taxed at 20 percent of the property’s fair market value. In 2018, British Columbia broadened taxation on foreign ownership in Metro Vancouver and enacted a 0.5 percent Speculation and Vacancy Tax, targeting vacant foreign-owned homes. In 2019, the British Colombia Ministry of Finance increased the tax to 2.0 percent. The tax includes foreign owners and satellite families defined as those who earn most of their income outside of Canada. In Ontario, non-resident buyers of real property in the Greater Golden Horseshoe Region (the urban region centered around the City of Toronto, located at the western end of Lake Ontario) are subject to a non-resident speculation tax (NRST) at 15 percent of the property’s fair market value. The federal government is considering imposing a national non-resident real property tax.

In terms of non-resident access to land, including farmland, Ontario, Newfoundland and Labrador, New Brunswick, and Nova Scotia have no restrictions on foreign ownership of land. Prince Edward Island, Quebec, Manitoba, Alberta, and Saskatchewan maintain measures aimed at prohibiting or limiting land acquisition by foreigners. The acreage limits vary by province, from as low as five acres in Prince Edward Island to as high as 40 acres in Manitoba. In certain cases, provincial authorities may grant exemptions from these limits, including for investment projects. In British Columbia, Crown land cannot be acquired by foreigners, while there are no restrictions on acquisition of other land.

Intellectual Property Rights

Canada took significant steps to improve its intellectual property (IP) provisions when the USMCA came into force July 1, 2020, addressing areas with long-standing concerns, including full national treatment for copyright protections, transparency and due process with respect to new geographical indications (GIs), more expansive trade secret protection, authority to seize counterfeit goods in transit to other countries, and enforcement measures in the digital environment. Canada must implement three additional provisions, including legislation to implement patent term adjustments to compensate for unreasonable patent prosecution delays by December 2024, legislation to extend copyright protections from 50 years to 70 years after the life of the author by December 2022, and accession to the Brussels Convention Relating to the Distribution of Program-Carrying Signals Transmitted by Satellite by July 2024. The Canadian courts have established meaningful penalties against circumvention devices and services. In 2019, Canada made positive reforms to the Copyright Board related to tariff-setting procedures for the use of copyrighted works, and efforts remain ongoing to implement those measures

Various challenges to IP protection in Canada remain despite this strong legal framework. Canadian IP enforcement of counterfeit and pirated goods at the border and within Canada remains limited. Canada’s system for providing patent term restoration for delays in obtaining marketing approval is also limited in duration, eligibility, and scope of protection. Canada’s ambiguous education-related exemption included in the 2012 copyright law undermines the market for educational publishers and authors.

Canada is on the 2021 Watch List in the Office of the U.S. Trade Representative’s (USTR) Special 301 Report to Congress. No Canadian markets were listed in USTR’s 2020 Review of Notorious Markets for Counterfeiting and Piracy

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

Canada’s capital markets are open, accessible, and regulated. Credit is allocated on market terms, the private sector has access to a variety of credit instruments, and foreign investors can get credit on the local market. Canada has several securities markets, the largest of which is the Toronto Stock Exchange, and there is sufficient liquidity in the markets to enter and exit sizeable positions. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for current international transactions.

Money and Banking System

The Canadian banking system is composed of 36 domestic banks and18 foreign bank subsidiaries. Six major domestic banks are dominant players in the market and manage close to USD 5.2 trillion in assets. Many large international banks have a presence in Canada through a subsidiary, representative office, or branch. Ninety-nine percent of Canadians have an account with a financial institution. The Canadian banking system is viewed as very stable due to high capitalization rates that are well above the norms set by the Bank for International Settlements. The OSFI, Canada’s primary banking regulator, is working on implementing the Basel III Framework to strengthen Canadian banks and improve their ability to handle financial shocks. The OSFI is consulting with industry on proposed regulatory changes and plans to introduce final guidance in late 2021.

Foreign financial firms interested in investing submit their applications to the OSFI for approval by the Minister of Finance. U.S. and other foreign banks can establish banking subsidiaries in Canada. Several U.S. financial institutions maintain commercially focused operations, principally in the areas of lending, investment banking, and credit card issuance. Foreigners can open bank accounts in Canada with proper identification and residency information.

The Bank of Canada is the nation’s central bank. Its principal role is “to promote the economic and financial welfare of Canada,” as defined in the Bank of Canada Act. The Bank’s four main areas of responsibility are: monetary policy; promoting a safe, sound, and efficient financial system; issuing and distributing currency; and being the fiscal agent for Canada.

Foreign Exchange and Remittances

Foreign Exchange

The Canadian dollar is a free-floating currency with no restrictions on its transfer or conversion.

Remittance Policies

The Canadian dollar is fully convertible, and the central bank does not place time restrictions on remittances.

Sovereign Wealth Funds

Canada does not have a federal sovereign wealth fund. The province of Alberta maintains the Heritage Savings Trust Fund to manage the province’s share of non-renewable resource revenue. The fund’s net financial assets were valued at USD 13 billion as of December 31, 2020. The Fund invests in a globally diversified portfolio of public and private equity, fixed income, and real assets. The Fund follows the voluntary code of good practices known as the “Santiago Principles” and participates in the IMF-hosted International Working Group of SWFs. The Heritage Fund holds approximately 45 percent of its value in equity investments, seven percent of which are domestic.

There are 35 SOEs at the federal level and 99 at the provincial level. The SOEs, classified as Government Business Enterprises (also referred to as Crown Corporations, Crown Agencies, and Operational Enterprises) in Canada, operate in a range of sectors including transportation, power, export development, and ports. A complete list of Canadian SOEs is available at http://www.osfi-bsif.gc.ca/Eng/fi-if/rtn-rlv/fr-rf/dti-id/Pages/GBE.aspx 

In line with USMCA, WTO, and other trade obligations, Canada has committed its SOEs and designated monopolies to operating in accordance with commercial considerations and in a non-discriminatory manner. Canadian SOEs involved in for-profit operations are subject to the rules of the Competition Act to prevent abuse of dominance and other anti-competitive practices. Foreign investors are also able to challenge SOEs under the USMCA, NAFTA, and WTO provisions.

Privatization Program

Federal and provincial privatizations are considered on a case-by-case basis, and there are no limitations to foreign participation. SOE privatization occurs via direct sales, share issuances, and employee-management buyouts that are considered non-discriminatory and transparent.

Canada defines responsible business conduct (RBC) as “Canadian companies doing business abroad responsibly in an economic, social, and environmentally sustainable manner.” The Government of Canada has publicly committed to promoting RBC and expects and encourages Canadian companies working internationally to respect human rights and all applicable laws, to meet or exceed international RBC guidelines and standards, to operate transparently and in consultation with host governments and local communities, and to conduct their activities in a socially and environmentally sustainable manner.

Canada encourages RBC by providing RBC-related guidance to the Canadian business community, including through Canadian embassies and missions abroad. Through its Fund for RBC, Global Affairs Canada provides funding to roughly 50 projects and initiatives annually. Canada also promotes RBC multilaterally through the OECD, the G7 Asia Pacific Economic Co-operation, and the Organization of American States. Canada promotes RBC through its trade and investment agreements via voluntary provisions for corporate social responsibility. Global Affairs Canada and the Canadian Trade Commissioner Service issued an Advisory to Canadian companies active abroad or with ties to Xinjiang, China in January 2021. The Advisory set clear compliance expectations for Canadian businesses with respect to forced labor and human rights involving Xinjiang.

The Canadian Ombudsperson for Responsible Enterprise is charged with receiving and reviewing claims of alleged human rights abuses involving Canadian companies foreign operations in the mining, oil and gas, and garment sectors. Contact information for making a complaint is available at: https://core-ombuds.canada.ca/core_ombuds-ocre_ombuds/index.aspx?lang=eng  .

Canada is active in improving transparency and accountability in the extractive sector. The Extractive Sector Transparency Measures Act was brought into force on June 1, 2015. The Act requires extractive entities active in Canada to publicly disclose, on an annual basis, specific payments made to all governments in Canada and abroad. Canada joined the Extractive Industries Transparency Initiative (EITI) in February 2007, as a supporting country and donor. Canada’s Corporate Social Responsibility strategy, “Doing Business the Canadian Way: A Strategy to Advance Corporate Social Responsibility in Canada’s Extractive Sector Abroad” is available on the Global Affairs Canada website: http://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-strat-rse.aspx?lang=eng .

A comprehensive overview of Canadian RBC information is available at: https://www.international.gc.ca/trade-agreements-accords-commerciaux/topics-domaines/other-autre/csr-rse.aspx?lang=eng#:~:text=RBC%20is%20about%20Canadian%20companies,laws%20and%20internationally%20recognized%20standards  .

Additional Resources

Department of State

Country Reports on Human Rights Practices ( https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/);

Trafficking in Persons Report ( https://www.state.gov/trafficking-in-persons-report/);

Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities ( https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/) and;

North Korea Sanctions & Enforcement Actions Advisory ( https://home.treasury.gov/system/files/126/dprk_supplychain_advisory_07232018.pdf ).

Department of Labor

Findings on the Worst forms of Child Labor Report ( https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings  );

List of Goods Produced by Child Labor or Forced Labor ( https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods );

Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World ( https://www.dol.gov/general/apps/ilab ) and;

Comply Chain ( https://www.dol.gov/ilab/complychain/ ).

Corruption in Canada is low and similar to that found in the United States. Corruption is not an obstacle to foreign investment. Canada is a party to the UN Convention Against Corruption, the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, and the Inter-American Convention Against Corruption.

Canada’s Criminal Code prohibits corruption, bribery, influence peddling, extortion, and abuse of office. The Corruption of Foreign Public Officials Act prohibits individuals and businesses from bribing foreign government officials to obtain influence and prohibits destruction or falsification of books and records to conceal corrupt payments. The law has extended jurisdiction that permits Canadian courts to prosecute corruption committed by Canadian companies and individuals abroad. Canada’s anti-corruption legislation is vigorously enforced, and companies and officials guilty of violating Canadian law are effectively investigated, prosecuted, and convicted of corruption-related crimes. In March 2014, Public Works and Government Services Canada (now Public Services and Procurement Canada, or PSPC) revised its Integrity Framework for government procurement to ban companies or their foreign affiliates for 10 years from winning government contracts if they have been convicted of corruption. In August 2015, the Canadian government revised the framework to allow suppliers to apply to have their ineligibility reduced to five years where the causes of conduct are addressed and no longer penalizes a supplier for the actions of an affiliate in which it was not involved. PSPC has a Code of Conduct for Procurement, which counters conflict-of-interest in awarding contracts. Canadian firms operating abroad must declare whether they or an affiliate are under charge or have been convicted under Canada’s anti-corruption laws during the past five years to receive assistance from the Trade Commissioner Service.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Mario Dion
Conflict of Interest and Ethics Commissioner (for appointed and elected officials, House of Commons)
Office of the Conflict of Interest and Ethics Commissioner
Parliament of Canada
66 Slater Street, 22nd Floor
Ottawa, Ontario (Mailing address)

Office of the Conflict of Interest and Ethics Commissioner
Parliament of Canada
Centre Block, P.O. Box 16
Ottawa, Ontario
K1A 0A6

Pierre Legault
Office of the Senate Ethics Officer (for appointed Senators)
Thomas D’Arcy McGee Building
Parliament of Canada
90 Sparks St., Room 526
Ottawa, ON K1P 5B4

Canada is politically stable with rare instances of civil disturbance.

The federal government and provincial/territorial governments share jurisdiction for labor regulation and standards. Federal employees and those employed in federally regulated industries, including the railroad, airline, and banking sectors, are covered under the federally administered Canada Labor Code. Employees in other sectors are regulated by provincial labor codes. As the laws vary somewhat from one jurisdiction to another, it is advisable to contact a federal or provincial labor office for specifics, such as minimum wage and benefit requirements.

Although labor needs vary by province, Canada faces a national labor shortage in skilled trades professions such as carpenters, engineers, and electricians. Canada launched several initiatives such as the Global Skills Visa to address its skilled labor shortage, including through immigration reform, the inclusion of labor mobility provisions in free trade agreements, including the Canada-EU CETA agreement, the Temporary Foreign Worker Program (TFWP), and the International Mobility Program. The TFWP is jointly managed by Employment and Social Development Canada (ESDC) and Immigration, Refugees, and Citizenship Canada (IRCC). The International Mobility Program (IMP) primarily includes high skill/high wage professions and is not subject to a labor market impact assessment. The number of temporary foreign workers a business can employ is limited. For more information, see the TFWP website: https://www.canada.ca/en/employment-social-development/services/foreign-workers.html 

The impact of COVID-19 on the labor force has yet to be fully realized. As of February 2021, the unemployment rate was 8.2 percent (historical unemployment traditionally hovers between five and eight percent). Statistics indicate women and marginalized communities have been disproportionately affected by job and other economic losses. The Canadian government administered an emergency wage benefit in response to a significant increase in unemployment caused by the pandemic.

Canadian labor unions are independent from the government. Canada has labor dispute mechanisms in place and unions practice collective bargaining. As of 2015 (the most recent year of available data), there were 776 unions in Canada. Eight of those unions – five of which were national and three international – represented 100,000 or more workers each and comprised 45 percent of all unionized workers in Canada ( https://www.canada.ca/en/employment-social-development/services/collective-bargaining-data/reports/union-coverage.html ). Less than one third of Canadian employees belonged to a union or were covered by a collective agreement as of 2015. In June 2017, Parliament repealed legislation public service unions had claimed contravened International Labor Organization conventions by limiting the number of persons who could strike.

In August 2020, dockworkers at the Port of Montreal Port Authority participated in a 19-day strike over wages and scheduling. Statistics Canada estimates the strike resulted in more than USD 300 million in economic losses.

In March 2021, front line workers at an electric power and natural gas utility company in Manitoba participated in a two-day strike over wages and holiday benefits. The strike followed 28 months of stalled labor negotiations.

The DFC does not operate in Canada.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $1,783,788 2019 1,736,000 www.worldbank.org/en/country 
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2019 360,895 2019 402,255 BEA data available at
https://apps.bea.gov/
international/factsheet/
 
Host country’s FDI in the United States ($M USD, stock positions) 2019 500,874 2019 $495,720 BEA data available at
https://www.bea.gov/international/
direct-investment-and-multinational-
enterprises-comprehensive-data
 
Total inbound stock of FDI as % host GDP (USD) 2019 1,037,092 2019 59.7% UNCTAD data available at
https://stats.unctad.org/handbook/
EconomicTrends/Fdi.html
* Source for Host Country Data: Host Country Source: Office of the Chief Economist, State of Trade 2020, Global Affairs Canada. Host Country Source: Statistics Canada Note: Data converted to U.S. dollars using yearly average currency conversions from IRS
Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward 745,399 100% Total Outward 1,044,549 100%
United States 348,475 47% United States 483,636 46%
The Netherlands 94,847 13% United Kingdom 81,927 8%
United Kingdom 47,744 6% Luxembourg 77,505 7%
Luxembourg 42,899 6% Bermuda 48,627 5%
Switzerland 39,627 5% Barbados 38,117 4%
“0” reflects amounts rounded to +/- USD 500,000.
Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 1,982,923 100% All Countries 1,516,210 100% All Countries 466,713 100%
United States 1,269,152 64% United States 945,000 62% United States 324,151 69%
United Kingdom 102,468 5% United Kingdom 80,839 5% United Kingdom 21,629 5%
Japan 73,560 4% Japan 64,298 4% Australia 10,584 2%
France 48,556 2% France 40,619 3% Japan 9,262 2%
Cayman Islands 43,436 2% Cayman Islands 38,097 3% Germany 8,485 2%

Economic Section
490 Sussex Drive, Ottawa, Ontario
613-688-5335
OttawaEconCounselor@state.gov

2021 Investment Climate Statements: Canada
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