Foreign investment in Canada dips to lowest in 8 years

Investments by foreign companies in Canada slumped last year to their lowest level since 2010 amid mounting concerns about national competitiveness and uncertainty surrounding the renegotiation of the North American Free Trade Agreement.

Foreign direct investment nosedived 26 per cent to $33.8 billion in 2017, Statistics Canada reported, continuing a trend of declining interest by foreign firms. And for the first time since data collection on the topic began in 2007, foreign firms sold more Canadian companies than they bought.

Finance Minister Bill Morneau disappointed some industry associations this week with a federal budget that did not lower business taxes in response to major reductions in the United States.

In comments Thursday in Toronto, Morneau reiterated his intention to take the time to review the U.S. tax cuts and regulations before responding.

“We recognize that this presents an important issue for us to consider in terms of our competitiveness,” he said, according to a transcript of a speech to the Canadian Club of Toronto. “We will look at those changes as they come forward.

“With respect to investment in Canada, we do recognize that as a result of the discussions around NAFTA there are some businesses that are concerned about their opportunity to invest. It will be important for us to maintain our focus on NAFTA in a way that can assure that we have a strong agreement that can work for all three countries.”

Canada’s long-held tax advantage was undercut by U.S. President Donald Trump’s Jan. 1 tax reform package that slashed business taxes to 21 per cent from 35 per cent and allowed for full expensing of capital expenditures.

In Canada, the average combined federal and provincial tax rate is 26.7 per cent, according to the Business Council of Canada.

“The bottom line is there really is a need for more urgency on the competitiveness front,” said Doug Porter, chief economist at BMO Financial Group. “We’ve got a sluggish picture for business investment in 2018 and now a report showing record net outflow of FDI.”