Canada needs more investment — not more ‘branding’ and ‘buzz’
Attracting foreign investors is about more than marketing, it’s about regaining the loss of our tax advantage to the U.S. and not giving taxpayer handouts disguised as ‘incentives’
Recently, International Trade Minister Francois-Philippe Champagne announced the launch of Invest in Canada, a new government agency tasked with promoting Canada as an investment destination.
That makes him the new salesperson-inchief of a product that hasn’t been selling very well. While the Canadian economy had a good run in 2017, it masked the fact that foreign direct investment hit its lowest level since 2010. The roller-coaster ride of the NAFTA renegotiations has exacerbated the problem, since any investor counting on Canadian investments as a way to access the broader North American market will understandably be taking a wait-and-see approach.
To even begin trying to address this problem, taking a long, hard look at ways that Canada might be a comparatively unattractive place for foreign investors would be a good place to start. The government could have analyzed the recent loss of our business tax advantage to the U.S., or considered the impact of our sclerotic regulatory environment, or looked at why even domestic companies are reluctant to invest. But rather than do any of those things, the government has simply decided that it’s actually all about marketing.
Never mind that Canada already has a battalion of trade commissioners stationed around the globe. And the taxpayerbackstopped Export Development Bank offers cut-rate loans to the buyers of our products. Or that countless industry groups and companies are soliciting investment on their own dime. The Trudeau government seems to believe Canada’s poor performance as an investment destination can largely be explained by its lack of government-directed marketing.
It’s a cartoonish view of the business world, as if setting up more “branding” and better “buzz” is all that stands between Canada and a big wave of foreign investment. It’s a plan for a fantasy world the Trudeau government seems to want to live in — one where Canada is an island unto itself, with no external competitive pressures to consider.
Nowhere is it considered that foreign investors might already be fully capable of determining where they can get the best return on their investment. Worse, the government just seems to assume that the only reason foreign investors aren’t investing in Canada is because they don’t know about Canada. The possibility that investors do know, and simply aren’t confident that investing here would be a smart bet, does not seem to occur.
To sweeten the pot, part of the marketing ploy will be to use Invest in Canada as a one-stop window for foreign businesses to line up at for “incentives,” which is government-speak for “taxpayer money.”
This is the masterstroke Ottawa has hit on: attracting the kinds of businesses who only come for the handouts, rather than ones that come of their own volition, confident enough to compete and earn their own keep in the marketplace.
It’s a recipe for even more subsidy-dependent businesses latched to the government teat, sucking away precious tax dollars generated by the other businesses that must survive without them.
It’s the tried-and-failed domestic strategy of governments bankrolling well-connected pet companies and industries, gone global. And it’s not only unsustainable, but increasingly politically toxic.
If this government is truly serious about attracting foreign investors to Canada, the recipe isn’t complicated: reduce taxes and streamline regulation.
Make Canada a place where it’s easy to set up shop, easy to do business and easy to turn a profit. Do that, and the government may discover that investors will quickly find Canada all by themselves — no marketing required.