The Peace Tower on Parliament Hill in Ottawa is seen, in the midst of the COVID-19 pandemic, on Saturday, April 18, 2020.
Justin Tang/The Canadian Press
The federal government is following the lead of other countries and tightening scrutiny of foreign takeovers of Canadian firms whose values have plummeted due to the COVID-19 pandemic.
The goal, according to the Saturday policy statement is to “ensure that in-bound investment does not introduce new risks to Canada’s economy or national security, including the health and safety of Canadians.”
Rules already in place to vet foreign direct investment from state-owned enterprises, or state-connected entities, will now apply to all investments, no matter their value said the weekend policy statement. The government will also pay close attention to “investments of any value, controlling or non-controlling” in businesses involved in public health or the supply of critical goods and services.
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According to the statement, the broader lens Ottawa is applying to state-linked entities is because the pandemic amplifies the concern that they may be “motivated by non-commercial imperatives that could harm Canada’s economic or national security interests.”
The new policy will stay in place until the “economy recovers from the effects of the COVID-19 pandemic.”
The change follows in the footsteps of countries like Australia, Germany, Spain and France that have taken steps to limit or further scrutinize takeovers from foreign investors. A month into the pandemic, innovation and legal experts say Canada’s move comes late and that it shouldn’t just be limited to the pandemic’s time-frame as COVID-19 has laid bare the country’s vulnerabilities when it is too reliant on international players for critical goods.
Innovation, Science and Economic Development Minister Navdeep Bains was not available for an interview Saturday.
In a statement, he said the enhanced scrutiny is needed to put a buffer between economically weakened companies and “opportunistic investors.”
Mr. Bains’ office did not say whether it has already identified foreign entities trying to take advantage of the lower valuations of many companies, but the Canadian Chamber of Commerce said it was not aware of any opportunistic buying so far. Still the chamber’s senior director of international policy, Mark Agnew, said the pandemic has shown the country needs to protect key sectors.
“Naive thinking will leave us ill prepared for future pandemics,” Mr. Agnew said in a statement
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He cautioned that the domestic economy still needs foreign capital and the move by Ottawa could have a “chilling effect.” The chamber also called on Ottawa to more widely publicize the changes, which were announced on a federal government website and flagged to some journalists.
Boarded up clothing stores are seen on Robson Street, in Vancouver, on Thursday, April 16, 2020.
DARRYL DYCK/The Canadian Press
The federal government should be clear about which sectors will be subject to the broader scrutiny, Mr. Agnew said.
Paul Boothe, a retired professor and former associate deputy minister at Industry Canada, said the policy statement puts companies “on notice” that the government will be taking a closer look at some transactions.
Attracting foreign investment has been a big focus of the Liberal government since is was first elected in 2015. To push its agenda Ottawa established Invest Canada in 2018. Saturday’s policy marks a departure from the federal government’s previous stance.
The new policy was panned by Jim Balsillie, chairman of the Council of Canadian Innovators, who said it’s not adequately thought through and falls short on several measures.
Jim Balsillie speaks at The Globe and Mail’s Canada Future Forward Summit, June 26, 2019, in Toronto.
Glenn Lowson/The Globe and Mail
“It confuses foreign direct investment with foreign portfolio investment, its short term applicability ignores the sustained capacity a sovereign country requires, and its narrow scope ignores the breadth of strategic assets required to protect Canadians’ interests,” Mr. Balsillie said.
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“Whoever developed this policy needs to talk to innovation policy experts who understand how strategic technologies are developed, commercialized and move across borders.”
Natalie Raffoul, an Ottawa patent lawyer with Brion Raffoul LLP, said the pandemic has revealed the vulnerability in becoming too dependent on international sources for critical goods. To prevent a repeat, she said more focus needs to be put on developing and protecting Canadian-made patents and other intellectual property so there is more domestic control over supply chains — not just for health and safety, but for the country’s overall prosperity and security.
“It’s great to see the government doing this, but I hope that it’s not just a COVID-19 specific measure and that they’re going to be now long-term looking at scrutinizing foreign direct investment,” Ms. Raffoul said. She stressed the distinction between foreign direct investment, which leads to foreign control, and foreign portfolio investment, which gives Canadian companies access to cash without forfeiting control.
Saturday’s statement comes a day after Prime Minister Justin Trudeau announced $1.2 billion in help for startups and small businesses. Given that companies, weakened by the pandemic-sparked economic crisis, are already desperate for cash, Ms. Raffoul said Ottawa is late implementing the new measures.
Prime Minister Justin Trudeau speaks during his daily press conference on the COVID-19 pandemic, in front of his residence at Rideau Cottage on Saturday, April 18, 2020.
Justin Tang/The Canadian Press
“We waited now a month,” she said, “so hopefully these programs can now move quickly to ensure that our innovative companies are going to be protected so we don’t lose the ground that we already have.”
The heightened scrutiny of foreign takeovers during the pandemic is also missing protections for patents, according to Jim Hinton, a Kitchener-Waterloo-based intellectual property lawyer with Own Innovation. Cash-strapped companies can boost their coffers by selling their patents or save money by letting patents lapse, which risks Canada losing even more of its domestically-made intellectual property and doing so at a discount, he said.
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“The tide has gone out and we are now shown that we don’t have the innovation capacity that you need to weather both economic and health storms,” he said.
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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
