The U.S. Department of State’s Investment Climate Statements provide information on the business climates of more than 170 economies and are prepared by economic officers stationed in embassies and posts around the world. They analyze a variety of economies that are or could be markets for U.S. businesses. The Investment Climate Statements are also references for working with partner governments to create enabling business environments that are not only economically sound, but address issues of labor, human rights, responsible business conduct, and steps taken to combat corruption. The reports cover topics including Openness to Investment, Legal and Regulatory Systems, Protection of Real and Intellectual Property Rights, Financial Sector, State-Owned Enterprises, Responsible Business Conduct, and Corruption.
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, proximity to the U.S. market, highly skilled work force, and abundant resources. Canada encourages foreign direct investment (FDI) by promoting stability, global market access, and infrastructure. The United States is Canada’s largest investor, accounting for 46 percent of total FDI. As of 2021, the amount of U.S. FDI totaled USD 406 billion. Canada’s FDI stock in the United States totaled USD 528 billion.
Canada averaged an inflation rate of 6.8 percent in 2022, a 40-year high, though inflation decelerated steadily in late 2022 and early 2023. The high rate was attributed in part to increased energy, food, and commodity prices resulting from Russia’s war of aggression against Ukraine.
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 October 2022, the Canadian government issued a new policy under the ICA to significantly restrict investments in Canada’s critical minerals sector and critical minerals supply chains by foreign State-Owned Enterprises (SOEs) and private investors with close ties to foreign governments. In December 2022, the Canadian government introduced legislation to modernize the ICA.
Despite a generally welcoming foreign investment environment, Canada maintains foreign investment prohibitions in the residential real estate, telecommunication, airline, banking, and cultural sectors. A two-year prohibition on the purchase of residential property by non-Canadians came into force on January 1, 2023. The prohibition follows the implementation of the Underused Housing Tax in 2022. 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.
Canada has taken steps to address the climate crisis by establishing the Canadian Net-Zero Emissions Accountability Act that enshrines in law the Government of Canada’s commitment to achieve net-zero greenhouse gas emissions by 2050 and issuing the 2030 Emissions Reduction Plan that describes the measures Canada is undertaking to reduce emissions to 40 to 45 percent below 2005 levels by 2030 and achieve net-zero emissions by 2050. Canada announced USD 61 billion in tax credits for investments in clean electricity, clean tech manufacturing, carbon capture, hydrogen, and critical minerals.
To access the ICS, visit the U.S. Department of State Investment Climate Statements website.