New Horizons in International Business series
Edited by Lorraine Eden and Wendy Dobson
Chapter 3: Continental Integration and Foreign Ownership of Canadian Industry: A Retrospective Analysis
* Alan M. Rugman INTRODUCTION The primary research focus of this chapter is an examination of the nature of regional economic integration in North America. In the sense that the Canadian–US bilateral relationship is the focus of this chapter, such regional economic integration is called ‘continental’ integration. Data are discussed which demonstrate extremely strong economic linkages between Canada and the United States. The traditional data at aggregate level, on trade and foreign direct investment (FDI), are supplemented here by ﬁrmlevel data for the set of US and Canadian entries in the list of the world’s 500 largest ﬁrms. In terms of the pioneering work of A.E. Safarian on foreign ownership of Canadian industry, it is apparent that the role of foreign-owned ﬁrms (mostly from the United States) has long been an issue for Canadian public policy. Yet the negotiation and implementation of the Canada–US Free Trade Agreement of 1988, and its subsequent passage into NAFTA in 1993, have reduced inward FDI into Canada. The foreign ownership numbers have been falling to the extent that it is no longer a serious public policy concern. A surge in bilateral trade has partly replaced FDI, leading to ever deeper economic integration. A principal ﬁnding of this chapter is that the extent of continental integration, while of historical concern to many Canadians, is not an exceptional event. Indeed, the bilateral economic integration of Canada and the United States needs to be recognized as part of a worldwide system of deep regional economic integration....
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