Canada-U.S. foreign investment regulation: transparency versus diffusion

The US has a large and growing body of restrictions against incoming foreign investments, which creates uncertainty for foreign investors. These are often administered unevenly by all 3 levels of government. Many of these restrictions and prohibitions in commercial areas do not provide for reciprocity. One of the most effective general bars to foreign investment from most countries into the US is the National Security Act and related statutes, designed to control foreign ownership in defense industries sensitive to national security. However, it has had the effect of restricting foreign investment in a large portion of the US corporate economy. The actual restrictions are less important than the comparison of their widespread pattern to the US government's aggressive posture against other countries' practices, particularly Canada in recent years. Among industrialized nations, Canada has long had the highest level of foreign direct ownership and control of its industry, including strategic sectors. Foreign investment has made great contributions to Canada's standard of living, but it also can drain the balance of payments, reduce domestic employment opportunities, and slow economic development. Canada's Foreign Investment Review Agency (FIRA) screens foreign investment, maximizing its benefits and minimizing the potential drawbacks. Recently, changes have been made to improve FIRA's efficiency and clarify its legislation.