It is the responsibility of the Canadian government to create a trade and investment strategy with China that is mutually beneficial. The current China-Canada Foreign Investment Promotion and Protection Agreement (FIPA), which came in effect October 1, 2014, is debated in this regard.
The Canada-China FIPA, originally signed in September 2012, equips both Canadian and Chinese corporations investing abroad with the power to challenge government legislation that interferes with their operations.
Critics of the FIPA argue that within Canada, Chinese investors and minority shareholders will be able to sue provincial and federal governments that implement policies that interfere with their operations. The treaty also allows lawsuits filed against Canada to be kept secret until a settlement is received, allowing the government to make authoritative decisions using public money without consultation from the public.
Although the same laws apply to Canadian investors in China, the current trade ratio is imbalanced in favour of China. Chinese foreign investment represents 2.4% ($16,697,000,000) in Canada, while only 0.6% (4,917,100,000) of Canadian investment is in China. These figures indeed demonstrate that, at this time, the FIPA benefits China more than Canada.
The Government of Canada argues that the China-Canada FIPA will prove beneficial to the country by laying the policy groundwork to stimulate economic growth. Since investing in Canada will become less risky and potentially more profitable, the government hopes that the Chinese will pour billions more into the Canadian economy. Additional foreign investment could stimulate job creation, especially in industries such as natural resources. The ratification of this FIPA allows China to increase dependence on Canada’s natural resources. Significant Chinese investments have focused on the oil sands. With the expanding middle class, the Chinese will continue to increase their energy needs. However, all Chinese companies must adhere to the same environmental and health standards, as any other company working in said industry. The government is not allowed to single out a specific Chinese company without doing so to others.
Additionally, “investment agreements provide the protection and the confidence Canadian investors need to expand, grow and succeed abroad.” The Chinese legal system has not always been fair to foreign companies. Canadians will likely increase their investments in China, now that their operations are protected under the treaty.
Examining the Canada-China FIPA demonstrates that while heavily debated, the Canada-China FIPA provides many benefits for investors abroad in China while strengthening our domestic competitive advantage.
