Transcript Document

Panel Discussion on
Transatlantic Investment Experiences:
The Impact of EU Enlargement and Canada as
a Gateway to North America
Mario Ste-Marie
A/Assistant Deputy Minister
Investment, Science & Technology
International Trade Canada
October 18, 2005
1
Key issues for discussion
 Explore recent Canadian Direct Investment trends in
the Enlarged EU in the context of global
developments
 Highlight major advantages of Canada as North
America’s gateway for businesses from the EU
2
Patterns of International and
Canadian Direct Investment in
the European Union
3
EU is increasingly important as a destination of global FDI
Global Inward FDI Stock
by Geographic Area (%)
100%
10%
6%
6%
7%
Others
7%
9%
8%
Latin
America
22%
19%
Asia &
Oceania
20%
North
America
45%
European
Union
8%

80%
In recent years, the EU has
made substantial gains in
attracting FDI, largely at the
expense of North America.
16%
14%
60%
26%
29%
25%
40%
20%
42%
EU (15)
42%
38%
EU (15)
EU (25)
EU (25)
1990
2000
2004
0%
1980
4
Source: IPS compilations based on data from UNCTAD
Large developed EU economies attract most of inward FDI
Share of EU Inward FDI Stock by
Member State (%), 2004



United Kingdom
Mostly large and developed
EU economies account for
the bulk of inward FDI stock
in the EU.
The 10 New Member States
(NMS) in the Enlarged EU
together held under 6% of the
EU’s total FDI stock in 2004.
Poland, Hungary and the
Czech Republic are the
dominant destinations of
international FDI in the NMS
(77%)
France
13.3%
Belg. & Lux
11.0%
Netherlands
10.7%
Germany
8.7%
Spain
8.6%
EU NMS*
5.7%
Ireland
5.7%
Italy
5.5%
Sweden
Denmark
4.1%
2.4%
Portugal
1.6%
Austria
1.6%
Finland
1.4%
Greece
5
19.2%
0.7%
Distribution (%) of
Inward FDI Stock in EU 10
New Member States (NMS), 2004
Czech Republic
24.6%
Hungary
26.3%
Poland
26.7%
Slovakia (6.3%)
Estonia (4.1%)
Cyprus (3.5%)
Lithuania (2.8%)
Slovenia (2.2%)
Latvia (2.0%)
Malta (1.5%)
* EU 10 New Member States
Source: IPS compilations based on data from UNCTAD
Low FDI per capita in NMS suggests
strong potential to attract FDI
10NMS
16.4%
7,091
FDI per capita
by country ($)
(2003)
Potential for NMS to attract
FDI from within Europe in the
near future is very promising,
especially for cost
competitiveness reasons
4,009
1,897
6,316
4,345
4,920
2,162 2,334
ia
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Sl
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Cz
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Hu
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Es
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Ma
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Cy
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EU
15
1,351 1,439 1,440
Po
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6
EU15
83.6%
8,781
d

Per capital FDI in NMS is
substantially below the levels
achieved in the EU-15
countries, on average.
La
tv

EU population
distribution
(2003)
Source: IPS compilations based on data from UNCTAD
Canada is the third largest non-EU investor in the region
Distribution of Inward FDI Stock in the
EU from Extra-EU Investing Countries
2002 (%)
United States

The bulk (about 70%) of
investment in the EU originates
from within the member
countries.
Switzerland
In 2004, Canada was the 3rd
largest foreign direct investor
in the EU among non-EU
investors, following the United
States and Switzerland
13.0%
Canada
Japan
Norway

54.2%
6.2%
5.2%
2.5%
Singapore
1.3%
Hong Kong (CN)
1.3%
Australia
1.3%
South Africa
0.4%
Russian Federation
0.4%
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Source: IPS compilations based on data from EUROSTAT
EU is also an increasingly important destination of Canadian
Direct Investment Abroad (CDIA), largely in traditional markets

EU has been attracting an
increasingly larger share of
CDIA since 2000, largely at the
expense of the traditionally
important U.S. market (21% to
27%)
Distribution of CDIA Stock in the EU-25
by country, Top 15
2004 (%)
United Kindom
37.3%
Ireland
17.4%
Netherlands
9.2%
France
8.8%
Hungary
8.5%
Germany

U.K. and Ireland have attracted
over one-half of Canada’s direct
investment in the EU.
Belgium
7.4%
3.9%
Sweden
1.9%
Spain
1.4%
Italy
1.2%
Distribution of CDIA Stock
by geographic Area (%)
100%
18%
80%

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Hungary is the only significant
destination of CDIA among the
three major NMS (Poland,
Hungary and Czech Republic).
Luxembourg
0.9%
Austria
0.6%
29%
29%
Others
50%
44%
US
60%
61%
40%
Portugal
0.5%
Greece
0.2%
Denmark
0.2%
20%
21%
21%
1990
2000
27%
EU
0%
2004
Source: IPS compilations based on data from Statistic Canada
CDIA is the dominant mode for accessing the EU market
Sales of Foreign Affiliates of Canadian
MNEs versus Canadian Exports:
EU versus the U.S., 2003
($Billion)


Investment is preferred to trade as
a commercial strategy for
delivering Canadian goods and
services to the EU.
In contrast, trade dominates
investment as a means of serving
the U.S. market.
European
Union
71
34
Affiliate
Sales
United
States
Exports
366
192
9
Affiliate
Sales
Exports
Source: IPS compilations based on data from Statistics Canada
Key Points

Marked shift in global FDI to EU since 2000, largely going to developed EU-15

The NMS, most notably Poland, Hungary and Czech Republic, have made
impressive gains in attracting FDI

Trend is likely to accelerate as more developed European economies look to
invest in NMS to improve cost competitiveness

Canada is the third largest investor in EU among non-EU countries with CDIA
diversifying from the U.S. to the EU and other regions since 1990

Although most CDIA in EU is still headed to “Old Europe”, Hungary has
attracted a significant share of CDIA – more understanding of this
phenomenon is needed

Investment in EU is the preferred mode by Canadian businesses serving the
EU market
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Canada:
A Gateway to North America for
the European Union
11
Canada enjoys strong trade and
Investment linkages with the United States
Canada - U.S. Trade in Goods & Services
800
 2-way trade in goods and services =
CAN$680 billion in 2004.
600
400
 Averages over CAN$1.3 million
dollars a minute in trade.
($CAN Billions)
Canada to
U.S.
200
U.S. to
Canada
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
 Canada and the U.S. investment stock
between the two countries totaling
CAN$432 billion in 2004.
Canada - U.S. Direct Investment Stock
($CAN Billions)
500
400
 The U.S. trades more with Canada
than with all of the countries of the
E.U. combined!
300
200
Canada to U.S.
100
U.S. to Canada
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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U.S. is the major export destination
of Canada-based EU firms


EU-controlled firms in Canada
account for almost a quarter of
Canadian merchandise exports to
the U.S. by foreign companies.
The overwhelming proportion of
exports (95%) by Germancontrolled firms and more than
80% of exports by other major
EU-controlled firms in Canada are
destined for the U.S. market.
Percentage of Canadian Exports to the U.S. by
Country of Control of Exporting Firms, 2002 (%)
Germany
95
Japan
93
United States
91
Sweden
89
United Kingdom
88
France
87
New Zealand
83
Netherlands
83
Australia
13
0
13
Source: IPS compilations based on data from Statistics Canada
20
40
60
80
100
Why Do EU Firms Invest in Canada?
Canada offers a First Rate Business Environment:
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
Easy Access to Markets
• Geography and NAFTA provide easy access to the world’s
most prosperous market

Excellent Economic Fundamentals
• Overall government budget in surplus
• Low inflation and low interest rates

A Cost-Competitive Business Environment
• Low overall business costs
• Competitive tax system (particularly for R&D)

An Energetic and Welcoming Infrastructure
• Ease in establishing a new business
• The world’s best-educated workforce
• Strong technological environment
Canada
- US
Border:
Smarter
Borders
Secure and Efficient
 January 1994 – North America Free Trade
Agreement establishes world’s largest free trade
area giving Canada direct access to over 400
million people with a combined GDP of over
US$11.4 trillion.
 A secure flow of goods and people at the border is
a key priority for both Canada and the United
States.
 December 2001- Canada and the USA signed a
declaration to build a Smart Border for the 21st
Century to accommodate the growth in trade and
commerce
 March 2005 – Security and Prosperity Partnership
for North America calls for common border security
and improved regulatory cooperation and
collaborative energy and transportation
15infrastructure.
Canada’s Sectors Offer EU Companies
Considerable Potential for Growth:
Canadian Growth Sectors
A
Information and Technology
 32 000 ICT firms;
 work force of 545 000,
 38% university degrees
B
Medical Devices
 22, 000 employees
 $2 B in exports in 2003
 Strengths – cardiovascular/radiation
therapy equipment/medical imaging
C
Automotive
 a North American integrated auto industry;
 8th largest in the world;
 employs half a million workers
D
Energy - Natural Resources
 Oil and gas
 Wind energy
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Conclusion
Canadian and EU companies share the same preferred commercial
strategy to access each others markets:
 To serve the EU, Canadian companies are investing in the EU
 To serve North America, EU companies invest in Canada as the gateway to
North America
 TIEA has the potential to improve prospects for investors in both directions
(regulatory cooperation and investment)
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Mario Ste-Marie
A/Assistant Deputy Minister
Investment, Science & Technology
International Trade Canada
111 Sussex Drive
Ottawa, Ontario
K1A 0G2
www.investincanada.com
[email protected]
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