An Overview of Canadian Direct Investment Abroad

The role of transnational corporations (also called transnationals or multinationals) in the world economy has increased dramatically in the past decade or so, and this trend is expected to continue. For instance, the stock of world outward direct investment increased almost fourfold from US$519 billion in 1980 to US$2 trillion in 1992, considerably outpacing the growth of world output and trade. According to the United Nations Centre for Transnational Corporations, there are at present over 37,000 transnational corporations worldwide, controlling some 170,000 foreign affiliates and accounting for over one-third of world private sector GDP. However, a small number of firms represent half of the foreign activity of transnationals. In 1992, the top 1 percent of these accounted for almost 50 percent of the total stock of world outward direct investment. Canada's share of the world's transnational population is about 3.5 percent. During the 1980s, the stock of Canadian direct investment abroad (CDIA) grew at a relatively faster pace than the global stock of outward direct investment. Consequently, Canada's share of the world outward direct investment stock increased from 4.0 percent in 1980 to over 4.5 percent in 1990 (Rutter, 1992). By now, Canada is a major host and home country for foreign direct investment (FDI). The share of Europe and the Asia Pacific Rim in CDIA has increased significantly. since 1985, primarily at the expense of a declining share of the United States. However, the United States is still the dominant location for CDIA. On an industry basis, resources, and resource-based manufacturing industries still accournt for over 40 percent of CDIA. However, the shares of financial services and technology-intensive industries (such as chemicals and chemical products, communication and communication equipment, and non-electrical machinery) have increased dramatically over the last 30 years. The rising share of financial and technologyand information-intensive industries in