PERSPECTIVES ON FOREIGN DIRECT INVESTMENT FROM THE VIEWPOINT OF A CAPITAL RECEIVING COUNTRY

Abstract

THIS PAPER CONSIDERS some of the basic issues raised by the emergence and growth of multinational firms in the higher-income host countries. It was requested that this be done with particular reference to Canadian experience, and with comment on both political and economic questions.' The conclusions would not always be relevant to other higher-income countries and would be quite different in some cases for some lower-income countries especially. Three related questions are considered. There is concern that the economic benefits traditionally associated with foreign direct investment are accompanied by high economic costs, both as conventionally defined and otherwise. There is even greater concern that, whether or not economic progress narrowly defined is involved, foreign direct investment poses a threat to political sovereignty or to the exercise of political power, and to cultural distinctiveness. This is particularly the concern with the large American firms so prevalent in Canada, a concern which is sometimes indistinguishable from the fuller range of questions in the relations between Canada and the United States. Lastly, there is growing frustration at the inability to mount effective policies to modify perceived problems, given the differing views on their importance and the highly regional nature of the country and of its government.