Canada’s moment as a global investment destination: Q&A with Canada’s Ambassador to the United States, Mark Wiseman

 
How would you characterize current US investor sentiment toward Canada as a destination for dealmaking and capital deployment?

In spite of what is going on with trade, there is a very strong interest by international investors, including US investors, in Canada. In fact, I would say that in my career, this is the period where I have seen the highest amount of interest by US and other international investors with respect to Canada.

There are several reasons for that. Part of it has to do with the fact that there is a strong perception—and I believe reality—that the current Canadian government is an investor-friendly government which is open to foreign direct investment (FDI), is open to business and economic growth, and is open to streamlining Canadian regulatory processes.

Secondly, and almost as importantly, Canada is viewed increasingly as having what the world wants. And that is not just measured in terms of natural resources like energy and critical minerals, but it is also viewed in terms of Canada's approach and collection of human capital. We have the highest proportion of post-secondary attainment among our citizens of any major country in the world. We have a globally trained and multinational workforce. And we have the type of skills that the world needs today.

So, what is really interesting is that we have a policy environment and the created endowments that make Canada particularly attractive for investors at this time.

How are Canada’s policy initiatives on fast-tracking major projects, providing regulatory certainty and attracting capital being received in the United States?

All of this is getting noticed, including the high degree of alignment of interest between the provinces and the federal government. The Major Projects Office is a part of that. But there are also dozens and dozens of investment opportunities in Canada beyond major projects. Whether it's tax policy, the speeding up and streamlining of regulatory processes, or provinces and territories working more closely together and with the federal government, it is clear to US investors that Canada is moving in the right direction to become an even more attractive destination for investment.

Now, that is not to say the work is done. If you are an investor, of course you always want to see continuous improvement. And there is definitely the need to continue down the path we are on. But certainly, from a directional perspective, as well as the general atmosphere of openness to FDI that Canada is expressing, it is music to the ears of global capital and companies to come and do more work here.

In late June, I was in two key US states for a week. I was in South Carolina at the Southeastern United States-Canadian Provinces Conference. The amount of business activity and interest in coming to Canada was extraordinary. I went from there to Arizona, and it was extraordinary as well, in the desire for increased business linkages between individual states and businesses, and Canada. There is a lot of interest, which I believe will lead to increased northbound deal flow, and increased northbound expansion by US businesses into Canada.

Even though Arizona is a border state with Mexico, they want to do more business with Canada. Arizona also views the trilateral relationship between the US, Canada and Mexico as being particularly valuable to the economy of their state.

To put the Canadian presence in Arizona in perspective, one million Canadians pass through Sky Harbor International Airport in Phoenix each year.

What in particular are US private equity firms and institutional investors looking for when evaluating Canadian investment opportunities or acquisition targets?

I think what people realize is that Canada is an exceptionally large market today. We have 41 million people and our GDP is US$2.5 trillion. This makes us a big and attractive market with critical mass. Beyond that, I think what investors are looking at is the business and supply chain connectivity between Canada and the United States. They see the opportunity—and not just in the Canadian and North American markets. Canada is also increasingly seen as a country with more bilateral trade deals than any other. This means access for businesses in Canada to use the country as a launching pad to go elsewhere in the world.

Investors know they can also get talent in Canada. That is a big deal for them. Most businesses need talent, whether it's managerial talent, engineering talent, or specialized AI talent. They are finding it in Canada, and also finding that talent increasingly wants to be in Canada. This includes talent from third countries. It is easier to attract talent into Canada today than it is into the United States. And that's another advantage for investors to build a business or invest in a business north of the border.

Where else does Canada have a competitive advantage in attracting US capital, and how can we continue to position the country effectively in a competitive global landscape?

A lot of it has to do with the general overall structure. I was recently speaking to the CEO of a business in advanced manufacturing. They are opening a major production facility in the Montréal area. And they were talking about how easy it was to get it open, in what is going to be a Canadian subsidiary. They had to get registered and incorporated, and receive the permissions they needed to build their facility.

There is also the access to the lending market in Canada, and right now it is cheaper to borrow in Canada than it is in the United States. And of course, Canada is a jurisdiction with a clear rule of law and well-trained and sophisticated advisors—be that in legal, accounting or banking. Frankly, for American investors, it feels a lot like home. This makes it easy to open and do business. On top of all that, there’s the tax rate. Canada’s corporate tax rate on average is about 4% lower than in the United States. When you put all of that together, it makes us very attractive.

Now, are we as good as we can be? No, I do not think we are. We need to continually improve. We can be even more streamlined. We are not as nimble as companies and investors are used to in the United States, so there is more we can do. But we are clearly headed in the right direction. We are attractive and becoming more attractive.

How does all of this fit with geopolitical volatility, and how does that affect Canada’s attractiveness as an investment and dealmaking destination?

People are looking at regions of the world they once thought were safe and stable, and seeing that in some cases, things have changed. There is more volatility and some places are less safe and stable than they once believed. In a world that is increasingly uncertain, Canada feels like a stable place. We have stability of government, we have a democratic process that is tested and secure, and we obviously have physical security.

As investors and dealmakers look for a place that is going to feel safe in very choppy waters, Canada is a safe harbour. Whether it’s our geopolitical standing or our domestic political stability, it's feeling like Canada is well positioned, if we play our cards right, to have more of the world beating a path to our door.

How are current trade and tariff dynamics affecting cross-border investment and M&A activity?

To start, we are in a good place. We definitely would be in a better place if we had more certainty on the trade files. Tariff policy around the world, vis-à-vis the United States, is uncertain. And for investors, whether a business that is looking to expand, or a sovereign wealth fund or a pension fund thinking about allocating capital, that uncertainty comes at a cost. It produces more risk in a business model and therefore has a higher cost of capital. And we are feeling uncertainty now as we go through the CUSMA review process.

But as I said recently, we also have to take a bit of a deep breath around this. What I mean by a deep breath is to remember several important points. Firstly, CUSMA expires on June 30, 2036. This is a 16-year agreement. The review process that was launched on the first of July is a prescribed part of the agreement. After six years, all three parties are required to raise issues they may have around the operation of the agreement and other trade issues. It allows the parties to have a dialogue and discussion. And if they should choose to renew the agreement, it effectively means extending it from 2036 to 2042, because you go back to time zero for 16 years.

The CUSMA review process is certainly important, but the agreement is unlikely to go away. Now, any party can withdraw from the agreement on six months’ notice. That was true the day it was signed. It is true today and will be true after the review period. But the review process is a kind of waypoint at year six of a 16-year agreement.

Also, we have sectoral 232 tariffs on steel, aluminum, autos, and forest products, and this is problematic. But even if you take those into account, Canadians and Canadian businesses on a whole benefit from the lowest dollar-weighted tariffs of any country in the world, vis-à-vis the United States. And if anything, Canada is actually becoming more competitive on a relative basis, as there's been increased tariffs on other countries who are not part of the CUSMA agreement. So yes, we would like to have more certainty. Yes, in particular, we would like to resolve the 232 sectoral tariffs. Yes, we would like to review and renew the CUSMA agreement as soon as it's practicable. But even with that backdrop, Canada remains in an incredibly attractive position, not least of which because we are adjacent to the largest, most dynamic, most innovative economy in the world. And Canadian business and Canadians have exceptional access to that market.

And at the same time, we have a government that has stated very clearly that it wants to continue to diversify and double its trade in absolute terms in the next 10 years with the rest of the world—not at the expense of the United States, but in addition to growing its trade with the United States. And the government is very clear that the goal of doubling trade with the rest of the world is not a relative goal. It is an absolute goal because we want to achieve that and continue to benefit and grow the access that we have to the US market.

And by the way, trade between Canada and the United States in the last six years under CUSMA has increased 27%. We've got to continue that growth and grow access to the rest of the world. As a whole, we really do continue to be in a good position and in a rarefied place in terms of our access to the US economy.

What are your final thoughts on how the outcome of the CUSMA review informs longer-term US investor perspectives on Canada as an investment destination?

More certainty is better. The business community in the United States, like the business community in Canada, would like to see the review process completed and see a renewal of CUSMA. That is true of most members of Congress. It is true of most states. As I said, I was just in Arizona and South Carolina, and the leaders of both states are huge proponents of free trade. And if you go across the border states, you would find even more alignment of interest, regardless of whether it's North Dakota or New York.

On a final note, we look forward to seeing some of our friends in the United States and global investment community at the first-ever Canada Investment Summit in mid-September in Toronto. The response to the Summit has been incredible and it is massively oversubscribed.

It will put the spotlight of FDI squarely on Canada. To put the demand for the Summit another way, if it was a restaurant in Toronto or Manhattan, it would be the hottest new restaurant in town.