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Activities of foreign majority-owned affiliates in Canada, 2014

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Released: 2016-12-07

Operating revenues earned by foreign majority-owned affiliates in Canada increased by 19% from 2010 to $1.1 trillion in 2014. This growth was led by foreign-owned firms in the services sector, as their revenues increased by more than those in the goods sector.

Meanwhile, total merchandise exports and imports by foreign-owned Canadian affiliates increased by 26% from 2010 to 2014. Foreign-owned firms accounted for 55% of total international merchandise trade in 2014.

Employment at foreign-owned firms rose by 7.5% from 2010 to 1.87 million in 2014, despite a 1.2% decline from 2013. On a regional basis, Alberta and British Columbia were, by far, the largest contributors in terms of employment growth from 2010 to 2014. Overall, employment at foreign-owned Canadian affiliates represented 12% of total Canadian employment in 2014, a share that has remained relatively stable since 2010.

Operating revenues and assets under foreign control continue to grow

Revenues (+2.3%) and assets (+0.5%) of foreign-owned affiliates in Canada continued to grow compared with 2013. Since 2010, revenues have increased by 19% to $1.1 trillion, while assets have risen by 25% to $2.1 trillion. Foreign-owned firms in the services sector led the growth in revenues and assets over this period. On the other hand, operating profits under foreign control declined 0.7% from 2013, but were still 20% higher than in 2010.

On a geographical basis, assets of Canadian affiliates under US control declined from 2013 but were still higher in 2014 than in 2010. This decline from 2013 was more than offset by increases in Canadian assets ultimately controlled by Japan and Germany.

Over half of the assets of Canadian affiliates were US-controlled in 2014, a share that has remained relatively stable since 2010. Meanwhile, the share of assets controlled by the Asia and Oceania region has increased since 2010, reflecting, in part, cross-border merger and acquisition activities over the period.

Chart 1  Chart 1: Assets of majority-owned affiliates in Canada, by select ultimate investing countries, 2010 and 2014
Assets of majority-owned affiliates in Canada, by select ultimate investing countries, 2010 and 2014

Foreign-owned firms account for a large proportion of Canada's total international trade

Total merchandise exports and imports by foreign majority-owned Canadian affiliates increased by 26% from 2010 to $554.2 billion in 2014. This amount represented 55% of Canada's total international merchandise trade in 2014, slightly less than the high of 58% observed in 2012.

From 2010 to 2014, trade activity at foreign-owned firms in Canada grew at a faster pace in the services sector (led by the wholesale trade industry) than in the goods sector.

Chart 2  Chart 2: Total international merchandise trade of foreign majority-owned affiliates in Canada, by goods- and services-producing industries, 2010 to 2014
Total international merchandise trade of foreign majority-owned affiliates in Canada, by goods- and services-producing industries, 2010 to 2014

Foreign majority-owned affiliates in Canada also accounted for a large share of total exports and imports of commercial services, with transactions up 40% from 2010 to $56.4 billion in 2014. These activities accounted for 47% of Canada's total international transactions in commercial services in 2014, up from 42% in 2010.

Cross-border technological related services expand significantly

Foreign-owned Canadian affiliates exported $8.8 billion of technological related services in 2013, the most recent year for which information is available. In contrast, they imported $9.5 billion of technological related services. Since 2010, total trade has increased by 37%.

US- and European-controlled firms were responsible for the bulk of the export activity. For imports, the United States and Japan were the largest contributors.

In terms of employment, there were nearly 39,000 full-time equivalent personnel engaged in research and development (R&D) activity at foreign controlled firms in Canada in 2013, with over 60% at US-controlled firms. Since 2010, personnel engaged in R&D has increased by 6.3% at US-controlled firms but has decreased at European-controlled firms, mainly those under German control.

Alberta and British Columbia lead the growth in employment at foreign-owned affiliates

Employment at foreign majority-owned affiliates in Canada was down 1.2% from 2013 to 1.87 million, the first decline in four years. In contrast, employment at non-foreign owned firms was up by 1.5% in 2014. Nonetheless, from 2010 to 2014, employment at foreign-owned affiliates in Canada grew at a faster pace than non-foreign owned firms in Canada.

On a regional basis, foreign majority-owned affiliates in Ontario, Manitoba and Saskatchewan, Quebec and the territories recorded employment losses in 2014. In Ontario, losses were mainly in manufacturing, as well as in the administrative and support, waste management and remediation services sectors. In 2014, employment at foreign affiliates in the manufacturing sector in Ontario was at its lowest level in four years.

Employment was up at foreign majority-owned affiliates in British Columbia, Alberta and the Atlantic provinces in 2014. In British Columbia, gains were mainly in the retail trade sector, while most of the increase in Alberta was in the construction sector and the mining, quarrying, and oil and gas extraction sector.

Since 2010, Alberta (+24%) and British Columbia (+15%) have led the growth in employment under foreign control in Canada. This growth significantly outpaced employment growth under domestic control in these provinces.

  Note to readers

Foreign majority-owned Canadian affiliates are identified using data on foreign direct investment in Canada and are defined as Canadian entities where a foreign direct investor owns more than 50% of the voting shares. Users should note that these entities do include firms that are also engaged in Canadian direct investment abroad.

The terms Canadian affiliates or foreign-owned firms refer interchangeably to foreign majority-owned Canadian affiliates in this release.

For the geographical dimension, two bases are used to present the ownership of foreign majority-owned firms: the country of the immediate investor, and the country of the ultimate investor. The immediate investing country shows the first foreign country of inter-company claims. The ultimate investing country indicates the economy from which the investment ultimately originates and where the control resides through layers of inter-corporate ownerships.

Round tripping refers to an investment structure where funds from an enterprise in one economy are invested in an enterprise resident in a second economy and are then invested in another enterprise in the first economy. In this release, data that are allocated to Canada on an ultimate basis illustrate the characteristics of enterprises whose ownership starts in Canada, is then routed through one or more foreign countries, and then ends up back in Canada.

The analysis is done for the ultimate investing country basis of ownership unless otherwise noted in the text.

Data on intramural research and development (R&D) expenditures, R&D personnel, and international technological related services (payments and receipts) are now available from 2010 to 2013. These data, however, are not yet available for 2014 at the time of release.

International technological services (payments and receipts) concern foreign transactions made by enterprises for patents (sale or licensing) and unpatented inventions, know-how, trademarks, designs and patterns, technical services, Industrial R&D carried out abroad, and foreign sources of funds for intramural R&D projects.

The primary statistical unit used in this analysis is the enterprise, except for provincial employment data which are compiled at the establishment level.

Please refer to the following CANSIM tables for the Canadian economy totals: goods imports and exports (228-0060), commercial services imports and exports (376-0033), employment (281-0024), intramural R&D expenditures (358-0205), and R&D personnel (358-0159).

Contact information

For more information contact us (toll-free 1-800-263-1136; 514-283-8300; STATCAN.infostats-infostats.STATCAN@canada.ca).

To enquire about the concepts, methods and data quality of this release, contact Angela Yuan-Wu (613-240-2871; angela.yuanwu@canada.ca) or Michael Machum (613-883-1669; michael.machum@canada.ca), International Accounts and Trade Division.

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