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Activities of foreign majority-owned affiliates in Canada, 2015

Released: 2017-11-20

Foreign majority-owned affiliates operating in Canada saw a reduction in many of their key economic and financial activities in 2015, including level of employment, the value of merchandise exports, and operating revenues, expenses and profits.

The reduced presence of foreign-owned firms operating in key sectors of the Canadian economy, combined with the impact of lower energy export prices, contributed to the decline in some of these activities in 2015.

Employment at foreign majority-owned affiliates in Canada was down by 2.2% to 1.86 million in 2015, a second straight year of decline. Meanwhile, employment at Canadian-owned firms increased by 1.6% to 13.92 million. As a result, foreign-owned firms accounted for 11.8% of all employment in Canada in 2015, down from 12.2% in 2014.

The share of Canada's international trade in goods and services generated by foreign-owned firms was 52.5% in 2015, down slightly from 2014. The reduction was mainly the result of lower merchandise exports by these firms. This was in contrast with increased merchandise exports by Canadian-owned firms in 2015.

Chart 1  Chart 1: Activities of foreign majority-owned affiliates as a share of the Canadian economy, 2015
Activities of foreign majority-owned affiliates as a share of the Canadian economy, 2015

Retail trade accounts for the bulk of the decline in employment at foreign-owned firms

Overall employment at foreign-owned Canadian affiliates decreased by 2.2% in 2015, a reduction of 42,100 jobs.

Across all sectors, retail trade showed the largest decline with a loss of 25,600 jobs. This represented over 60% of all job losses at foreign-owned firms. The decline was mainly observed in British Columbia. Employment at foreign-owned firms in the retail trade sector in the province fell by 20.9% in 2015, compared with a 9.1% increase in employment at Canadian-owned firms.

Chart 2  Chart 2: Employment at foreign majority-owned firms, by major sector (North American Industry Classification System)
Employment at foreign majority-owned firms, by major sector (North American Industry Classification System)

Employment in the accommodation and food services sector also declined with a loss of 11,900 jobs, nearly half in Ontario. In contrast, for the Canadian economy as a whole, the number of jobs in the accommodation and food services sector increased by 33,600.

The share of Canada's international trade generated by foreign-owned firms down slightly

Overall, the value of international trade in goods and services performed by foreign-owned firms in Canada was up by 0.7% in 2015, compared with a 4.2% increase for Canadian-owned firms. As a result, foreign-owned firms represented 52.5% of the national activity in 2015, down slightly from 53.3% in 2014.

The value of merchandise exports by foreign-owned firms decreased by $12.1 billion, while the value of imports rose by $14.2 billion. The largest declines in export values were in mining, quarrying, and oil and gas extraction and wholesale trade, reflecting the impact of lower energy product prices. These losses were moderated by higher export values in the manufacturing sector.

On a geographical basis, US-owned firms still accounted for the largest share of merchandise exports generated by foreign-owned firms at 47%. European-owned firms saw their share of this activity fall from 36% in 2014 to 31% in 2015. On the other hand, the share of Canadian firms owned by investors from Asia/Oceania rose from 14% in 2014 to 19% of all activity in 2015. Japan was the main contributor, with most of the increase from firms in the manufacturing sector.

Chart 3  Chart 3: Merchandise exports by foreign majority-owned firms, by major sector (North American Industry Classification System)
Merchandise exports by foreign majority-owned firms, by major sector (North American Industry Classification System)

Foreign-owned firms in services-producing industries lead the growth in research and development expenditures

Foreign majority-owned Canadian affiliates play a significant role in research and development (R&D) activity and cross-border technological related services in Canada.

In-house R&D expenditures at foreign-owned Canadian enterprises totalled $6.4 billion in 2014, representing more than one-third of all the activity in Canada. Canadian firms majority-owned by the United States accounted for 62% of these expenditures, followed by the United Kingdom (8%) and France (6%). Of all the personnel engaged in R&D activity in 2014, more than one-quarter were employed by foreign-owned firms, led by the United States.

Imports of technological related services by foreign-owned affiliates increased to $11.1 billion in 2015, accounting for 81% of the overall activity. US-owned affiliates accounted for 45% of all imports, followed by Japanese-owned affiliates at 17%. Conversely, exports declined to $7.9 billion. Lower exports from European-owned Canadian enterprises, mainly the United Kingdom and France, contributed the most to the decline.

Lower profits for foreign majority-owned affiliates in Canada

The value of assets held by foreign-owned Canadian enterprises edged up to $2.2 trillion in 2015. On a sector basis, higher assets in the mining, quarrying and oil and gas extraction sector were moderated by lower assets in the finance and insurance sector.

Operating revenues, expenses and profits of foreign majority-owned affiliates were all down in 2015, the first decline since 2010, when the data became available. Operating profits were down the most, falling 16.2% from $85.7 billion in 2014 to $71.8 billion in 2015. On an industry basis, petroleum and coal product manufacturing and wholesale trade were the major contributors, against the backdrop of declining energy product prices.


  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, are now available from 2010 to 2014. These data, however, are not yet available for 2015 at the time of release. Please note that the Research and Development in Canadian Industry Survey was redesigned for reference year 2014. As a result, comparisons between 2014 and prior years for R&D personnel and intramural R&D expenditures should be done with caution.

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.

Products

The updated Canada and the World Statistics Hub – United States (Catalogue number13-609-X) is available online. This product illustrates the nature and the extent of Canada's economic and financial relationship with the United States using interactive graphs and tables. This product provides an easy access to information on trade, investment, employment and travel, including merchandise trade by Canadian provinces and US states.

The Methodological Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-607-X) is available.

The User Guide: Canadian System of Macroeconomic Accounts (Catalogue number13-606-G) is also available. This publication will be updated to maintain its relevance.

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 Carter McCormack (343-998-3002; carter.mccormack@canada.ca), International Accounts and Trade Division.

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