In general, because investment has a long-term time horizon, business people need to be assured that political risk is low. New and capricious investment regulations deter FDI and thereby reduce global economic efficiency. Canada has mitigated the worst excesses of left wing economic nationalism through the investment provisions of the FTA and NAFTA. The MAI is the icing on the cake of globalization for Canada.
In short, the MAI is a good news story. All of the substantive concerns raised by the Council of Canadians were first dealt with ten years ago in the satisfactory negotiations for the FTA, and they were reaffirmed in NAFTA. The NAFTA is such an advanced trade and investment pact that it is being used as the model for the MAI. Given that Canada has survived quite well for the last ten years under the investment provisions of the FTA it is well placed to take on board the MAI. The MAI has the additional advantage of helping to open up markets in Europe and Asia for Canadian investors on the same terms as the U.S. market.
Alan M. Rugman is on leave as Professor of International Business at the Joseph L. Rotman School of Management, University of Toronto. He is now Thames Water Fellow of Strategic Management at Templeton College, University of Oxford.
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