Canadian Public Policy

US Ownership of Firms in Canada: Issues and Policy Approaches by Steven GlobermanReview by: William C. WedleyCanadian Public Policy / Analyse de Politiques, Vol. 6, No. 2 (Spring, 1980), p. 411Published by: University of Toronto Press on behalf of Canadian Public PolicyStable URL: http://www.jstor.org/stable/3550015 .

Accessed: 14/06/2014 17:27

Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at .http://www.jstor.org/page/info/about/policies/terms.jsp

.JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range ofcontent in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new formsof scholarship. For more information about JSTOR, please contact support@jstor.org.

.

University of Toronto Press and Canadian Public Policy are collaborating with JSTOR to digitize, preserveand extend access to Canadian Public Policy / Analyse de Politiques.

http://www.jstor.org

This content downloaded from 185.2.32.134 on Sat, 14 Jun 2014 17:27:56 PMAll use subject to JSTOR Terms and Conditions

Reviews/Comptes rendus / 411

estimates the importance of MNE's in Canada's 1974 exports and imports. The final appen- dix describes the computer program used to generate the book's pseudo-empirical results.

In conclusion, Mathewson and Quirin have written a book well worth reading by people interested in questions of Canadian international trade policy and in the theory of multi- national corporations per se. More work needs to be done along these lines, particularly in terms of Canada's trade options.

L O R R A IN E B. E D E N /Economics Department, Mount Saint Vincent University

US Ownership of Firms in Canada: Issues and Policy Approaches by Steven Globerman. C.D. Howe Research Institute (Canada) and National Planning Association (USA), 1979. Pp. vii, 96. $5.00.

This short book covers two related subjects - the impact of US foreign direct investment on Canada and the influence which FIRA (the Foreign Investment Review Act) has had upon that investment. To cover two such broad topics in only 96 pages means that many issues cannot be explored in depth.

Globerman manages to be both invigorating and exasperating at the same time. He has done a masterful job of succinctly summarizing past research and then analyzing new material of his own. If only he could have written without the heavy-handed jargon of the economist and without the wordiness of the academician, then his work would have been more presentable to the public. An editor with a sharp pen could have widened the potential audience.

The inattention to correct words is even exhibited in the title. Except for one chapter which analyzes Westinghouse Canada's attempt to divest itself of its appliance division, the monograph says very little about firms in Canada. It says much, however, about the more global topic of US direct investment in Canada - how that direct investment brings net ben- efits to both Canada and the US and how the review process reduced the income benefits of both countries.

In keeping with the general viewpoints of the C.D. Howe Research Institute, Globerman advocates non-intervention in economic matters. Attempts to control foreign investment through FIRA has resulted in a one-time drop in direct foreign investments. In the absence of FIRA, these investments would have produced net economic benefits for the Canadian economy. Foreign portfolio investment does not fill the void, because it is an imperfect sub- stitute for direct investment. The latter type of investment brings with it technological com- petence, marketing expertise, supply access, and economies of managerial control which.are not associated with portfolio investment.

Acknowledgements are made throughout the book to consider both direct and indirect factors and economic and non-economic benefits. Unfortunately, only the direct and eco- nomic variables are capable of rigorous analysis. By putting aside the intangibles, this book will do little to lessen the debate between the free traders and nationalists. But it helps focus the issues and it recommends that additional study is necessary. For example, a better under- standing why foreign direct investment occurs in non-technological industries will give in- sights as to how Canadian industry can be improved. One probable deficiency is the dearth of indigenous managerial talent.

The conclusions lauding foreign investment and recommending non-interference in invest- ment flows are based on an analysis of US investment in the Canadian manufacturing indus- try. One difficulty in drawing conclusions from foreign investment from one country in one industry is that the results cannot be extrapolated to other countries or other industries. Just because it appears that direct investment in manufacturing has benefited Canada does not mean that similar results will come from foreign investments in the resource industry. Our future demands for foreign investment are likely to be strongest in the resource industry, yet the development of our non-renewable resources is likely to be affected by longer-term in- ventory policies rather than the immediate workings of the marketplace.

w IL L IA M C. W E D L E Y / School of Business Administration and Economics, Simon Fraser University

This content downloaded from 185.2.32.134 on Sat, 14 Jun 2014 17:27:56 PMAll use subject to JSTOR Terms and Conditions