- May 1, 2020
The Canadian economy
Aznar(2016), argues an investment agreement refers to a treaty or contractthat has been signed between two or more countries for the purpose ofprotecting, liberalizing and promoting trading between the membercountries. Notably, an investment agreement is associated withvarious benefits. For instance, it enhances international competitionby providing a level playing field for countries involvedsubsequently producing quality goods which are vital for theconsumers. On top of that, such agreements help member countriesachieve higher levels of economic development. It also preventsunfair trade practices amongst the members and increases foreigndirect investments Aznar (2016). In light of this task, the essaywill primarily focus on evaluating the effects of the investmentagreements signed by Canada and other countries. That will includeCanada-China Investment Promotion and Protection Agreement as well asthe Agreement between Canada and the Czech Republic for the Promotionand Protection of Investments.
2.0Canada-China Investment Promotion and Protection Agreement.
Thetalks between Canada and China as far as the promotion and protectionagreements of foreign investments have been going on for a while.They started in the year 1994, but they were interrupted when Chinawas in the process of entering the World Trade Organization. However,the negotiations commenced the year 2004. According to LeSieur(2015), The Canada-China Investment Promotion and ProtectionAgreement was the final talk held between the two countries and itwas signed on 9th September the year 2012 by Chen Deming, China’sMinister of Commerce and Ed Fast who is the Minister for theAsia-Pacific Gateway and Minister for Trade. Besides, the investmentpromotion and protection agreement was presided over by President HuJintao of China and Canada’s Prime Minister Haper (LeSieur, 2015).
Itis also important to note that the primary objective of the treatybetween China and Canada is to ensure that all foreign investors areprotected from unfair trade practices or any discriminatory ruleswhich might negatively affect their operations in either of the twocountries. Equally, the agreement seeks to ensure that expropriationCanada is well known for its excellent economic performance. Thecountry has a broad range of industries such as manufacturing, foodprocessing, manufacturing construction, agriculture, quarrying,mining as well as gas and oil extraction companies. Therefore, TheCanada-China Investment Promotion and Protection Agreement will havethe following implications.
2.1A tool to protect investor rights
Theinvestment promotion and protection agreement between China andCanada is a useful instrument that has been used to ensure that therights of the investors are protected. LeSieur (2015), argues thatthe treaty provides general investment rules that are be followed bythe investors or multinational companies between the two countries.Those restrictions or guidelines are essential in ensuring thatentrepreneurs, private businesses, public enterprises interested inventuring or expanding their operations into untapped markets withinthe two countries, will be obliged to follow and embrace fair tradepractices. As a result, the all the investors are now protected andfeel safe to carry out their operations in Canada or China.Similarly, the agreement seeks to prevent both governments fromenacting arbitrary and discriminatory trade practices againstinvestors. For instance, the agreement has prevented both Chinese andCanadian governments from executing any expropriation processeswithout an adequate and timely compensation. Through that, bothgovernments will have a responsibility to ensure that the tradepolicies or laws passed favour foreign investors. That will allowChinese investors to explore and invest their money in Canadiancompanies because of the environment provided by the government.
Onthe same note, it is crucial to mention that foreign investorsusually prefer favourable conditions where they feel protected sothat they can make their investments. The growth of the industrieswill provide more job opportunities to the native citizens, improvetheir living standards and marginal propensity to consume. That willbe essential for Canada’s economic growth because the governmentwill be able to increase its tax collection to meet its budgetaryobligations such as improving the quality of services offered inhealthcare facilities, constructing roads, building more learninginstitutions as well as initiating development projects essential forcreating more job opportunities. That has been instrumental inimproving the country’s economic growth from 1.2% in the year 2015to 2.2 % in 2016 and 2.7% in 2017 (LeSieur, 2015). More importantly,the agreement has ensured equal and standard treatment to investorsfrom both countries thus minimizing incidences of discrimination.Equally important, the treaty has allowed investors to access theinvestor-state dispute settlement hence enlightening them on thespecific procedures and processes that they should follow to suecompanies for any form of trade malpractice.
2.2Increased foreign direct investment from China
Apartfrom that, the agreement between China and Canada has been effectiveso far because it has enabled foreign investors from China to makepayments, transfer capital or conduct other transactions related totheir businesses in and out Canada. As a result, the Chinese firmsand other industries based in Canada have been able to repatriatetheir profits without any delays that might arise from exchangerates. That has subsequently resulted in increased foreign directinvestments which are vital for Canada’s economic growth.
Toillustrate, Canada’s foreign direct investment rose by 6.8% to$768.5 billion. It is the largest rate of FDI to be recorded sincethe year 2008 (LeSieur 2015). The development is as a result of thetrade agreements that Canada has signed to boost its trade andrevenue generated from imports and exports. On the other hand, theagreement also substantially improved China’s foreign directinvestment rates by 4.2 % in the first quarter of 2016 to hit $ 96.94billion mark. Moreover, the agreement has seen a massive influx ofChinese investors in Canada so that they can access venture into theforeign markets, acquire new technologies to improve their productionprocesses and widen their client base. Because of that, Canada hasbeen able to perform well economically even at a global platform(LeSieur 2015).
3.0Agreement between Canada and the Czech Republic for the Promotion andProtection of Investments
Thisagreement between Canada and the Czech Republic was brought intoforce in January 2012. The treaty has had various implications forCanada.
3.1Increased foreign direct investment
Accordingto Sice (2016), the promotion and protection agreement between Canadaand the Czech Republic requires both countries to countries to takeappropriate measures which will allow foreign investors to come intotheir territories, explore the available or unexploited markets andcarry out their operations in a peaceful and secure manner. Equallyimportant, the treaty has laid down rules and regulations whichshould be followed by the contracting parties. That has played acrucial role in ensuring that investors from the Czech Republic orCanada follow the laws that have been put in place to carry out theirinvestments. For instance, the agreement has clear rules on theprocedure to be followed by the investors when they are setting upnew businesses (Sice, 2016). That also includes the regulationscontrolling the acquisition of new businesses by foreign investors.As a result, Canada has been able to generate more revenue throughthe increased foreign direct investments. Due to the economy’s goodeconomic performance, Canada was able to increase its total revenuefrom $276. 3 billion in the year 2014 to $ 290. 3 billion in 2015(Sice, 2016).
3.2Equity and fairness to the investors
Apartfrom that, Canada has benefited from equity and justice that has beenadvocated by the agreement it signed with the Czech Republic. In thiscase, the investments or the returns that are acquired from thecompanies or businesses run by the investors have been subjected toequal treatment per the international laws which have been put inplace. On top of that, the agreement underscores the need forsecurity and full protection of the investors. That has had positiveimplications for Canada because it has been able to improve its traderelations with the Czech Republic (Sice, 2016).
Theagreement has also stated that it is the obligation of contractingparties to ensure that the government should not forcefully acquirethe returns generated from the activities carried out by theinvestors or their investments without adequate compensation.Expropriation has only be allowed if the due process of the law isfollowed. Because of that, Canadian investors have been able toventure into some of the unexploited markets in the Czech Republic sothat they can generate more revenue for their businesses by having abroad client base (Sice, 2016). Given the fact that the compensationis based on the investments’ real time value that has evenincreased the confidence levels amongst the investors because theyknow that their properties are protected.
3.4Enhanced process of transferring funds
Thetreaty signed between Canada, and the Czech Republic has had positivefinancial implications. To illustrate, the agreement has enabled theinvestors to have a better and suitable platform where they caneasily send or receive money. The contract has removed allrestrictions which may affect the transactions. Further, this freetransfer has been applied to the loans that are being repaid on theinvestments made, the income or profits generated from theinvestments which have been wholly or partially liquidated.Additionally, the free transfer is also applied to any payments orreimbursement that is given to an investor (Sice, 2016). Because ofthat, the free transfer of funds been instrumental in shaping upCanada’s economy.
Asit has been established, trade or investment agreements are vital forthe growth and development of the parties involved. The essayfocussed on two treaties. First, the paper discussed the promotionand protection agreement between Canada and China. In this case, thepaper based its discussion on two broad implications. That isincreased foreign direct investment and a tool for protecting therights of the investors. Apart from that, the essay also discussedinto detail the treaty between Canada and the Czech Republication.Here, the various implications discussed include increased foreigndirect investment, equity, and fairness to the investors,expropriation as well as the unrestricted transfer of funds.
Aznar,F. P. (2016). Local Litigation Requirements in InternationalInvestment Agreements: Their Characteristics and Potential in Timesof Reform in Latin America. JournalOf World Investment & Trade,17(4),536-561. doi:10.1163/22119000-12340003
LeSieur,F. (2015). Treaty on the Wall, Who is the Fairest One of All: TheCanada-China Foreign Investment Promotion and Protection Agreement.JournalOf East Asia & International Law,8(2),427-428. doi:10.14330/jeail.2015.8.2.07
Sice(2016). AgreementBetween The Government of Canada And The Government Of The Czech andSlovak Federal Republic For The Promotion And Protection OfInvestment. Retrieved,November 17, 2016, from:http://www.sice.oas.org/Investment/BITSbyCountry/BITs/CAN_Czech_e.asp