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Canada: Market Profile

Picture: Canada factsheet
Picture: Canada factsheet

1. Overview

Canada has a stable government, skilled workforce, well-developed transportation system and is rich in natural resources. Until recently, Canada's healthy banking and financial system and continued growth in non-commodity export-related industries aided by competitive currency dynamics, have lent support to domestic business, consumers amid soft crude oil prices and weak investment in the oil and gas sector. Looking ahead, while the Canadian economy is expected to strengthen in line with the stronger United States and global economy, as well as the stabilisation of commodity prices, the end of the era of ultra-low interest rates and uncertainties stemming from global trade tensions and the United States' post quantitative easing policies and tax reform will likely temper the country's growth in the years ahead.

Source: Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

October 2015
Liberals under Justin Trudeau, the son of former Prime Minister Pierre Trudeau returned to power with a large win over the Conservatives.

October 2016
Canada signed a free trade agreement (FTA) with the European Union (EU).

October 2018
The United States, Canada and Mexico reached a new trade deal to replace the North American FTA (NAFTA). The United States-Mexico-Canada Agreement (USMCA) broadly maintained the key tenets of the original NAFTA, and also gave the United States greater access to Canada's dairy market while allowing extra imports of Canadian autos.

Sources: BBC country profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Canada real GDP and inflation
Graph: Canada real GDP and inflation
Graph: Canada GDP by sector (2017)
Graph: Canada GDP by sector (2017)
Graph: Canada unemployment rate
Graph: Canada unemployment rate
Graph: Canada current account balance
Graph: Canada current account balance

e = estimate, f = forecast
Sources: IMF, CIA World Fact Book
Date last reviewed: May 31, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Canada merchandise trade
Graph: Canada merchandise trade

Source: WTO
Date last reviewed: May 31, 2019

Graph: Canada major export commodities (2018)
Graph: Canada major export commodities (2018)
Graph: Canada major export markets (2018)
Graph: Canada major export markets (2018)
Graph: Canada major import commodities (2018)
Graph: Canada major import commodities (2018)
Graph: Canada major import markets (2018)
Graph: Canada major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: May 31, 2019

4.2 Trade in Services

Graph: Canada trade in services
Graph: Canada trade in services

e = estimate
Source: WTO
Date last reviewed: May 31, 2019

5. Trade Policies

  • Canada has been a World Trade Organisation (WTO) member since January 1, 1995 and a member of the General Agreement on Tariffs and Trade (GATT) since January 1, 1948. Canada maintains a relatively liberal trade regime. There are no foreign exchange restrictions and import licences are only required for a limited number of goods. Imports are generally subject to import duties. To enhance the productivity and boost the overall competitiveness of local businesses, Canada has become the first G20 economy to eliminate all remaining tariffs on manufacturing inputs, of which about 76% are textiles items and the remainder include chemicals, plastics, certain articles of wood, glass, aluminium and graphite, and machinery and equipment. Duties on 1,541 tariff lines were eliminated on March 5, 2010, while duties on an additional 381 tariff lines were phased out over a five-year period and removed altogether by 2015.

  • On November 27, 2013, Canada launched an updated foreign policy and trade plan, entitled the Global Markets Action Plan (GMAP), as a means to encourage market diversification while concentrating its efforts on the markets that hold the greatest promise for Canadian business. Under the Plan, 20 emerging markets and 22 priority sectors have been highlighted with strong competitive advantages or dynamic growth opportunities for Canadians, including aerospace, agriculture and processed foods, education, information and communications technology, life sciences, sustainable technologies and transportation with regard to Hong Kong.

  • Customs tariffs (also known as duties) are tariffs or taxes levied on goods imported into Canada. The amount of customs duty that applies to imported goods depends on a number of factors, including the nature of the duty (i.e., ad valorem or specific), tariff classification, country of origin, and value for duty declared. The Tariff Schedule to the Customs Tariff, which is based on the World Customs Organisation's Harmonized Commodity Description and Coding System, sets out the customs duty rates for goods imported into Canada. Goods that originate from most countries with which Canada does not have a FTA or other preferential tariff arrangement will generally attract the 'Most Favoured Nation' (MFN) duty rate or tariff treatment.

  • Canada also extends preferential tariff rates to many (but not all) products imported from certain countries via the General Preferential Tariff (GPT), the Least Developed Countries Tariff, the Commonwealth Caribbean Countries Tariff, the Australia Tariff, and the New Zealand Tariff. To qualify for preferential tariff rates, goods must meet various requirements with respect to the rules of origin and transhipment, among other things.

  • The importation of certain commodities is, however, tightly controlled. Examples of regulated goods include food products, drugs and medical devices, hazardous products, some weapons and firearms, endangered species and motor vehicles. Import licences are required for items regulated under the Export and Import Permits Act. The act lists various agricultural products (poultry, eggs and dairy products), a number of textile and clothing items and certain steel products.

  • Duties are assessed on the transaction value (the price actually paid or payable for the goods), including commission, brokerage, packing, royalties and transportation. Hong Kong and mainland China origin goods are eligible for the preferential tariffs under the Canadian GPT Scheme.

  • A provincial sales tax is assessed on all imports to Saskatchewan (5%), British Columbia (7%), Manitoba (8%) and Quebec (9.975%). Additionally, a broad-based value-added sales tax, known as the GST/HST, is levied at 5%, 13% (New Brunswick, Newfoundland and Labrador, and Ontario), 14% (Prince Edward Island) and 15% (Nova Scotia). In addition, excise duties and taxes are charged on goods, such as spirits, wine, beer, tobacco products, fuel-inefficient vehicles, automobile air conditioners and certain petroleum products.

  • The USMCA, which replaces the North America FTA (NAFTA), has made key changes to the autos rules of origin. The revised automotive rules of origin require higher levels of North American content in order to incentivise production and sourcing in North America. The agreement specifies that 40% of vehicles sold in the region must come from a market with wages of USD16/hour or more. This wage provision was brought into place in order to attempt to level the playing field between Mexican, Canadian and United States workers and reduce the incentives for companies to outsource manufacturing jobs to cheaper locations.

  • Canada may impose anti-dumping (AD) duties on imports considered to be priced less than the 'normal' price charged in the exporter's domestic market and negatively affect the concerned industry in Canada. Furthermore, if a country is found to be unfairly subsidising its exporters, Canada is authorised to impose a countervailing (CV) duty equal to the amount of the subsidy expressed as a percentage of the export price of the goods. These duties remain in place for five years and can be renewed for additional terms of five years.

  • Currently, Canada imposes AD and/or CV duties on several imports from mainland China, including aluminium extrusions, as well as various carbon, copper and alloy steel product lines, photovoltaic modules and laminates, piling pipe, polyethylene terephthalate resin, pup joints, seamless casing, silicon metal, thermoelectric coolers and warmers, and unitised wall modules. Meanwhile, Canada has also imposed a definitive AD duty of 108.5% on imports of certain concrete reinforcing bar from Hong Kong (except for one company which has an individual rate of 54%) for a period of five years from May 4, 2017.

  • Canada requires bilingual labelling (English and French) for most products. Bilingual designation of the generic name on most pre-packaged consumer products is required under the Consumer Packaging and Labelling Act. Under this Act, the product identity declaration, net quantity declaration and dealer's name and principal place of business must appear on the package or label of consumer goods sold in Canada. In addition, textile labelling and advertising regulations have been amended to allow the use of lastol and polylactic acid as generic fibre names in textile and apparel labels in April 2010.

  • The agency responsible for inspection of imports, Canada Customs and Revenue Agency, also requires an indication of the country of origin on several classes of imported goods. Goods not properly marked will not be released from Canada Customs until suitably marked. In general, environmental claims that are ambiguous, misleading or irrelevant, or that cannot be substantiated, should not be used.

Sources: WTO - Trade Policy Review, Government of Canada, Fitch Solutions

6. Trade Agreement

6.1 Trade Updates

  • On October 29, 2018, Canada ratified the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) agreement. The CPTPP will add nearly half a billion consumers to the growing list of places where Canadian businesses can compete and succeed on a level playing field. The ratification of the CPTPP represents another important step towards trade diversification.

  • After significant negotiations, by October 1, 2018, Canada, the United States and Mexico had reached an agreement on a new and modern trade agreement called the USMCA. This outcome will reinforce the strong economic ties between the three countries and support job creation.

6.2 Multinational Trade Agreements

Active

  1. USMCA/NAFTA: In October 2018, Canada, the United States and Mexico reached an agreement on a new and modern trade agreement called the USMCA. Additionally, a new Customs Administration and Trade Facilitation Chapter standardises and modernises customs procedures throughout North America to facilitate the free-flow of goods. There are also important improvements to disciplines on technical barriers to trade that will make it easier for businesses to export goods within the USMCA region. The USMCA maintains many of the benefits of the previous NAFTA and ensures that the vast majority of USMCA trade will continue to be duty-free. More robust rules of origin for the automotive sector will help keep the benefits of the agreement in North America and diminish incentives to make investment and sourcing decisions based on the availability of low-cost labour. However the United States is yet to ratify the agreement (as of April 25,2019).

  2. The CPTPP: the agreement–comprising Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam–is in effect. The agreement entered into force on December 30, 2018, with the deal representing 13.4% of global GDP, approximately USD13.5 trillion. The CPTPP is the third-largest free trade area in the world, after the USMCA and the EU. The agreement aims to cut tariffs, improve access to markets and set common ground on labour and environmental standards and intellectual property protections.

Provisionally Active

The Comprehensive Economic and Trade Agreement (CETA): The CETA is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force. CETA is expected to strengthen trade ties between the two regions, having come into effect in on September 21, 2017. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport. CETA will take approximately seven years to be fully implemented, after which 99% of the EU's tariff lines will be duty-free.

Under Negotiation

Canada is also undertaking discussions of bilateral or multilateral FTAs with mainland China and MERCOSUR in order to expand market access.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Canada FDI stock
Graph: Canada FDI stock
Graph: Canada FDI flow
Graph: Canada FDI flow

Source: UNCTAD
Date last reviewed: May 31, 2019

7.2 Foreign Direct Investment Policy

  1. Invest in Canada, established in March 2018 as a federal agency, aims to attract, increase and facilitate foreign direct investment (FDI) in Canada by expanding trade, encouraging innovation and further integrating firms into global supply chains. The organisation directs FDI into sectors aligned with the government’s economic growth strategy, in particular advanced manufacturing, digital technology, clean technology, agri-food, health and biosciences, and clean resources.

  2. Canada offers a number of sector-specific incentives to eligible companies, including over CAD3 billion for scientific research and experimental development, incentives to support the growth of clean technology, more than CAD1.3 billion for large industrial and technology projects and the possibility to fast track visas and work permits for specialised foreign workers.

  3. With a few exceptions, Canada offers full national treatment to foreign investors within the context of a developed open market economy operating with democratic principles and institutions. Canada reviews investments under the Investment Canada Act (ICA). Foreign investment is prohibited or restricted in several sectors of the economy, including banking, air and rail transport, media and communications and cultural businesses. Investment in specific sectors is covered by special legislation.

  4. ICA reviews large acquisitions by non-Canadians and imposes a requirement that these investments be of 'net benefit' to Canada. For the vast majority of small acquisitions and the establishment of new businesses, foreign investors need only notify the Canadian government of their investment. Fewer than 10% of foreign acquisitions are subject to ICA review. The threshold for investments subject to ICA review for 2016 was CAD600 million for WTO members (indirect control acquisitions by WTO members do not have to be reviewed). New regulations that came into effect on April 24, 2017 implemented revised review thresholds for WTO investors, other than state-owned enterprises (SOE), and increased the review threshold to CAD800 million. The threshold will be increased to CAD1 billion in 2019. Thereafter the review amount will be subject to indexation. Additionally, the time periods for the security review process will be increased from 130 days to 200 days. For non-WTO members, the threshold remains at USD5 million for direct control and USD50 million for indirect control acquisitions.

  5. Investment relations with other states are governed by Foreign Investment Protection Agreements (FIPAs). These are bilateral treaties that promote and protect foreign investment through a system of legally binding rights and obligations. Canada has 30 FIPAs in force with countries in Central Europe, Latin America, Africa and Asia. Canada is actively pursuing FIPAs with 10 countries including India, Pakistan and Kosovo. Canada views mainland China as an increasingly important trade and investment partner and ratified a FIPA with mainland China in September 2014.

  6. The Invest Canada-Community Initiatives programme provides financial support to communities for their FDI initiatives and activities.

  7. Canada announced new state-owned enterprise (SOE) guidelines in December 2012, which included the statement that future SOE bids to acquire control of a Canadian oil-sands business will only be approved on an 'exceptional basis'. Canada altered the definition of an SOE in its 2013 Budget Implementation Bill to an entity or individual that is influenced directly or indirectly by a foreign government. The Bill also established a separate threshold review for SOE acquisitions of control, and allows Canada's Industry Minister to review minority SOE investments for the first time. SOE investments from WTO member countries over USD375 million are subject to review.

  8. Canada limits foreign ownership of Canadian air carriers to 25%. In addition, foreign interests may not control a Canadian air carrier. One Canadian airline has put a special procedure in place for foreign share-transfers which reclassifies its stock as variable voting shares. This allows non-Canadians to own more than 25% of the equity while reducing foreign voting rights and allowing the airline to remain Canadian with at least 75% of its voting interests owned and controlled by Canadians. A government review of the Canada Transport Act released in February 2015 recommended that foreign ownership limits for commercial airlines be increased to 49% to foster competition.

  9. Regulatory reform in electricity provision continues in Canada in expectation that increased competition will lower costs of electricity supply. Province-owned power firms are interested in gaining greater access to the United States’ power market. Several Canadian provinces have introduced initiatives to encourage the development and implementation of renewable sources of electricity. Canada continues to encourage additional foreign investment in its energy sector to develop its vast oil and gas resources.

  10. Bank ownership must be 'widely held' with no more than 25% of a bank's shares owned by a single shareholder. Canadian influence is still exerted through certain requirements of the Bank Act: the head office of a bank must be located in Canada, shareholders' meetings are required to be held in Canada, two thirds of the directors must be resident Canadians, the chief executive officer of the bank must ordinarily be a resident in Canada, important corporate and transactional documents must be kept in Canada and certain administrative changes require ministerial approval.

  11. Foreigners cannot be majority owners of uranium mines.

  12. Under provisions of Canada's Telecommunications Act, foreign ownership of transmission facilities is limited to 20% direct ownership and 33% through a holding company, for an effective limit of 46.7% total foreign ownership. Canada also requires that at least 80% of the members of the board of directors of facilities-based telecommunications service suppliers must be Canadian citizens. Incentives for investment in cultural industries, at both the federal and provincial level, are generally available only to Canadian-controlled firms. Incentives may take the form of grants, loans, loan guarantees, venture capital or tax credits. Provincial incentive programmes for film production in Canada are available to foreign filmmakers.

  13. The primary responsibility for property law rests with the provinces. Government authorities can expropriate property after paying appropriate compensation. British Columbia began a 15% tax on foreign buyers of residential real estate in the Metro Vancouver area in August 2016. In early 2017, the province announced that foreign buyers with work permits would be exempt from the tax.

  14. The November 2018 Federal Fall Economic Statement proposes to allow an immediate 100% capital cost allowance deduction for manufacturing and processing and specified clean energy equipment acquired after November 20, 2018 and available for use before 2024, subject to a phase-out period for equipment first becoming available for use after 2023 and before 2028.

Sources: WTO – Trade Policy Review, ITA, US Department of Commerce, Government of Canada, Invest in Canada

7.3 Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Any location- Lowest overall tax rate on new business investment in the G7.

- Duty-free tariff regime on imports of manufacturing inputs and machinery.

- The goods and services tax/harmonised sales tax (GST/HST) is fully recoverable for most businesses and does not apply to exports.

- Canada's duty and tax relief is geographically flexible. It can be enjoyed anywhere in the country.

- Canada is the first country in the G20 to offer a tariff-free zone for industrial manufacturers. Canada's initiative applies across the entire country, making it one large free trade zone for firms importing manufacturing inputs.

- Investors who choose Canada will have the advantage of importing advanced machinery and equipment into Canada free of import duties. This reduces the import cost of advanced machinery and equipment, thereby realising productivity gains from efficient production.
Other incentives (regional)- Federal and provincial governments in Canada offer a wide array of investment incentives that municipalities are generally prohibited from offering. The incentives are designed to advance broader policy goals, such as boosting research and development or promoting regional economies. The funds are available to any qualified Canadian or foreign investor who agrees to use the money for the stated purpose.

- The Province of Quebec officially re-launched its 'Plan Nord' (Northern Plan) in April 2015, a 20-year sustainable development investment initiative that is intended to harness the economic, mineral, energy and tourism potential of Quebec's northern territory.

- Quebec also seeks to attract foreign investment through its Maritime Strategy. The province has designated 16 ports where maritime industrial zones will be developed or improved. The provincial government has pledged to invest CAD300 million annually for the next five years and intends to pursue this strategy until 2030.

- Provincial incentives may also be restricted to firms established in the province or that agree to establish a facility in the province.

Sources: National sources, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 5%
  • Corporate Income Tax: 15%

Source: Canada Revenue Agency

8.1 Important Updates to Taxation Information

The latest Quebec budget proposes to expand the mandatory Quebec Sales Tax (QST) registration rules to non-residents of Quebec. Suppliers that make digital and certain other supplies to ‘specified Quebec consumers’, may be required to register for QST under a new specified registration system as of: September 1, 2019, for residents of Canada that reside outside Quebec and on January 1, 2019, for non-residents of Canada.

8.2 Business Taxes

Type of TaxTax Rate and Base
Federal Corporate Income Tax rate (net)15%
Federal Capital Gains Tax rate7.50%
Branch Tax rate25% (5%, 10%, or 15% if treaty with non-resident country is enacted - rates apply according to the treaty)
Withholding Tax: dividends and interest25%
Royalties from patents, know-how, etc.25%
Branch Remittance Tax25%
Goods and Services Tax, a value added tax, applies to a broad range of goods and services5%
Harmonised Sales Tax, a value added tax, applies to a broad range of goods and services in certain provinces15%

Source: Canada Revenue Agency
Date last reviewed: May 31, 2019

9. Foreign Worker Requirements

9.1 Entry Visas

An individual who is not a citizen or permanent resident of Canada or a national from a designated country that is exempt from the visa requirement, and who wishes to enter the country as a tourist, business visitor, student or foreign worker must obtain a Temporary Resident Visa through a consulate outside Canada before entering the country. A foreign national who is exempt from the requirement to possess a travel entry visa (for example, most citizens of a EU country, Australia and Japan) must first obtain an electronic travel authorisation (ETA) before departing for Canada. An ETA is normally valid for five years or for the duration of the traveller's passport, whichever is shorter. The application and approval process is normally very fast for most travellers through the Immigration, Refugees and Citizenship Canada website, but must be completed before departure in order for the airline to allow the traveller to board the aircraft.

9.2 Skilled Workers

Canada launched several initiatives in past years, including the Global Skills Visa, announced in November 2016, to address its skilled labour shortage, including through immigration reform, the inclusion of labour mobility provisions in free trade agreements, including the Canada-EU Comprehensive Economic and Trade Agreement, and the Temporary Foreign Worker Program (TFWP). The Global Talent Stream of the TWFP makes it easier for businesses in Canada to attract skilled foreign workers by fast-tracking the work permit and visa process to only two weeks. The TFWP is jointly managed by Human Resources and Skills Development Canada and Citizenship and Immigration Canada and is divided into two categories: the International Mobility Program, which primarily includes high-skilled or high-wage professions, and the TFWP which refers to primarily low-skilled workers. The number of temporary foreign workers a business can employ is limited.

9.3 Business Visitors

An individual wishing to enter Canada as a business visitor must first secure a Temporary Resident Visa or, in the case of visa-exempt foreign nationals, an ETA. A foreign national may enter Canada as a business visitor without obtaining a work permit in certain limited instances. In general, these instances are limited to foreign nationals engaging in international business activities in Canada, without directly entering the Canadian labour market or providing services to a Canadian entity. Common circumstances in which a foreign national may enter Canada as a business visitor include the following:

  • Foreign nationals attending business meetings or conferences.
  • Foreign nationals seeking to purchase Canadian goods or services or receiving training.
  • Foreign nationals giving or receiving training with a Canadian parent or subsidiary of the corporation that employs the foreign national abroad.
  • Foreign national sales representatives who come to Canada to sell goods (or services) manufactured outside Canada, if they do not sell to the general public.

9.4 Work Permits

With few exceptions, most individuals providing services in Canada's labour market require a work permit, regardless of duration of stay or source of income. Admission to Canada is generally granted for a specific purpose and is subject to a limited duration. All foreign nationals seeking entry to Canada must ensure that they have the appropriate status for their intended activities and length of stay. The federal government, through Service Canada and Employment and Social Development Canada, is responsible for ensuring that the Canadian labour market is not negatively affected by the use of foreign nationals in place of Canadian citizens or permanent residents. A foreign worker may apply to Immigration, Refugees, Citizenship Canada for a work permit only after Service Canada has provided a Labour Market Impact Assessment to the employer that states that a job may be offered to a foreign worker. However, in certain circumstances an employer is exempt from obtaining approval from Service Canada, and the qualifying employee may apply directly for a work permit. Foreign workers employed in low-skilled and low-wage occupations have greater restrictions on their ability to work in Canada.

9.5 Drivers Permits

Foreign nationals may drive temporarily in Canada using driver's licences from their home countries. Because each Canadian province issues driver's licences independently, rules for foreigners vary. In general, foreign nationals have 60 days from the time of their arrival in Canada to obtain a Canadian driver's licence. Depending on the province, an eye examination and a driving examination may be required.

Sources: Canadian Justice and Home Affairs Department, Invest in Canada, Fitch Solutions

10. Risks

10.1 Sovereign Credit Ratings


Rating (Outlook)Rating Date
Moody's
Aaa (stable)
02/11/2018
Standard & Poor'sAAA (stable)
29/07/2002
Fitch Ratings
AAA (stable)20/07/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators


World Ranking
201720182019
Ease of Doing Business Index
22/190
18/190
22/190
Ease of Paying Taxes Index
28/190
16/190
19/190
Logistics Performance Index
N/A
20/160
N/A
Corruption Perception Index
8/180
9/180
N/A
IMD World Competitiveness12/63
12/63
13/63

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices


World Ranking
201720182019
Economic Risk Index Rank N/A27/20229/202
Short-Term Economic Risk Score
73.871.971.3
Long-Term Economic Risk Score72.573.073.3
Political Risk Index Rank N/A4/2024/202
Short-Term Political Risk Score92.792.792.7
Long-Term Political Risk Score92.392.392.3
Operational Risk Index Rank N/A11/20211/201
Operational Risk Score77.976.577.1

Source: Fitch Solutions
Date last reviewed: May 31, 2019

10.4 Fitch Solutions Risk Summary

ECONOMIC RISK
Canada benefits from having a stable government, a skilled workforce, high incomes and good standards of living comparable to other western nations. The country also has a well-developed logistics networks and is rich in natural resources. The Canadian economy should continue operating near potential over 2018-2020, although growth is expected to moderate as higher borrowing costs eat into household-spending gains. Moreover, buoyant economic sentiment should propel the further recovery of non-residential investment. A robust external sector, bolstered by the USMCA, as well as stronger oil and gas exports, should increasingly support activity over the medium-term. That said, looking ahead, Canada's economy remains vulnerable to a hard landing in the housing market, given record-high household debt levels relative to disposable income. A trade-related downside shock to global growth and commodity prices would adversely affect Canadian exporters.

OPERATIONAL RISK
Canada has a robust free-market economy, with businesses ranging from small owner-managed enterprises to multinational corporations. Canada's economic development was historically based on the export of agricultural staples, especially grain, and on the production and export of natural resource products, such as minerals, oil and gas, and forest products. However, secondary industry has evolved to the stage where Canada ranks as one of the top manufacturing nations of the world. The service industry has also expanded rapidly and has transformed the Canadian economy from one based primarily on manufacturing to one with a significant service-based sector. Canada is among the world's major trading nations and the United States is its primary trading partner.

Source: Fitch Solutions
Data last reviewed: June 3, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Canada short term political risk index
Graph: Canada short term political risk index
Graph: Canada long term political risk index
Graph: Canada long term political risk index
Graph: Canada short term economic risk index
Graph: Canada short term economic risk index
Graph: Canada long term economic risk index
Graph: Canada long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Political and Economic Risk Indices
Date last reviewed: May 31, 2019

10.6 Fitch Solutions Operational Risk Index


Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Canada Score77.174.375.476.782.1
Developed States Average73.564.671.376.381.8
Developed States Position (out of 27)9
410
1617
Global Average49.750.349.8
49.049.8
Global Position (out of 201)11
5
151821

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Canada vs global and regional averages
Graph: Canada vs global and regional averages
Country
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk
Index
Crime and Security Risk Index
Denmark80.874.876.288.384.0
Netherlands80.365.978.288.688.4
Switzerland79.975.077.675.191.8
Sweden
79.367.778.187.583.8
New Zealand77.773.775.772.189.4
United Kingdom77.671.479.0
78.581.3
United States77.581.375.382.970.5
Norway77.364.072.280.892.3
Canada77.174.375.476.782.1
Finland
76.155.874.183.491.2
Austria75.460.871.980.588.3
Luxembourg75.254.277.680.088.9
Japan75.172.465.577.984.7
Ireland74.866.878.072.082.5
Germany74.365.569.081.281.7
Australia73.167.872.168.384.3
Spain72.659.468.980.981.3
France72.560.171.183.275.5
Belgium72.458.272.883.275.3
Portugal71.051.766.580.985.0
Iceland71.060.667.269.686.6
Liechtenstein70.559.878.161.582.6
Israel67.471.464.671.162.4
Malta66.254.969.060.880.1
Isle of Man65.869.162.449.382.3
Italy64.854.559.776.268.7
Greece58.954.249.268.963.2
Regional Averages73.564.671.376.381.8
Emerging Markets Averages46.048.146.544.744.8
Global Markets Averages49.750.349.849.049.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: May 31, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Canada

Graph: Major export commodities to Canada (2018)
Graph: Major export commodities to Canada (2018)
Graph: Major import commodities from Canada (2018)
Graph: Major import commodities from Canada (2018)

Note: Graph shows Hong Kong imports from/exports to Canada (by consignment)
Date last reviewed: May 31, 2019

Graph: Merchandise exports to Canada
Graph: Merchandise exports to Canada
Graph: Merchandise imports from Canada
Graph: Merchandise imports from Canada

Note: Graph shows Hong Kong imports from/exports to Canada (by consignment)
Exchange Rate HK$/US$, average
7.75 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: May 31, 2019


2017
Growth rate (%)
Number of Canadian residents visiting Hong Kong370,335
0.3
Number of Canadians residing in Hong Kong14,8891.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division


2017
Growth rate (%)
Number of North American residents visiting Hong Kong1,585,964
0.3
Number of developed state citizens residing in Hong Kong65,680
1.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division, Fitch Solutions
Date last reviewed: May 31, 2019

11.2 Commercial Presence in Hong Kong


2017
Growth rate (%)
Number of Canadian companies in Hong Kong106
-3.6
- Regional headquarters19
11.76
- Regional offices30-6.25
- Local offices57-6.56

Sources: Hong Kong Trade Statistics, Census and Statistics Department

11.3 Treaties and Agreements between Hong Kong and Canada

Canada signed an agreement with Hong Kong on November 11, 2012 for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in Canada, while double taxation will be avoided in that any Canada tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income. Meanwhile, the withholding tax on interests and royalties received from Canada will be reduced from 25% to 10%, while the withholding tax on Canada dividends will be reduced from the current rate of 25% to 15% (and will be further lowered to 5% on fulfilling certain conditions). The agreement entered into force on October 29, 2013 and has been effective from 2014/2015.

Sources: Fitch Solutions, Hong Kong Inland Revenue Department

11.4 Chamber of Commerce or Related Organisations

The Canadian Chamber of Commerce in Hong Kong

The Canadian Chamber of Commerce in Hong Kong - Representing some 1,100 members with business interests in Canada, mainland China and Hong Kong, the Canadian Chamber of Commerce in Hong Kong is the largest Canadian business organisation outside Canada. It is also one of the largest and most active international chambers in Hong Kong and one of the most influential business groups in the Asia Pacific.

Address: Unit B & C, 10/F, China Overseas Building, 139 Hennessy Road, Wan Chai, Hong Kong
Tel: (852) 2110 8700
Website: The Canadian Chamber of Commerce in Hong Kong

Sources: Directory of Hong Kong Trade and Industrial Organisations, The Canadian Chamber of Commerce in Hong Kong

The Hong Kong-Canada Business Association

Source: Federation of Hong Kong Business Associations Worldwide

Consulate General of Canada in Hong Kong
The Consular Section: 9/F, Berkshire House, 25 Westlands Road, Quarry Bay, Hong Kong
The Office of the Consul General: 5/F, Tower 3, Exchange Square, 8 Connaught Place, Central, Hong Kong
Email: hkong@international.gc.ca
Tel: (852) 3719 4700
Fax: (852) 2847 7561

Source: Consulate General of Canada in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Starting March 2016, the Canada Electronic System for Travel Authorisation allows nationals from certain eligible countries to travel to Canada for stays of up to six months with an electronically delivered ETA e-Visa. Hong Kong residents are eligible for this entry method for tourist and business visits. Once approved, the ETA is valid for five years or until the passport expires, whichever comes first.

Source: Government of Canada
Date last reviewed: May 31, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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