On October 1, 2014, Canada brought into force its Foreign Investment Promotion and
Protection Agreement (FIPA) with China. Although the FIPA has various trade-related
obligations, it is primarily an investment protection agreement aimed at ensuring Canadian
investors in China and Chinese investors in Canada are treated the same as any domestic or
other foreign investors by the two respective host governments.
There is a near-unanimous consensus among researchers that inward and outward Foreign
Direct Investment flows benefit all nations that engage in such activities. Therefore, this FIPA,
which supposedly encourages greater Chinese investments in Canada, should be good news.
However, the agreement has received a strong opposition since its signing in September 2012.
Critics oppose the agreement for three main reasons. First, they do not believe the agreement
is transparent. Disputes can be resolved in secret through FIPA arbitration tribunals, and case
details are not proactively made public. Second, critics point to the huge losses Canada has
incurred in NAFTA tribunals as evidence that the Investor-State Dispute Settlement provision in
the FIPA could result in similar huge losses through settlements, essentially paid by Canadian
taxpayers’ dollars. Finally, critics argue that Canadian investors in China will not get fair
judgments because the FIPA does not allow them to file a lawsuit in Chinese courts while
Chinese investors in Canada can approach Canadian courts to resolve their disputes.
In this paper, the author looks into the historical trade and investment relationships between
China and Canada to analyze the veracity of the opposition’s claims about the FIPA. While the
claims have some merit, the issues are not black and white. It is historical knowledge that some
flexibility is needed to engage with China. Canadian firms in China often state their investments
as strategic, long term, and filled with potential rather than opportunistic, short term, and for
quick profitability. It is also noted that since coming out of self-isolation, China has made
significant changes in order to modernize its economy. That process still continues.
The author concludes that despite shortcomings, Canada’s FIPA with China builds on their
historical political and economic relationship. Although the agreement is less-than-ideal, it still
provides more protection to Canadian investors in China than was previously available. Finally,
it is also in Canada’s interest to ensure that China—now the world’s largest economy and with
the world’s largest reserve of foreign currency—continues to see Canada as a bright investment
destination. Canada’s FIPA with China is an unfinished document. Canada should continue to
engage China while evolving and reforming the agreement.