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Do Investment Agreements Necessarily Cause Offshoring? The Canada-Peru Case

Stephanie Houle

Department of Economics Working Papers from McMaster University

Abstract: This paper studies firm offshoring behaviour following the Canada-Peru Foreign Investment Protection Agreement (FIPA) enactment in 2007. This is achieved by using confidential Statistics Canada firm tax filing microdata merged with raw firm-level import microdata. While in the aggregate data, there is a large increase in Foreign Direct Investment (FDI) by Canadian firms and a change in the composition of Canadian firm imports from Peru from raw unprocessed ore to manufactured metals, the microdata show that the change is not simply offshoring by individual firms. FDI into Peru was in mining as opposed to manufacturing. Moreover, firms that increased their Peru investment did not reduce their Canadian employment, nor were they the same firms with large increases in imports. Hence, these findings in the microdata show that the large increase in investment to Peru was not associated with offshoring of Canadian firms.

Keywords: Investment Agreements; Multinational Firms; Offshoring; Foreign Direct Investment (search for similar items in EconPapers)
JEL-codes: F13 F23 F53 L23 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2018-03
New Economics Papers: this item is included in nep-int
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