global business cultural analysis canada

Running head: GLOBAL BUSINESS CULTURAL ANALYSIS 1

Global Business Cultural Analysis: Canada

Subin Panta

Liberty University

GLOBAL BUSINESS CULTURAL ANALYSIS 2

Abstract

Canada is Canada is the 2nd largest country in the world with population over 30 million.

Canada’s two largest and most important industries are logging and oil. The eight dimensions of

business culture in Canada and the differences with US. Things to consider for US business

retailers who wants to expand to Canada. How the free trade agreement between US and Canada

started and settled into NAFTA. The investor wanted to invest in Canada can get benefit from

NAFTA provisions. Canada has bilateral trade agreements between, European Union and Asia.

SWOT analysis of doing business in Canada

Keywords: Business cultures, Canada, Trade Analysis, Import, Export, SWOT Analysis


Global Business Cultural Analysis: Canada

The breakthrough in technological advancement has made the world feel lot closer than

before. The markets previously unreachable can be reached with an ease. The corporations are

maximizing their profits from doing business around the globe. As per consumer, the products

that are common on industrialized countries only, can be bought on the local market. All these

happened because of the international business.

Canada is the 2nd largest country in the world.

Canada is the 2nd largest country in the world with

population over 30 million. According to IMF and World

Bank’s GDP ranking, Canada has the 10the largest

economy in the world. Heritage Foundation ranks

Canada 6th in terms of economic freedom. (Business

vibes, 2012)

Canada’s two largest and most important

industries are logging and oil. Also, it has 8th largest

commercial fishing and seafood market of the world.

Canada’s manufacturing sector heavily relies on

production of automobile and aircrafts. But the service

sector employs 75 percent of Canadians, which makes it

most dominant. Other industries includes energy (vast

natural resources) and agricultural. (Business vibes,

2012)


This research project is aimed to help us

understand the business cultures of Canada and Canada’s

role in the world economy today.

A. Introduction

1. Brief history

Canada is the world’s 2nd largest nation in the

world. It has diversified cultural heritage with over 30

million people. British and French colonized the Canada

but the wave of immigrants from Asia and other

European countries have diversified the culture. Canada

is officially bilingual country. English is the main

language but you will have to give equal recognizance to

French speaking minorities. Canada has large number of

immigrants coming from all over the world. So business

managers have to consider meeting people from the

different cultures than French and British. (Business

vibes, 2012).


2. What are the major elements and dimensions of cultures in Canada?

On this section, I would be discussing the

elements and dimensions of the cultures in Canada. The

paradigm of culture can be broken into several

categories: communication, religion, ethics, values and

attitudes, manners and customs, social structure and

education. The global manager should be knowledgeable

of these dimensions and adapt accordingly.

2.1 Communication:

The global manager, in order to success in this

fast paced world, he should have adequate knowledge of

communicating with its counterpart. The people from

different culture speak differently. The high and low

context of communication style of English speaking

Canadian and French speaking Canadian. Canadian

people tend to be very reserved. Both French and English

Canadian use a firm handshake with eye contact when

meeting and leaving. Usually male counterparts wait for

female to extend their hands for a handshake. French

Canadian will shake hands more frequently than English

Canadian. Using person’s title are if they have are highly

recommended if not Mr., Mrs., Miss and the surname are


preferred. French Canadian uses their first name when

talking on the phone but use their full name when

meeting in person. French Canadian prefers open

conversation with body language and sign. But English

Canadian prefer reserved conversation, they think it as a

confident and credible. French Canadian stands very

close to you while talking but give enough space. While

dealing with French Canadian, all the business related

material should be printed in English and French. While

talking, don’t say “we American”, it infers that we are

including our Canadian host and they might feel it

offensive. (Roberts and Taylor, “Canadian business

etiquette”, 2012)

2.2 Religion:

Canada is culturally diversified country. The

religions are diversified as well. The predominant

religions in Canada are Catholicism which represents 42

percent of its population and Christianity who represents

40 percent. The other religions are Muslims, Sikhs,

Hindus, Buddhists and minor religions. The heavy

concentrations of Catholics are in Quebec and most of

them are French Canadian. This is because the 83

percent of the French people are Catholics. When settlers


arrived from France and England, they tend to promote

their religion and as a result the Canada has been

diversified in religion. English settler were mostly

Christian, thus the Christianity became other

predominant religion in Canada. And the floods of

immigrants from Asia, Europe brought their religion to

diversify Canadian culture are religions. (Roberts and

Taylor, “Canadian business etiquette”, 2012)

2.3 Ethics:

Ethics are defined as the moral value. Different

people have different moral compass. Some people will

do anything to success in business. They will use

coercion, corruption or bribery to get the favorable

outcome from their business venture. These practices are

widely accepted in developing countries. But it has been

practiced by the business officers from the developed

countries to get the positive result for doing business in

the developing countries.

Canada didn’t have regulatory governing bodies like US securities and Exchange

commissions and foreign corrupt practice acts till 1996. Canada’s business ethics have been

frame worked by broader socio-political and socio-economic factors. In order to satisfy the

growing concerns from US and Europe, Canadian business ethics evolved. It has been shaped by


pressures from Canadian society, share ownership from churches, responsible institutions, ethical

investors, self-interest of executives. Canadian citizens concern in health, conscience, the

environment and the good corporate governance has helped to shape the business ethics. As

Canada’s economy became dependent in global market, people became more aware of the ethics

in business places. (Brooks, 1997). The ethical investors who wish to invest which reflect their

value screen their investment portfolio to make sure they don’t violate environmental, health

laws. (Brooks, 1997) The group like social audits by the United Church of Canada, Task Force

on Churches and Corporate Responsibilities (TCCR) and Fairvest Securities Corporations are

most significant ethical investing firms in Canada. Also the development of regulatory centers

like Canadian Center for Ethics and Corporate Policy (CCECP) and the Centre for Corporate

Social Performance and Ethics (CCSPE) has created the code of ethics by which the Canadian

companies get the guidance to improve their ethical performance. (Brooks, 1997) Mr. Colin

Boyd, (Boyd, 1997) feels that in two areas where Canadian business ethics are varies with other

countries. The social activist organization, like Greenpeace, attacks on business ethic on

harvesting baby seal and fur-bearing animals. The other areas where Canadian business attitude

differs from the other countries are in the issues like ageism, sexism and gender preference.

(Boyd, 1997)

2.4 Values and Attitude:

Culture cannot be defined without defining

values and attitude of its people. Culture is accumulation

of values, rituals, norms and traditions that set apart the

members of one society to other. (Yeganeh, 2011). The

language, organization and technology are the most


important elements of culture. (Scholtens and Dam,

2007) According to Scholtens and Dam (2007) values

are perceived as broader tendencies to prefer certain

states of affairs over others. The values are basis of

standard by which norms are developed. (Satterlee, 2009,

p.51) According to Satterlee (2009), attitude is what one

thinks or feels about someone or something. Canadian

business managers attitude are strict as they want you to

be punctual for meeting and appointments. French

Canadian have relaxed attitude but you should be

punctual even if they are not in time. Canada has the

highest ranking individualism in Hofstede’s ranking that

means Canada has society with individualistic attitude

and doesn’t bond well with others. They look out for

themselves and their families. They value their privacy

as their cultural norm and wouldn’t share with someone

outside their comfort zone. (Roberts and Taylor,

“Canadian business etiquette”, 2012) Canadian people

don’t like gender discrimination. Male and female works

in the co-operative work environment with mutual

respect to each other. (Boyd, 1997)

2.5 Manners and Customs:


Canadian people have their own manners and

customs. The Canadian people prefer businessmen and

women to wear dark colors business suit with tie, and

quality leather shoes. Classic clothes that are neat and

clean are preferred than new fashionable clothes. While

you are not in business or at work, you should wear

casual dress considering the weather. If you are showing

“V for victory” sign your palm should be outward, “V”

sign in with your palm inward means insult. (Roberts and

Taylor, “Canadian business etiquette”, 2012)

Canadian business cultures are strict on their attitude towards time. You are expected to

be punctual for meetings and appointments. Mostly in French speaking areas like Quebec, time is

far relaxed than other places. But you are expected to be punctual even your host is not on time.

Canadian people are of reserved demeanor and they expect you to be as well. Canadian people

don’t like people eating and walking on the public. The gift giving is not widely popular in

Canadian culture but after finalizing the deal, a nice gift of wine or liquor for office is always

appreciated. Canadian people rarely invite you to their home. Canadian people don’t talk

business during or after a meal. If you have extra ticket to sporting events, play or symphony,

taking your Canadian counterparts is always a nice gesture. When you are in English speaking

cities, don’t gesture by hand or move your body too much and there is rarely touching except

handshakes. But in French speaking areas, people stand close and will touch and gesture

frequently. (Roberts and Taylor, “Canadian business etiquette”, 2012)


Both French and English Canadian use a firm

handshake with eye contact when meeting and leaving.

Usually male counterparts wait for female to extend their

hands for a handshake. French Canadian will shake

hands more frequently than English Canadian. Using

person’s title are if they have are highly recommended if

not Mr., Mrs., Miss and the surname are preferred.

French Canadian uses their first name when talking on

the phone but use their full name when meeting in

person. French Canadian prefers open conversation with

body language and sign. But English Canadian prefer

reserved conversation, they think it as a confident and

credible. French Canadian stands very close to you while

talking but give enough space. While dealing with

French Canadian, all the business related material should

be printed in English and French. (Roberts and Taylor,

“Canadian business etiquette”, 2012)

2.6 Social structure and organization:

Satterlee (2009) described social structure as the

organization of its institutions, social group, statuses and

roles. (Satterlee, 2009, p.54) Canada doesn’t have

distinctive social structure and it’s confirmed by

Hofstede’s Power distance dimensions. Power distance is


determined by the how much the culture accepts the

importance of position that separates people. (MacNab

and Worthley, 2007) Canada has low Power distance

which means it is acceptable to address superiors with

their name. Canada also has equally distribution of

wealth and social programs. Canada has income equality,

larger middle class and spends two third of their tax

revenue in social programs.(MacNab and Worthley,

2007) Canada has low score of 39 comparing to world’s

average of 55, which indicates that greater level of

equality between social, government, organization and

families. However, French Canadians are more formal,

hierarchical than English Canadian. (Cultural Insights,

2013)

2.7 Education:

The Canadian school systems are different from

each province. They do not have federal department of

education, all the policy making are done on provincial

level. The ten provinces and three territories are

responsible for organization, delivery and assessment of

education in elementary, secondary, technical, vocational

and post-secondary levels. The schooling is mandatory to

the age of 16 in all provinces of Canada, except on New


Brunswick and Ontario where the mandatory age is 18.

School usually starts on September of every year and end

on June of next year. Both English and French medium

for education are provided depending on the area where

enough students are speaking the secondary language.

According to the government report, each provincial are

unique and so are the curriculum and assessment which

expresses the geography, history, language, culture of

that province. The child generally starts kindergarten at

age five. Depending on the province, the elementary

school usually includes grade one to six, after that junior

high for seventh and eighth. Some province doesn’t have

junior highs, so elementary school includes grade one to

eighth. And after elementary or junior high, high school

are from nine to twelve. But in Quebec, high school ends

in eleven and followed by a program that prepares

student for university or technical field. After high

school, people can go to vocational school, technical

school or university. (Working in Canada, 2012)

3. How are these elements and dimensions integrated by locals in

conducting business in Canada?


Canadian businessmen/women are very proud of

their culture. The Canadian culture can co mingles with

any other culture. Rushton explains that we are attracted

to people whom we think have similar culture and we

keep distance from we think are dissimilar to us.

(Yeganeh, 2011) Many researcher believe that

difficulties, costs, conflicts, communications and risks

dramatically increase when two culturally different

people do business.(Yeganeh, 2011) The research done

by Mr. Yeganeh (2011) shows that linguistic

commonality has positive implications but the cultural

distance and religion doesn’t seem to be significant to

international trade.

Heritage Foundation ranks Canada 6th in

economic freedom. (Business vibes, 2012) Canadian

business cultures support the new entrants in their

market. If you want to invest or expand your business in

Canada, I would recommend all the documents to be in

English and in French, as Canada is officially bilingual

country. Lots of legislations are regulated by provincial

government. To protect their culture from foreign

invasion, Canada has placed certain foreign investment

and antitrust laws. Canada has lower threshold when it


comes to acquisition of sensitive sectors including

cultural business.(Delfino and Paura, 2009) Delfino and

Paura (2009) defined cultural business as the publisher,

distributor and sellers of books, magazines, newspapers,

music, audio, film, video, music video recording and

broadcastings. If it’s direct acquisition minimum

threshold is C $5 million and if it’s indirect minimum

threshold is C$ 50 million.(Delfino and Paura, 2009)

Canada has distinctive laws regarding real estate

acquisition. Some Canadian provincial jurisdiction, who

regulates by local municipal government, challenges new

entrants in the area of real estate assembly and zoning

approvals. (Delfino and Paura, 2009) The consumer

protection legislation falls under provincial government,

which regulates sales to consumers, mandatory

disclosure requirements of consumer agreements and

limit the retailer’s ability to exclude statutory implied

warranties. (Delfino and Paura, 2009) The Canadian

provincial legislations are more favorable to trade

unions. Delfino and Paura (2009) wrote that if retail

employees are not unionized, provincial employment

standards legislation provides protections. The privacy

laws, regulated by both provincial and federal level,


dictate the retailer and other business connections with

the collection, storage and use of the personal

information of customers and employees. (Delfino and

Paura, 2009) Canada has placed various investment

restrictions like investment screening, domestic content,

performance requirements and rules in interest of

protecting Canadian culture. (Price and Christy, 1995)

Not to mention, the immigration laws in Canada are

getting tougher and tougher, to control the flows of

immigrants from all over the world. Finally the Canadian

Federal Income Tax Act requires all non-resident person

or corporation to pay income tax on its taxable income.

(Chiavetta, 1991) Beside federal taxes and provincial

taxes, there is an additional tax of goods and service tax

which is imposed on purchasers of goods and services.

(Chiavetta, 1991)

Canada wants to open their market to world and

at the same time protects its rich culture and heritage.

4. How do both of the above items compare with US culture and business?

Many people make the mistake of thinking

Canada and USA has same culture, being next to each


other. But Canada is the independent country with its

own rich heritage and culture. In this section, I will try to

differentiate between the two countries.

4.1 Cultural difference in US:

USA and Canada share the border but their

cultural heritages are different and so are the business

cultures.

4.1.1 Communication:

Communication wise English Canadian and American people are not so different. Both

offer a firm handshake with eye contact upon greeting and leaving. If you meet your good friend,

you hug briefly. The little difference in introduction style is that if there is title it’s same way, if

using Mr., Ms., Mrs., Americans use full name not only surname. Americans exchanged business

cards during introductions so as their Canadian counterparts. (Roberts and Taylor, “United states

of America”, 2012) Unlike Canada, America is not bilingual country.

4.1.2 Religion:

Like Canada, USA is also the predominant Christian country, about fifty six percent of

population and the Catholicism followers are twenty eight percent of population. The other

religions that are on rise in America are Jews, Muslims, Hindus, Buddhist, Atheist and other

minor religions. (Roberts and Taylor, “United states of America”, 2012)

4.1.3 Ethics


Ethics are important to Americans. There are

regulatory bodies like US Securities and foreign

Exchange, Foreign Corrupt practice acts which protects

the individuals from fraud and unethical business

practices. Both Canada and USA has strong penalties and

punishment for corporations or people using unethical

business practices or fraud. (Boyd, 1997)

4.1.4 Values and Attitude

Satterlee (2009) described values as an interpretation of culture by society members. A

successful business manager should take care in consideration of values and attitude of host

culture. American business managers like their Canadian counterparts are strict on concept of

time. American has the highest ranking individualism in Hofstede’s dimension which means like

Canada, American is also the society with individualistic attitude and look out for themselves

and their families. American people don’t like any kind of discrimination of gender or race.

(Roberts and Taylor, “United states of America”, 2012)

4.1.5 Customs and Manners

American customs and manners are relatively

similar to Canadian. Like the Canadian people American

businessmen and women prefer to wear dark colors

business suit with tie. When doing business in rural area ,

men can come to business meeting without wearing a


jacket and or tie and women can wear dress, or skirt and

blouse. Clean and neat clothes are preferred to

fashionable and trendy one. (Roberts and Taylor, “United

states of America”, 2012)

American people values time as money and are

very strict on punctuality. Canadian people are of

reserved demeanor and they expect you to be as well.

Unlike Canadian people American people talks about

business during meals. The gift giving is not widely

popular in American culture as well but after finalizing

the deal, a nice gracious note is always appreciated.

However, American people accept invitation to meal or

accept modest gift which doesn’t appear as bribe.

(Roberts and Taylor, “United states of America”, 2012)

American like both French and English Canadian

use a firm handshake with eye contact when meeting and

leaving. Using person’s title are if they have are highly

recommended if not Mr., Mrs., Miss and the full name

are preferred. When departing, usually business cards are

exchanged. In rural area, you will be greeted hello rather

than hand shake. (Roberts and Taylor, “United states of

America”, 2012)


4.1.6 Social Structure and

Organization

Like Canada, USA doesn’t have social structure.

According to Hofstede power distance, USA scores 40 in

compare to world’s 55. The society has been equally

integrated and there are no class systems. Hofstede

linked lower power distance with opportunities for

benefitting from and access to social programs. (MacNab

and Worthley, 2007) Canada has score of 38 which is

pretty close to USA but the difference remains. The

Canadian health care system has effective safety net for

the lower income population than US. That means poor

Canadian has better health care than the poor American.

(MacNab and Worthley, 2007) Also Canada shows more

income equality and larger middle class than America.

(MacNab and Worthley, 2007)

4.1.8 Education:

Education system in America is decentralized,

federal government reserves power for quality and

assurance of education over states, city and local

authorities whereas in Canada province control over the

quality of education. But they share similarities in


schooling, kindergarten, followed by elementary and

middle school, high school and then postsecondary

education like vocational, technical or college.

(Organization of US education, 2008)

Beside the similarities and differences in

dimensions of culture, I further researched into political

culture in USA and Canada. The article by (Alston,

Morris and Vedlitz, 1996) presents the Seymour Martin

Lipset’s theory that the formation of two nations gave

rise to two distinctly different cultures. English

Canadians supported royal crown and develop positive

view of government and related institutions which

resulted in values centering on particularism, elitism and

collectivism. But American rejects the crown rule and

developed egalitarian and universal values. Furthermore

Lipset stated that “America is country of revolution,

Canada of the counter-revolution”. Tocqueville argued

that Americans are individualistic and suspicious of

institutions but Canadians are more collectivistic and

supportive of their institutions. American people being

individualistic attitude and pro-choice, forty five percent

favors abortion but Canadian being collectivistic attitude,

only thirty two percent favors abortions (Alston et al.,


1996) In the article by Mr. Robinson, Lipset and Meltz,

argues that Canada’s labor law is more union friendly,

supports unions and their objectives creating higher

union density level than Americans. In this same article,

Inglehart and his coauthors compares USA and Canada

in two dimensions: first on the materialist/postmaterlist

spectrum and the second on attitude towards religion

authority. On the first spectrum, Canada and USA are

identically on the axis but in second spectrum the

difference is higher. (Robinson, 2006) The USA and

Canada are quite much alike in social diversity but there

are differences when it comes to work related issues. The

research by (Ali, Falcone and Azim, 1995) showed that

American displays more dedication to work and have

less interest in leisure activities than Canadian. (Ali et

al., 1995)

This article compares USA and Canada on Hofstede’s dimensions of culture. Hofstede’s

dimension of culture includes four theories: Individualism, Power Distance, Masculinity and

Uncertainty Avoidance. (Satterlee, 2009, p. 56, 57) The article by MacNab and Worthley (2007)

compared the cultural closeness of USA and Canada on three dimension; individualism, power

distance and uncertainty avoidance. (MacNab and Worthley, 2007) Hofstede ranked the USA

and Canada close on all dimensions of culture. Then they are grouped in categories of cultural


clusters based on their scores on uncertainty avoidance (low), power distance (low) and

individualism (high). (MacNab and Worthley, 2007)

(i) Power distance is determined by the how much the culture accepts the importance

of position that separates people. (MacNab and Worthley, 2007) Both USA and

Canada are low in power distance, meaning that both countries benefits from

some kind of social program, incomes are equally distributed and has much larger

middle classes. (MacNab and Worthley, 2007) The hypothesis proposed by

MacNab and Worthley for their empirical test that the Canadian sample will

demonstrate lower level of power distance than US sample was not supported

because there was no significant difference. (MacNab and Worthley, 2007)

(ii) Uncertainty Avoidance is the degree to which extent the culture has accepted that

future can never be known. Both Canada and USA are low in the uncertainty

avoidance score, which means the greater tolerance. But still there remain the

differences. MacNab and Worthley (2007) described the presence of linguistic

group in country, national policy towards them and official positions to

bilingualism are culture. Canada share some linguistic with US, but Canada is

official bilingual country. Bowman observed that there are significant difference

in linguistic orientation within the political system, public policy and national

culture. This led to 2nd hypothesis by MacNab and Worthley (2007) that the

Canadian sample will demonstrate lower uncertainty avoidance than US sample.

However this hypothesis was supported by the findings of significant difference

in uncertainty avoidance. Canadian sample has lower level of uncertainty

avoidance than the US sample.(MacNab and Worthley, 2007)


(iii) Individualism defines as the individual nature where people take care of them and

those near to them. It has been correlated to western free market economies. Both

US and Canada ranks in top twenty economies. Individualism can be linked to

freedom of press. (MacNab and Worthley, 2007) In the recent study of 194

nations, the US and Canada tied for the ranking on freedom of press which shows

that both countries have similar individualistic characteristic. Thus MacNab and

Worthley (2007) proposed third hypothesis that Canadian and US samples will

have similar propensities for individualism. As predicted, there is no significant

difference on culture of individualism in both countries.(MacNab and Worthley,

2007)

(iv) Masculinity determines how much the society care for the traditional masculine

work role model of male achievement, power and control. (Satterlee, 2009, p. 57)

Both Canada and the US have higher ranks on masculinity dimensions which

mean the higher degree of gender differentiation of roles. (Roberts and Taylor,

“United states of America”, 2012)

5. What are the implications for US businesses that wish to conduct business

in that region?

After satisfying the local needs, any profit

oriented firm looks forward to expand to next market. It

could be next city, state or country. So, when US

business retailer looks to expand to new market, it targets


Canada because of its similar business culture and its

long border with US. Also, except some part of Canada,

like in Quebec, everyone speaks English. However,

businesses managers are highly recommended to learn

French in case you have to deal with business manager

from such part. In this part of research paper I am going

to talk about important things to remember when doing

business in Canada.

The main attractions for US retailer to expand in

Canada are the similarity in business culture,

geographical fit and familiar legal landscape. (Delfino

and Paura, 2009) To avoid confusion, it is recommended

that you involve Canadian legal, tax, accounting advisor

from beginning. The nature of issues that arise varies

from the scope of investment, particular retail sector, to

regions. Canada has broad foreign investment and

antitrust laws, and distinctive employment consumer

protection, privacy laws. (Delfino and Paura, 2009)

Since US and Canada signed free trade agreement

in 1988, and North American Free trade agreement

(NAFTA) in 1994, there is substantial growth of US

retail investments in Canada. (Delfino and Paura, 2009)

Even though trade barriers are down, foreign investment


and antitrust law applies to US and other foreign

investments in Canada, when a firm wants to extend

through acquisition of existing Canadian business. Under

Investment Canada Act, it takes 45 to 75 days after

application was filed for foreign investment authorities to

make decision whether the investment is beneficial to

Canada. (Delfino and Paura, 2009)

If US retailer who intends to expand by building

entity from the zero find practical and legal challenges in

the area of real estate assembly and zoning approvals,

which are largely regulated by local government. .

(Delfino and Paura, 2009) All laws relating to real estate

acquisition, leasing and development are similar in most

Canadian provinces but US retailer who wants to expand

to Quebec, needs to find proper counsel in Quebec,

whose civil code are similar to Europe. (Delfino and

Paura, 2009)

One of the many aspects that surprises US retailer

is the relatively large degree of authority granted to

provincial government under Canada’s federal

constitution. The provincial governments dominate

several laws which directly affect the retail expansion,

which includes environmental, privacy, consumer


protection, employment standards and labor law. The

province of Quebec imposes their own French language

relating to labeling signage and advertising. (Delfino and

Paura, 2009) The consumer protection acts, which are

governed by province, regulate sales to consumers,

establish mandatory disclosure requirements and limit

the retailer’s ability to exclude statutorily implied

warranties. (Delfino and Paura, 2009) The employment

legislations are regulated by province and tend to be

more favorable to trade unions. The entitlements of

vacation time, exemptions from overtime are firmly

established. If you fired someone, it will cost more than

in US, there is no at-will employment is not recognized. .

(Delfino and Paura, 2009) The privacy law are regulated

by both federal and provincial government. The

Canadian privacy legislation prohibits retailer from

collection, storage and use of the personal information of

customers and employees. (Delfino and Paura, 2009) The

Canada’s intellectual property laws are regulated by

federal government, it is advised that act swiftly to get

domain name even before announcing the intention of

expansion. (Delfino and Paura, 2009) If you decide to

send some of your employees to Canada, you need to


arrange proper visas or work permits in advance to avoid

delays and complications. (Delfino and Paura, 2009)

Canada has a 5 percent national value added tax known

as Goods and Service Tax (GST) which is in addition to

provincial sales tax (PST). (Delfino and Paura, 2009)

Finally I want to talk about tax implication of

doing business in Canada. If US retailer opens up

permanent establishment in Canada, the profit earned

will be subjected to Canadian federal income tax.

(Chiavetta, 1991) If US retailer does business in Canada

through the use of sales person, it is considered as

nonresident and has to file Canadian federal income tax

under The Canadian Federal Income Tax Act. (Chiavetta,

1991) If US retailer wants to open a Canadian branch,

the taxation on those branches is determined as if it was a

separate entity. The branch is subjected to branch tax in

addition to federal income and capital taxes. The income

or loss on Canadian branches is included in US income

tax return as foreign tax credit. (Chiavetta, 1991) When

US Corporations opens Canadian corporations as their

subsidiary, it will be taxed as a foreign branch. The

dividends and interest paid by such subsidiary to its

parent companies are subject to Canadian non-resident


withholding tax. Those dividends and interest received

are included in income the gross amount and is allowed

foreign tax credit for 15 percent Canadian nonresident

withholding tax when filing in US tax return. (Chiavetta,

1991) For the employees, the federal law dictates the

employer to withhold wages and remit income tax;

Canadian pension plan contributions and unemployment

insurance contributions and it also require employer

contribution for pension plan and unemployment

insurance. (Chiavetta, 1991) If US retailer sends US

individual to work in Canada and if the earning is more

than 10,000 Canadian dollars, it’s subject to Canadian

income tax and need filing Canadian personal income tax

return. (Chiavetta, 1991)

All these tax laws should be taken into

consideration when expanding your business to Canada.

Since the laws are changing from time to time, it’s

always best to consult Canadian business lawyers,

accountants to get up to date information to save

precious time.

B. Additional Questions:

1. Trade agreements between US, Europe and rest of the world.

1.1 NAFTA:


Talking about NAFTA and US Canada trade

relationships, it appears that the Free Trade Agreement

(FTA) is of much greater importance to Canada that to

the US.(Swanson, 1990). This is because the FTA

provides Canadian producers with a consumer market of

over 265 million people, 90 percent of whom are US

citizens. (Swanson, 1990) According to the estimates of

the Canadian government, increased trade led by FTA

will add 120000 new jobs to the Canadian economy and

will increase nation’s income 2 to 3 percent (Swanson,

1990)

President Obama’s administration wanted to

renegotiate NAFTA and change the way trade is

conducted. (Long, 2009) Many people argue that the

member reaped the benefits from NAFTA. Hart (2004)

on his article shared the six lessons he learned from free

trade agreements. The free trade agreements need unique

partnership of political leader and policy entrepreneur.

They need support from business group and civil

societies. He ascertain that economist were generally

right about the benefits of trade but didn’t provide best

way to achieve them.(Hart, 2004) The political scientist

were general wrong about the threat of free trade, but


they will contribute for full benefit and the involvement

of lawyers.(Hart, 2004) Even though the benefits are

high from free trade agreements, some Canadian artists

voice their problem performing in USA because of

Immigration Act of 1990.(Zemans, 1994) Canadian

artists argued that even though there is project in place to

facilitate a constant traffic of artists between US and

Canada, the collaboration didn’t get support it deserved.

(Zemans, 1994)

1.2 EUROPEAN UNION:

Likewise, Canada should also consider a

comprehensive trade and economic agreements (CETA)

with the European Union (EU). Schwanen (2011) in his

study states that Canada’s agreement with the EU is good

opportunity to diversify the market for its high value

added goods and to increase the attractiveness of its

economy to the investors. Just like most investors have

reaped the benefits from the NAFTA agreement, the

CETA would provide similar advantages. (Schwanen,

2011)

1.3 ASIA:

Canada now has more active involvement in trade

with Asia in recent times. Experts are now exchanging


ideas to enhance Canada’s trade with Asian countries.

Scholars admit that Canada has lagged far behind in

identifying and pursuing economic activities in the Asia

Pacific region. In order to receive optimum benefits and

reap full advantage, Canada must promote free trade

agreement with Asian countries like Malaysia,

Singapore, Brunei, Thailand and Indonesia. (Boosting

trade with Asia, 1993)

2. Import and Export and its effect on global market:

Import and export are essential part of

international trade. Adoption of import export policies by

many countries have led to significant positive changes.

Akram, Khan, Atif and Shafique (2011) in their paper

assessed the effect of export on economic growth of

Canada and concluded that there is a significant positive

relationship between export and economic growth.

Economic growth most of the time is accompanied by

increased exports. Export not only enhances labor skills

but also increases productivity in local as well as

international markets (Akram, Khan, Atif and Shafique,

2011). Exports of any developed country will constitute a

significant share in the GDP. For instance, Canada’s


exports contribute up to 30% of its GDP (Akram et al.,

2011). It was the North American Free Trade Agreement

(NAFTA) and removal of trade barriers that led to

growth in Canada’s exports. Therefore, there is a general

agreement among scholars that exports are essential for

economic growth and exports lead to industrialization.

There are many instances where reduction in

exports has led to economic turmoil in many countries. It

is also vital to determine the developmental level of

country to see what effect export has on it. This is

because there is a relationship between country’s

developmental level and the effect of export on that

country. The more developed a country is the stronger is

the impact of export on that country. In less developed

countries exports do not have a significant impact on

economic growth (Akram et al., 2011). Since Canada is a

developed nation, export plays a major role in its growth.

Canada is the 19th largest exporter country in the world.

Exports leads to long term growth not just by

improving the finances but also by human capital

formation, reduction in unemployment, and by

infrastructure development. While export constitutes a

strong determinant of growth and development so is


import as it brings progress and prosperity. Bloskie

(2004) in his article highlights Canada’s import relations

with other nations. Canada imports a wide variety of

products from many parts of the world and US has been

the biggest trading partner (Bloskie, 2004).

3. Investment flow in Canadian market:

Rise of globalization in this era is characterized

by capital market integration and increasing cross-border

investments. These trends can be observed in the

strategic implementations of both developing and

develop nations. Business interests and fixed assets

mostly contribute to all the cash that flows into a nation

which is classified as investment flows. This occurs as a

result of buying and selling of the business interests and

assets. Canada has been seeing an increase in direct

inward investment flows since 2009. (Dang, 2010)

Canada’s productivity and foreign direct investments are

increasing as a result of Canada participating in the

global value chains. All countries in the world have their

own investment flow policies and strategies that help

them increase their flow chains in the global economic

market. Investment flows in Canada have been


determined by a variety of policies and thus, these

experimentations have helped the country to examine the

effects of various types of investment flow strategies

both in national and sectorial level. The three main

financial sectors of Canada can be said to be

manufacture, finance and the petroleum business.

(Shapiro and Globerman, 2003) The understanding of

sectorial inflows and investments in these three sectors

can be a useful tool in identifying the status of

investment flows in the country and its various sectors.

(Shapiro and Globerman, 2003) Inbound flows are

usually directed by foreign investment policies but firms

don’t always tend to invest inbound. Of the many foreign

direct investment strategies that Canada has applied,

Foreign Investment Review Act was one of the acts that

monitored the capital and investments that the nation was

making. (Shapiro and Globerman, 2003) The act would

allow investments to make the investments profitable by

levying undertakings from the investors. There are

various liberalization provisions of the trade agreements

that Canada has done in the past. (Shapiro and

Globerman, 2003) The FTA-NAFTA provisions of

liberalization have helped Canada in increasing the


inward FDI flow. The various integrations that

multinational companies use while doing business can

also be modified to complement the trade process and

increase the flow of investment. Horizontal and vertical

integrations can be used in order to increase the

investment flow by decreasing the costs of intra-firm

relations. The countries that promote their free-trade

agreements and large tariff free markets gain a better

hand at increasing their inward FDI flow.(Shapiro and

Globerman, 2003) It is one of the processes by which

tariff free large markets lures nations into making

relationship within the large network. A high GDP also

function in the increasing investment flow in the country.

If Canada as the host nation has a higher GDP compared

to other countries then, the investments in the country are

considered to be profitable. Also, domestic funds for

investment are largely available and it is a plus for

inward investment flow. For finance, the GDP of a cross

border country does not highly matter. IN the case of

Canada, the increasing or decreasing GDP of U.S. would

not affect the financial services sector of Canada and its

effects on the investment inflow. However the GDP of

Canada and the exchange rate in the US largely and


positively affects the FDI inflows in this sector.

Surprisingly the provision of the FTA-NAFTA did not

significantly help in increasing flows into the country.

(Shapiro and Globerman, 2002) Canada is also working

in bilateral investment treaties with US and the rest of

the world which protects the investors to seek monetary

damages from a foreign government. (Boscariol et al.,

2009) The businesses who want to invest in North

America are protected by NAFTA provisions. (Price and

Christy, 1995) They provide investor with four basic

guarantees of nondiscrimination, prohibition of

performance requirement, freedom to transfer earnings

and international law standards on expropriation and

compensation. (Price and Christy, 1995)

Over the past decade emerging economies have

integrated with advanced economies in financial aspects

and broadened the economic horizons of international

markets. Capital flows from advanced to emerging

economies have surged unlike ever in history and the

reverse has also come to manifest itself in the global

market place. Increased flows of capital in Canadian

economy have brought about policy changes and the

country has faced some financial stability challenges in


the past few years. There are both macroeconomic and

financial implications of increased investment flows into

any economy. These implications should be handled by

further strengthening the national policies and making

the exchange rate system more flexible and supporting

sterilization.

4. Global Implication of world’s 11th largest economy:

Globalization is helping the economies of the

world join hands together to increase trade and capital

unaccountably. World Trade Organization and

International Monetary Fund have been corresponding

with China and Russia, two very large economies of the

world, to get into becoming a part of the trade

organization. (Macmillan and Grady, 1999) Involvement

of strong economies into the trading and marketing

environment is going to help the world economy see

arrays of progress and increment. International marketing

and trade environment is affected by the

increase/decrease in countries GDPs’ and the stability of

their economies. Canada has played a good enough part

in sustaining the world economy because of this large

trade, business chains around the world. Since Canada

remains in the middle range of powerful economies, it


has had enough say in the World Trade Organization

treaties and processes. Canadian economy has been

focusing on reducing unnecessary nuisance tariffs,

restricting trade barriers, and addressing non-tariff

barriers. It would all help in stabilizing the Canadian

economy and increasing its trade with countries around

the world. (Macmillan and Grady, 1999) Kiggundu and

Uruthirapathy (2010) come up with several points which

will help change the policy to make more favorable for

Canada to compete with other countries. They pointed

out to strengthen the national alliance for

competitiveness, raising the profile of competition

policy, taking climate change as an opportunity for

enhancing competitiveness and need for clear

framework. (Kiggundu and Uruthirapathy, 2010)

The Canadian economy has seen a recovery in

exports in the last few years. The figures are definitely an

encouraging push for the Canadian economy. The

economy did not go through good times after the

encouragement, although the factors were more of the

outside than inside. The weakening U.S. economy and

global market disruption stemming from East Asia and

the natural disasters had affected the growth and


productivity of Canada’s economy. Since the economy

highly relies on commodity prices increase in commodity

prices increases investments into various sectors in the

country. Although increase in commodity prices does

have negative effects, the economy is strengthened by its

long term benefits. (Roy, 2006)

The country’s GDP is highly reliant on trade and

increasing trade leads to an increase in GDP. Trade is an

important factor because a large fraction of the GDP is

reliant on the exports of the country. AN increase in

trade will help in increasing the GDP of the country. The

Canadian economy not only depends on the economic

performance of U.S. but also the European countries. A

huge financial blow from their side can be a negative in

the economic conditions of Canada. The exchange rate of

Canadian and U.S. currency has been stagnant over time

and thus, Canada’s economy is favorable to the U.S.

economy in many prospects. The country is seeing good

progress in terms of a growing economy because after

the U.S. recession, Canada outperformed U.S. in trade

and economic growth. Weak U.S. commodity markets

lead to decrease in Canadian trade. Canadian

involvement in bilateral treaties with strong economies


like China have helped increase Canada’s global

presence. Increasing bonds, treaties and decreasing trade

deficits have helped in the increase of Canadian

economy and its power in the world. (Roy, 2006)

The Canadian economy should keep on focusing

on trade liberalization policies. The Millennium rounds

that are coming up are highly dependent on how the

global economy treats the developing countries.

(Macmillan and Grady, 1999) Increasing trade

liberalizations and making the developing countries a

part of the trade negotiations will help the world

economy to sustain and grow. Canada’s support in trade

liberalization though tariff reductions and limiting trade

barrier or restrictions will help the developing countries

become a part of the world economy and will get to

enjoy their share in the world’s economy. Canada as an

important part of the world economy should work on

strengthening the global market. For this, Canada should

work with other strong economies to commit into

making strong policy foundations for organizations like

WTO and IMF and the World Bank. (Macmillan and

Grady, 1999) Also, strong economies which impact the

world economy should give greater attention to poor


economies and the third world nations. Financially

capable nations should work on making their national

financial institutions the strongest of all and increasing

their trade insights into the larger world. Next, capital

liberalization should be looked upon with importance

because safe liberalizations can help the developing

nations to be guided into the path financial growth and

productivity. Formation of an organization which would

serve the same purpose as private sector investors would

also be a good way to provide provisions to the

international trade system. They would be helpful as they

would be responsible in forming mechanisms to reduce

financial crisis.

Canada’s economy definitely influences the

international trade market and it should work on

implementing safe capital liberalizations and open trade

agreements which would benefit the world economy.

5. Business cultures in Canada:

Finally I want to talk about SWOT analysis of

business culture in Canada. Canada has been the largest

trade partners with USA. The US retailer has great

benefits and protection under NAFTA if they want to

expand to Canadian market. Strength of Canadian


business culture is that it has similar culture and

geography with USA. Weakness would be the different

foreign antitrust acts, real estate acquisition, privacy law,

consumer laws etc. Opportunities are the vast untapped

reserve of the oil industries, no trade barriers, and

benefits and protection from NAFTA. Threats are the

Canada’s free trade agreements with Europe and Asia

which can open door to the flow of investments.

C. Conclusion

Canada is the 2nd largest country in the world with 10th

largest economy. Canada has its own rich cultural

heritage. It is also largest trade partner of the USA. The

retailers from around the world want to do expand their

business in Canada because of its economic freedom.

This research paper will give you the glimpse of its rich

culture, political nature, laws, trade agreements, import

and exports and economic freedom.


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