James Blanchard, a partner at DLA Piper and co-chair of the firm’s Government Affairs Practice Group, was the U.S. ambassador to Canada in the mid-1990s. Here he offers his insight on doing business in Canada.
Q: What are the benefits and incentives of doing business in Canada? Is the government business-friendly?
A: Well, it’s a different country with a somewhat different culture, and a totally different political system, but they have a similar legal system. There is a common language and a common legal system. It is a market economy. Business practices are similar to the U.S. So if a company is expanding, the natural place is to start with Canada. That’s true of small businesses or franchises as well as larger businesses. Most large businesses are already in Canada and have operations there. But it’s a good place to start if a company wants to go international.
Q: What should U.S. companies know about business culture in Canada?
A: There are a lot of really good law firms in Canada—most of them are national in scope. In Canada, in terms of business and law, relationships are much more important than in the U.S. U.S. relationships used to be really important, but now businesses shop around so much for the lowest price for the best value, that relationships are not what they used to be. But in Canada, relationships are very important both with law firms and with businesses. Most business leaders in Canada, from large businesses, know each other. They share information. It’s pretty amazing. It’s a country of 34 million people, spread out over a huge land mass from Newfoundland to British Columbia, but it’s interesting how much networking goes on among business leaders within the same industry and between different industries. One’s reputation is instantly shared.
Q: Are corporate taxes lower in Canada than they are in the U.S.?
A: Corporate taxes in Canada have been lowered, and I think Prime Minister Stephen Harper has proposed to lower them even more. The banks get much more involved and have a lot more power in Canada.
A: Right now our two governments [the U.S. and Canada] are trying to harmonize a lot of regulations. The prime minister and President Obama have announced a review of regulations with the goal of harmonizing regulations, and they’re going to start out in the area of transportation, and also food and food safety.
Q: Talk to me about Canada’s current political situation. Have there been, or will there be, big changes in the near future in terms of party rule?
A: [There will not be any major changes in terms of party rule] at the federal level. Prime Minister Harper’s government in the spring won a big majority, and so for the next four years—almost five—the Conservative Party will be the party of power in Ottawa, Ontario, in the federal government. A parliamentary system is much more efficient, and it’s a real contrast to the U.S. system. Canada’s provinces have much more power than our states. In the provinces, there are some elections coming up. There are leadership changes that are going to occur in Alberta.
Q: Has there been any major regulatory reform in Canada recently?
A: Canada is on the verge of adopting a new law on copyrights and intellectual property. That’s important because there’s been a lot of criticism by the U.S. of the lack of protection in the area of copyright and intellectual property. It looks like sometime this fall the government will adopt a new framework on that, which I think will put criticism largely to rest in the U.S.
Q: How has the international economic downturn affected Canada?
A: The bottom line is that Canada’s economy had been humming along quite nicely for the past few years. It only really began to wane somewhat as a reaction to [the U.S.’s] economy. Canada did not have the financial scandals and the financial meltdown that the U.S. had, so there banks to a great extent were never touched by the subprime crisis. They’ve had much better regulations of financial institutions than we do. They didn’t need any kind of federal bailout.
I will say that because our auto industries are integrated, that when the U.S. helped rescue General Motors and Chrysler, Canada and Ontario were part of that rescue. I’m on the board of Chrysler, just as a matter of record. The auto industry is very important in Canada. It’s one of the top industries. Also manufacturing, energy and financial services are big. Canada is the U.S.’s largest provider of energy of any kind of energy—oil, gas, hydro. It is the U.S.’s largest trading partner.
Q: Is class action abuse common in Canada?
A: The Canadians are not as litigious. Canadians, including Canadian businesses, are very wary of the U.S.’s aggressive legal culture. Class actions, for example, are just really emerging. Class actions have been rare, but they’re starting to rear their head, and of course the business community is not happy with that at all. The bar associations are trying to make sure they are not abused.