ARCHIVE: TRADE, INVESTMENT POLICY AND INTERNATIONAL COOPERATION
Visa Requirements Holding Back Trade and Investment
Michael Burt, Associate Director, Canadian Industrial Outlook Service Winter 2009
Visa requirements for foreign business visitors are costing Canada billions of dollars in reduced trade and investment. To minimize these costs, Canadian policy makers need to reduce wait times for visas, increase the use of multi-entry visas, and expand the use of outsourcing for visa processing. In addition, the presence of a Canadian foreign office provides a significant boost to trade, investment, and visitors, so Canada should consider targeted expansion of its overseas offices. Impediments to the mobility of foreign business people limit trade and investment flows and hurt economic growth. These conclusions and recommendations are based on Conference Board research for its International Trade and Investment Centre published in Barriers at the Border: The Costs of Impediments to Business Mobility. The study examined whether factors such as visa requirements, the prevalence of English and French in foreign countries, and the availability of Canadian offices abroad affected trade and investment. Visas Constrain Investment Impediments to the mobility of foreign business people limit trade and investment flows and hurt economic growth. The stocks of inward and outward foreign direct investment (FDI) were found to be $8.9 billion and $4.7 billion lower, respectively, than they would have been without visa requirements. Imports and exports of services were $926 million and $330 million lower, respectively, than expected. Visa requirements also reduce the number of foreign visitors by nearly 115,000 visits. Business people travelling to Canada for a short-term visit who require a temporary resident visa (TRV) face the most significant constraints. - There is often no local Canadian trade or immigration representative in a particular country to issue a visa.
- Payment rules vary with each processing centre and can be complicated.
- Processing times vary greatly, depending on security requirements and capacity constraints.
- Completing an application can be difficult and confusing.
- The use of multi-entry visas is actively discouraged.
Since TRVs limit foreigners travelling here rather than Canadians travelling elsewhere, it is not surprising that this non-tariff barrier had a larger effect on imports than on exports. Language, Particularly English, Affects Trade The prevalence of English in a foreign country does increase trade, investment, and the number of visitors, with the exception of outward Canadian FDI. The most likely reason for this exception is that Canadian FDI is concentrated in resource industries, where the location of the resources is the most important factor in determining the destination of FDI. Whether French is spoken in a foreign country is generally not a significant factor for trade or investment; the presence of the language is significant only in the case of inward FDI. Embassies Boost Trade and Investment The findings of the study indicate that there is an economic benefit to establishing and maintaining overseas offices. The presence of a Canadian foreign office particularly boosts outflows of Canadian trade and investment; it has less of an impact on inflows. This result may be influenced by the persistence of “home bias” in investment decisions. All told, the presence of foreign offices contributes to more than $10 billion of Canada’s stock of outward FDI, which represents 2 per cent of the total. In addition, exports of goods and services are nearly $3 billion higher than they would otherwise be. The presence of foreign offices also increases the number of foreign visitors by about 165,000 visits. Recommendations Since the presence of a Canadian foreign office significantly boosts trade, investment, and visitors, Canada should consider targeted expansion of its overseas embassy network where market shares of trade and investment are currently below average. Places without embassies—such as Slovakia and Slovenia in Eastern Europe, Iraq and Qatar in the Middle East, and islands such as Bermuda and the Bahamas in the Caribbean—have higher trade and investment potential than some countries with offices, such as Zimbabwe, Guyana, and Cambodia. If necessary, the resources for new offices could be reallocated from these countries with limited trade and investment opportunities. The presence of a Canadian foreign office significantly boosts trade, investment, and visitors. Visa requirements for foreign business visitors are costing Canada billions of dollars in reduced trade and investment. Short of eliminating TRV requirements, which would be neither sensible nor politically feasible, Canada could reduce their negative effects. Lessening the burden in large emerging economies where visa requirements exist—such as China, Russia, India, and Turkey—would have the most beneficial effect. Measures to reduce wait times include adopting international best practices, improving technology, and making allowances for people who have travelled to Canada before and those sponsored by a “trusted” source. Increased use of multi-entry visas could also reduce the effects of TRVs by significantly reducing both the workload of Citizenship and Immigration Canada personnel in overseas offices and the difficulties facing applicants. Finally, increased use of outsourcing would help reduce the problems associated with not having a local office in many locations around the world.
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