According to the World Bank's Governance Indicators for the years 1996 to 2008, as compiled by Kaufmann, Kraay, and

Mastruzzi, Canada most recently achieved a score of +1.03 for the factor "Political Stability and Absence of Violence." The governance indicators are normally distributed, with a mean of zero. Higher scores signify a less violent and more politically stable society. The U.S. Department of Commerce's 2010 Country Commercial Guide reports that "political violence" in Canada is similar to that experienced in the United States, generally limited to demonstrations at summits such as the 2001 Summit of the Americas in Quebec City where property was damaged and protestors and police clashed. The 2010 Background Note published by the U.S. Department of State describes Canada's government as "a constitutional monarchy with a federal system, a parliamentary government, and strong democratic traditions." The prime minister is the head of the political party in power and of the cabinet. Britain's Queen Elizabeth II is also the Queen of Canada, and she appoints a governor general as her representative in Canada. The governor general usually serves a 5-year term.

Economic ModelMarket-based economy

The 2009 Economic Freedom of the World Annual Report by Gwartney et al. awards Canada a score of 10 (out of 10, with a higher value signifying greater economic freedom) for the factor "Government Enterprises and Investment" as a percentage of total investment for Canada. Countries received this rating when government investment is less than 15 percent of total investment and the number of state-owned enterprises (SOEs) is very small. The Heritage Foundation's 2010 Index of Economic Freedom states that total government expenditure, including consumption and transfer payments, is relatively high, comprising 39.1 percent of GDP in the most recent year for which data is available. The index adds that "privatization is widespread" and competition is encouraged. The U.S. Department of State's 2010 Background Note describes Canada's and the United States economic partnership as "unique in the world," noting that the trading relationship is responsible for supporting millions of jobs in both countries. The Canadian economy has a large manufacturing base and is dependent on the urban services sector. According to the U.S. Department of Commerce's 2010 Country Commercial Guide, Canada experienced a decline in U.S. trade volume during the height of the global economic crisis, but its economy has been on the mend, and GDP growth rates are expected to reach 2.5 percent in 2010 and 3.2 percent in 2011. Cross-border trade with the U.S. is encouraged by the two countries' shared commitment to the rule of law and free market principles, and by the competitive advantages conferred by U.S./Canadian participation in the North American Free Trade Agreement.

Adequate Foreign Investment LawYes

The Heritage Foundation's 2010 Index of Economic Freedom assigns a score of 75 percent for the factor Investment Freedom to Canada. The U.S. Department of Commerce's Country Commercial Guide to Canada asserts that foreign investment is governed by the 1985 Investment Canada Act. Provisions of the North American Free Trade Agreement specifically deal with trade between Canada and the United States, including provisions that create the right to binding

arbitration in disputes involving investors and the state. Canada is alone among member states of the Organization for Economic Cooperation and Development in maintaining a review process for foreign direct investment, but 2009 saw an increase in the threshold at which such a mandatory review would be triggered. Specific legislation applies to investments in certain sectors, such as the financial sector and telecommunications. Investments impacting on Canada's cultural heritage are subject to administration by the Department of Canadian Heritage. At the provincial level, regulation of foreign investment is, by and large, limited to concerns regarding the purchase of real estate.

Creates incentives for Domestic / Foreign InvestmentYes

The U.S. Department of Commerce's 2010 Country Commercial Guide discloses that Canada offers various incentives to foreign and domestic investment at the federal level. However, no tax incentives are specifically aimed at promoting or discouraging foreign investment in Canada.

Tax ratesAverage
The Heritage Foundation's 2010 Index of Economic Freedom classifies Canadian income tax rates as "moderate," with the federal income tax rate topping out at 29 percent and the provincial and local rates varying from 10 to 24 percent. The general corporate tax rate is 19.5 percent. There are also a value-added tax and a property tax. In the most recent year for which data is available, the overall tax revenue represented 33.3 percent of GDP.

Property Rights / Contract LawEstablished

According to the U.S. Department of Commerce's 2010 Country Commercial Guide to Canada, foreign investors have the right to full access to the country's legal system. The only limitations on private property rights are, first, the right of federal and provincial governments to create monopolies and, second, the government's right to expropriate property in the public interest. Dispute resolution for problems arising from government expropriation actions is available through established mechanisms, and are accessible to foreign investors from member-countries which are party to the North American Free Trade Agreement. Certain key treaties dealing with copyrighted works on the internet have yet to be ratified by Canada, although they were signed in 1997. There have been complaints that enforcement of anti-piracy and counterfeiting is inadequate.