The Offshoring Strategies of US Multinational Corporations Operating in Canada

Using Confidential Data on 1300 U.S.-based multinational corporations (MNCs), we examine whether MNCs that moved jobs out of Canada between 1983 and 2003 systematically moved the jobs elsewhere within the MNC. We also look at whether trends in the movement of jobs within MNCs differ for manufacturing and service industries. We find no evidence of systematic offshoring of Canadian jobs by U.S. MNCs: those that increase (shrink) employment in Canada tend to exhibit the same pattern elsewhere within the firm. We do find, however, that the sectors with the fastest job growth by U.S. MNCs in Canada are those with the lowest median real wages. Similarly, we find that the relative importance of U.S. MNCs’ Canadian operations seems to decline over the 20-year time window. U.S. MNC employment in Canada, relative to employment in other foreign countries, drops from 27.6 percent of total foreign employment in 1983–1985 to 21.6 percent in 2001–2003. This change in relative employment does not appear to be the result of job cuts in Canada but of U.S. MNCs’ choosing to grow — including high-paying jobs — in countries other than Canada.