Canada: In The Current Immigration Debate In North America, Can Quebec Become The Next Silicon Valley?

Last Updated: April 13 2017
Article by Julie Lessard and Olga Prygoda

Canada is gaining momentum as a preferred location for nurturing global talent amid uncertainty resulting from recent proposals of the U.S. administration on immigration. Can Canada seize this opportunity of becoming the destination of choice for US investors by continuing to offer highly competitive immigration policies?

At the center of headlines worldwide, the Executive Order banning certain foreigners including highly skilled workers with approved work visas and permanent residents from predominantly Muslim countries created serious concerns for U.S. business in the Silicon Valley and throughout North America. In addition, the prospect of a second Executive Order on immigration targeting the H-1B visa programme caused widespread speculations. Although these initiatives are stalled at the moment, the visa ban combined with the possibility of sweeping changes to the H-1B programme, which remains a lifeline for numerous U.S. companies in the IT sector when it comes to recruitment of foreign talent, keep many CEOs and foreign workers on the edge1.

One of the first to react, Google Chief Executive Officer Sundar Pichai told Bloomberg that Google was "concerned about the impact of this order and any proposals that could impose restrictions on Googlers and their families, or that create barriers to bringing great talent to the U.S."2   Amazon's CEO Jeff Bezos openly stated that his company will rally behind the legal challenge of the ban3. In an unprecedented coordinated action opposing the ban, about 100 technology companies argued in a legal filing last week that undue immigration restrictions damage U.S. competitiveness. The petitioners, including Google, Facebook, Netflix and Apple, argued that "instability and uncertainty" caused by the executive order "will make it far more difficult and expensive for U.S. companies to hire some of the world's best talent — and impede them from competing in the global marketplace."4

Career diplomats also seem to agree with the businesses that rushed immigration action would "hurt America economically", according to a widely circulated Dissent Memo of the U.S. Department of State5. The scientific community in the U.S. was equally uneasy, reports from the Harvard University and the University of Toronto mentioning that some leading foreign scientists are "considering coming to Canada for post docs."6

The world financial markets also initially reacted negatively on the rationale that, if increasingly global U.S. corporations are curbed from moving people where they need them, it will hurt their productivity7. "The global investors now characterize this risk premium as "not insignificant", according to Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor in the UK8. The markets seem to question now whether "temporary changes to immigration policy could be a prelude to potentially bigger disruptions..." according to Colin Cieszynski, chief market strategist at CMC Markets in Toronto9. In a commentary to the Financial Times, Saker Nusseibeh, Chief Executive of Hermes Investment Management, pointed out that "companies want to employ the best talent in the countries in which they base themselves...If the U.S. is perceived as difficult, and that the ban may be expanded, there are opportunities for London's position..."10. Echoing the analysts, Microsoft Corp. inserted language in a securities filing, cautioning investors that immigration restrictions "may inhibit our ability to adequately staff our research and development efforts.11."

It is not the first time that Microsoft is fighting an immigration-fueled controversy. In 2007, the H-1B crisis prompted Microsoft to set up an office in Vancouver, "a global gateway with a diverse population... close to Microsoft's corporate offices in Redmond, allowing the company to recruit and retain highly skilled people affected by immigration issues in the U.S.12" During the following decade, Vancouver has been able to create an ecosystem of IT companies which include satellite offices of U.S. tech giants based on the west coast, but also some genuine home grown start up talent13.

The idea of setting up business operations in Canada or in Montréal to face talent and immigration challenges is by no means new. Current U.S. political climate may give it a new momentum. Many initiatives are already in place in Vancouver to invite US companies to create new subsidiaries as 'talent hosts'. In the Northeast, we can also expect a growing number of opportunities to attract U.S. investments. Québec's advantages for U.S. tech companies are manifold, including its geographic location in the 14 Northeast corridor and New York (EST) time zone comfortably midway between Europe and the West Coast, the presence of a strong IT cluster, and sizeable R&D tax credits for hi-tech companies. In addition, the recent signature of CETA presents further investment opportunities in creating a new corridor of free trade and an extended path for global talent mobility. Canada's "ease of doing business index" is also well recognized and the country's banking system consistently ranks as the most stable amongst the developed economies. Our world-class but definitely affordable education also facilitates building up a pool of available local talent, as Québec achieved one of the highest enrollment and graduation rates in OECD countries. In a just – released 2017 QS Best Student City rankings report Montreal unseated Paris as the "best student city in the world".

Subsidiaries of foreign corporations, primarily American and French, already play a key role in Greater Montréal's economy. Montréal is home to 2,000 foreign subsidiaries where almost 40% of them belong to these three high-tech clusters: Aerospace, Life Sciences & Health Technology, and Information and Communications Technology15. Within the ICT cluster itself, the fields of Gaming and Virtual Reality (VR), Special Effects & Interactive Media, and Artificial Intelligence (AI) are growing fast. AI research has been identified as a priority for The Government of Canada, which recently announced the funding of $213,187,000 (Canada First Research Excellence Fund) to the Université de Montréal, HEC Montréal, Polytechnique Montréal and McGill University. The gaming sub-cluster, represented among others by Ubisoft, EA Montréal, Warner Bros. Games, and dozens of other studios, have been present for some time, transforming Montréal's old Mile End and Griffintown neighborhoods into rapidly growing areas for the young and hip, where creativity booms, restaurant choices are mind-blowing, and housing is still affordable. With more than 40 VFX and animation studios, Montréal is also a large post-production hub16.

It has been shown that the presence of the strong cluster significantly increases the chances of success of a new venture which would grow within the same ecosystem. In November 2016, Google opened a new AI lab and invested $3.4M in Montréal-based AI research, with other smaller players quickly following suit17. Speaking to The Toronto Star, Shibl Mourad, Head of engineering for Google's Montréal office, says "the company hopes to help turn the city into a "super-cluster" of AI knowledge that will attract corporate investors, burgeoning startups and researchers"18. Given the current climate, it may be worthwhile for the U.S. companies who are not yet present in Québec, to seriously consider looking in that direction.

Québec and Canada benefit from highly competitive immigration policies intended to support new investment and innovation and provide Canadian employers with access to global talent. Québec administers temporary worker program facilitating entry of highly-skilled workers in the gaming and IT sector, and maintains unique Business Immigration programs, Immigrant Investor and Immigrant Entrepreneur. A recently announced Global Skills Strategy Initiative19 will help companies in the innovative sectors of economy attract foreign talent when they can demonstrate "high growth" potential with respect to local job creation. Foreign companies which will make a substantial investment, relocate their operations, or expand their production in Canada, will benefit from this Initiative, slated for implementation in mid-201720

In the current climate around immigration policies, Canada's positioning as an open country for global talent is ever more a significant competitive advantage for companies seeking an environment favoring the attraction and retention of talent, and the ability to rapidly and efficiently deploy a global workforce. More than an island, could Montréal become one of the next "valleys"?

Footnotes

1 Donald Trump not planning any executive order on H-1B visas: Shalabh Kumar:

http://timesofindia.indiatimes.com/world/us/donald-trump-not-planning-any-executive-order-on-h-1b-visas-shalabh-kumar/articleshow/56931970.cms; accessed on February 5, 2017.

2 Google Recalls Staff to U.S. After Trump Immigration Order, Bloomberg News, https://www.bloomberg.com/technology , accessed on ‎January‎ ‎28‎, ‎2017‎.

3 Amazon boss Jeff Bezos mounts legal challenge against Donald Trump's travel ban, The Telegraph, http://www.telegraph.co.uk/technology/2017/01/31/amazon-boss-jeff-bezos-mounts-legal-challenge-against-donald/ , accessed on January 31, 2017.

4 Facebook, Google, Apple Lead U.S. Business Charge Against Trump Travel Ban : The Forbes, http://www.forbes.com/sites/mattdrange/2017/02/03/silicon-valley-giants-joins-forces-again-to-oppose-donald-trumps-immigration-orders/#4bb30d1d94f5 , accessed on February 5, 2017.

5 The U.S. Department of State Dissent Channel Memo: Alternatives to Closing Doors in Order to Secure Our Borders, available at: https://assets.documentcloud.org/documents/3438487/Dissent-Memo.pdf , accessed on February 13, 2017.

6 Trump travel ban has Iranian scientists looking for new places to do research, Canada Broadcasting Corporation, http://www.cbc.ca/news/world/trump-travel-ban-iran-harvard-medical-students-toronto-1.3967469; accessed on February 13, 2017.

7 Here's How Trump Muslim Ban Will Slam U.S. Economy, The Forbes, http://www.forbes.com/sites/johnwasik/2017/02/01/heres-how-trump-muslim-ban-will-slam-u-s-economy/#35d8046b446b ; accessed on February 13, 2017.

8 The next catalyst for selling stocks? Analysts react to Trump's immigration order , http://www.marketwatch.com/story/the-next-catalyst-for-selling-stocks-analysts-react-to-trumps-immigration-order-2017-01-30; accessed on February 4, 2017;

9 "Colin Cieszynski, Chief Market Strategist, CMC Markets looks at how markets are reacting to the Trump travel ban": Interview with Colin Cieszynski, BNN News, http://www.bnn.ca/tsx-wall-street-fall-amid-trump-travel-ban-uncertainty-1.660625; accessed on February 4, 2017.

10 Op. cit, The Next Catalyst for Selling Stocks?

11 Op. cit., The Next Catalyst for Selling Stocks?

12 Microsoft opens Canada center in response to US immigration problems,

http://www.workpermit.com/news/microsoft-opens-canada-center-response-us-immigration-problems-20070710; accessed on February 5, 2017.

13 Vancouver's Booming Gastown Tech Startup Scene, Mapped: Canadian Business,

http://www.canadianbusiness.com/innovation/vancouver-gastown-the-next-tech-boom/; accessed on February 4, 2017.

14 Montreal named world's best city for students, cbc.ca , http://www.cbc.ca/beta/news/canada/montreal/montreal-named-world-s-best-city-for-students-1.3984987; accessed on February 16, 2017.

15 Attractiveness Factors 2013-2014, Greater Montreal: the Power to Make You Succeed, http://www.montrealinternational.com/en/publications/attractiveness-factors-2013-2014/; accessed on February 13, 2017.

16 VFX Montreal: The Advantages of Montreal: http://vfx-montreal.com/why-montreal-2/ ; accessed on February 15, 2017.

17 Google opens new AI lab and invests $3.4M in Montreal-based AI research,

https://techcrunch.com/2016/11/21/google-opens-new-ai-lab-and-invests-3-4m-in-montreal-based-ai-research/; accessed on February 5, 2017.

18 Why tech giants like Google are investing in Montreal's artificial intelligence research lab

https://www.thestar.com/business/2016/11/21/montreals-artificial-intelligence-research-lab-attracts-major-tech-firms-like-google.html; accessed February 5, 2017.

19 Factsheet: Global Skills Strategy Initiative, Fall 2016 Economic Statement, Government of Canada, available at: http://www.budget.gc.ca/fes-eea/2016/docs/themes/skills-competences-en.html ; accessed on February 13, 2017.

20 Government unveils Global Skills Strategy with fast-track visa process, http://betakit.com/government-unveils-global-skills-strategy-with-fast-track-visa-process/; accessed on February 13, 2017.

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