Hemispheric Partners Trade, Technology, and Innovation Ties Between the Bay Area and Canada
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Hemispheric Partners Trade, Technology, and Innovation Ties Between the Bay Area and Canada April 2019 Acknowledgments Contents This report was developed and written by Sean Executive Summary ..................................................1 Randolph, Senior Director at the Bay Area Council Economic Institute, and Niels Erich, a consultant to CHAPTER 1 the Institute. The Institute wishes to thank the report’s Canada’s Economy: Growth and Transition ...............3 sponsors: Global Affairs Canada, Air Canada, and Silicon A Current Snapshot ................................................... 5 Valley Bank. We also gratefully acknowledge the advice, information and insight provided by many people who Real Estate/Construction ....................................... 6 made their time available for interviews: Manufacturing ....................................................... 7 Mark Agnew , Senior Director–International Policy, Energy .................................................................... 9 Canadian Chamber of Commerce Mining .................................................................. 12 Estelle Alberts, Regional Sales Manager, Air Canada Win Bear, Head of Business Development, Canada, Financial Services ................................................ 12 Silicon Valley Bank CHAPTER 2 Yves Beaulieu, Consul, Consulate General of Canada– Trade: Integrated Markets ......................................15 San Francisco Laura Buhler, Executive Director, C-100 A Thriving, Interdependent Energy Market ............. 18 Serge Corbeil, Director–Government Relations Western California and the Bay Area ..................................... 18 Region, Air Canada Growing Air Links ..................................................... 20 Michael Deschenes, Managing Director and COO, Perimeter Institute for Theoretical Physics Trade Friction Fallout ............................................... 20 Iain Evans, Technology Lead, Digital Technology CHAPTER 3 Supercluster FDI: Interconnected by Investment .........................25 Vincent Gauthier-Doré, Director Business California Investment ............................................... 28 Development–USA, Air Canada Iain Klugman, CEO, Communitech CHAPTER 4 Anthony Lee, Partner, Altos Ventures Canadians in Silicon Valley: Human Capital and Commerce ...............................33 Jayson Myers, CEO, Next Generation Manufacturing Canada Network Integration ................................................ 36 Moura Quayle, Director pro tem, School of Public Policy Financing the Boom ................................................. 39 and Global Affairs, University of British Columbia University Ties .......................................................... 41 Roseann O’Reilly Runte, President & CEO, Canada Foundation for Innovation CHAPTER 5 Rana Sarkar, Consul General, Consulate General of Canada’s Evolving Tech Ecosystem .........................43 Canada–San Francisco Where Science Meets Economic Development ...... 47 Jacques Shore, Partner, Gowling WLG Build It and They Will Come .................................... 48 Trevin Stratton, Chief Economist, Canadian Chamber of Commerce A Tale of Two Visas .................................................. 56 Jen Thompson, Marketing Manager, Silicon Valley Bank Conclusion: Building Synergy and Alignment .........59 Warren Wall, Executive Vice President, Corporate Affairs, D-Wave Systems Notes .......................................................................60 Hemispheric Partners Executive Summary No two economies are more closely connected high-value services and technology exports. A large than those of Canada and the United States—with share of US-Canada trade is complementary, in part due unprecedented flows of trade, investment, water, power, to bilateral trade agreements spanning three decades. people, and technology. Supply chains between the countries, particularly in the automotive sector, are deeply interwoven. Canada, like other developed economies, has experienced slow, steady post-2008 recession growth. Canada is California’s second largest trading partner After 3% real GDP growth in 2017 and a 2% growth after Mexico. It is an important supplier of natural rate in the third quarter of 2018, the Royal Bank of gas and hydroelectric power to California utilities and Canada expects the GDP growth rate for 2019 to be industrial customers; California buys roughly 75% of 1.7%. Real estate and construction together form the British Columbia’s hydropower exports to the Western largest component of GDP (20%), the other leading US. California exports mainly electronic (computing, contributors being energy (11%), manufacturing audio-visual, telecommunications, optical, medical) (10%), financial services (7%), and mining (3.6%). equipment and agricultural commodities—much Manufacturing is growing, but the economy has seen of them from Bay Area counties—and in turn buys volatility from fluctuating oil and other commodity vehicles, energy, meat, seafood, plastics, and wood prices. Uncertainties surrounding trade with the United products. More than half of California’s services exports States, and a concern with over-reliance on its traditional to Canada are technology-related—including business, strength in natural resources, is prompting a heightened professional & technical services, telecommunications, focus on competitiveness and innovation. This has and royalties/licenses—with the remainder mainly in become one of the strongest points of connection tourism and financial services. between the Bay Area and Canada. On the whole, California has been little affected by Canada has consistently been the largest global market recent tariff frictions and the renegotiation of NAFTA; for US goods exports. While the US runs a small goods California wineries won concessions on retail display; trade deficit with Canada, it runs a net surplus due to California lumber producers have benefitted from 1 Hemispheric Partners tariffs, but higher lumber import prices could add to basic research, and entrepreneurship. The Toronto, California’s already high construction costs. Uncertainties Montreal, Quebec City, and Vancouver metro areas have continue over the ratification and implementation of developed dynamic university, incubator/accelerator, the US-Mexico-Canada Agreement (USMCA), which is and VC funding networks; in rural and maritime intended to replace NAFTA and modifies but does not provinces, entrepreneurs are developing digital and AI fundamentally change its key provisions. The Trans- solutions in mining, agriculture, forestry, fisheries, and Pacific Partnership (TPP) trade agreement, to which both renewable energy. Toronto, Vancouver, and Montreal are the US and Canada were parties, has been replaced growing tech hubs. by the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which the government Canada’s large presence in the Bay Area provides a of Canada has championed. The US withdrawal counterpoint to these developments inside Canada. from TPP in 2017 and its absence from CPTPP—an Canadians occupy leading executive positions in a agreement among the 11 remaining parties to reduce wide range of Bay Area companies, particularly in tech. trade and investment barriers and address issues such Canada, alongside Israel, is also the leading source of as intellectual property and cross-border data flows— immigrant founders of billion-dollar companies in the will make California and US exports less competitive US; of nine such companies, six are in the Bay Area. with Canadian exports in a range of Asian markets, C100, a leadership group of senior Canadian executives, including Japan. provides a support network for Canadian entrepreneurs in the Bay Area. Leading Canadian financial institutions Two-way US-Canada foreign direct investment (FDI) is such as Royal Bank of Canada are active in Silicon Valley, roughly balanced; the US accounted for more than half mirroring investment in Canada by large Bay Area of the stock of FDI into Canada, while Canada was the companies such as Wells Fargo Bank and Silicon Valley second largest source of the stock of FDI into the US Bank, which has a strong focus on startups and lending in 2017. The flow of FDI into Canada saw a net decline in the tech and life sciences space. Many of the Bay in 2017, in part due to a slump in the energy sector, Area’s leading venture capital firms are active in Canada, but rebounded in 2018 with new manufacturing, tech, particularly in Toronto. logistics, and financial services investment. Southern California’s large population and manufacturing Despite Canada’s earlier fears of a tech “brain drain,” base have attracted a larger share of Canadian Canada and key US tech corridors—especially Silicon manufacturing, aerospace, and retail investment; Valley—have maintained a healthy back-and-forth ebb the Bay Area has drawn more technology, biotech, and flow of talent. Silicon Valley continues to draw renewable energy, and finance investment. Canadian talent due to the size of the US market, the availability of venture funding at scale, the global With the loss in the 2000s of technology industry platform it presents, opportunities to engage with leaders, such as RIM (Blackberry) and Nortel Networks, customers and partners, and the depth of technology and an overreliance on natural resources, Canada available there. As Canada’s tech sector advances, some today is increasingly driving toward an economy that Silicon Valley entrepreneurs