Successive days in February brought news of great successes to Ontario.
On February 6, Google’s Ruth Porat, senior vice president and CFO at Alphabet and Google, announced that, 19 years after Google began its business in Canada with one salesperson in Toronto, Google would build on its 1,500-strong workforce in Waterloo, Toronto and Montreal by building a new office in each of those cities.
“By 2022, these offices will accommodate up to 5,000 employees,” she wrote in a blog post. “Canada’s investments in first-rate education and technological research — spearheaded by facilities like MILA in Montreal and Toronto’s Vector Institute — coupled with its consistent welcoming of global talent, reflect a commitment to a labor force designed to seize the opportunities of the digital economy,” she said.
The next day, Statistics Canada announced that employment in Ontario increased by 15,900 in January; by 210,200 in 2019; and by 307,800 since June 2018. An 8.7% cut to the small business corporate income tax rate (bringing it to 3.2%) is among several steps the province has taken to keep that momentum going, with the Canadian Federation of Independent Business (CFIB) in January awarding Ontario an A- on its 2020 Red Tape Report Card for the second straight year.
A native and two-term mayor of North Bay, Vic Fedeli developed a global advertising firm from his hometown, and followed that up by helping attract Voyageur Airways’ MRO operations to the shut-down airside assets of Canadian Forces Base North Bay. He gained renown on both sides of the border when he launched a grassroots campaign to reverse the U.S. ‘Buy American’ provision. After re-election in 2018 as Nipissing's member of provincial parliament, he was appointed Ontario’s finance minister and chair of cabinet by Premier Doug Ford. In 2019, he was named Ontario Minister of Economic Development, Job Creation and Trade.
Before making a trip to Washington, D.C., in early February, Minister Fedeli spoke with Site Selection about talent, trade and FDI.
Site Selection: What are your thoughts about Google’s investment just announced yesterday?
Minister Fedeli: I think it’s very exciting news. It’s due to the fact we’ve created such a competitive business environment. It’s due to the talent. Employers continue to recognize we have the best-trained young men and women in the world. We’re the number two IT cluster in all of North America. Ontario will continue to attract these companies because we have the talent and competitive environment. This year we’re taking $5.4 billion out of the cost of doing business, after costs related to the Ontario Workplace Safety and Assurance Board [Canada’s largest insurer for workplace safety] were reduced by $2.2 billion last year. Businesses have created 290,000 net new jobs since our election. If there’s a further exclamation point, directly as a result of the changes to the business climate, 75% of all new jobs in Canada last year were created in Ontario.
How have Ontario’s and Canada’s openness to immigration helped create this environment for economic development success?
Minister Fedeli: We’re open for business, jobs and trade. And part of our complete package is our immigration. I was in India in October, and in my speeches I talked about the fact there are 830,000 people of Indian origin living in Ontario. There are 52,000 Indian students in Ontario this year. We're training students and encouraging them to stay here and start their adult lives here.
After successfully fighting against U.S. "Buy American" provisions in 2009, are you now having to try and reverse the "Buy American" provision again?
Minister Fedeli: That was a successful operation as mayor of North Bay. We put together a mayor-to-mayor campaign with the mayor of Cortland, New York, where I was about to buy a $6.7 million membrane for my water filtration plant. "But if you keep this up," I explained, and I was able to name the exact number of employees that would lose their jobs. We did the same thing with a small town in Michigan with two fire trucks. We got mayors all across the country [involved], putting a package in a box, and saying, "You will lose these jobs this summer." Now here we are a decade-plus later, and it’s still an issue.
Premier Ford speaks loudly to the business community, and we will talk plainly to the U.S. governors, because we are the number one partner for 19 U.S. states, and number two for nine more states. Americans go to work every morning to make products to ship to our country — we’re having conversations with key states like Ohio on a greater economic alignment that will benefit both sides. In Ohio, 307,000 men and women wake up every morning to make products to ship to Ontario. We’re going to need reciprocal agreements. It’s not a one-way street. We are great partners, and that needs to continue with free trade. We can’t see the protectionist comments coming out.
Former U.S. Commerce Secretary Penny Pritzker told me last year how valuable she thinks mayors are to state and national economic development. What are your thoughts as a former mayor yourself?
Minister Fedeli: I think it’s hugely important, because mayors are where the rubber meets the road in our communities. I spoke to an economic development conference just this morning, and we talked about it coming down to that personal nature, when a company comes to town and wants to meet the mayor. When I was mayor for two terms, I formed the mayor’s office of economic development. They wanted to look that mayor in the eye and know they had a strong partner. It was that critical. You meet the mayor, you shake their hand, they help tour the city. They also know they can’t always win this one but it might be good for the region. Believe it or not, that does happen — I wanted to support our airport in North Bay, and I had letters from 10 area mayors.
I know there is a tremendous number of former mayors who are now caucus and cabinet members in Ontario. It really helps in a full understanding.
What do Ontario leaders think of the new USMCA trade agreement?
Minister Fedeli: Our government supports the core aspects of the new USMCA: tariff-free trade, state dispute settlement, entry provisions and the cultural exception. The ratification was a highly positive outcome. It provides a certainty and a more stable environment for business investment and Canada-U.S. trade. We have $400 billion a year of two-way trade. No two nations depend on each other more for trade and security than the U.S. and Canada. It's a model for the world, and it supports growth and innovation.
USMCA effectively preserves the NAFTA market access, so there are no new tariffs between the partners. It incorporates new, modernized provisions and better regulatory practices, with language on digital trade and on SMEs. But it really ensures that businesses in all three countries will benefit from a continental free trade. Because of that, business has generally been supportive of the new agreement.
In Washington, I’m looking for side meetings to have a better delineation of what the auto parts negotiations entail, because the local content rule will change from 62.5% to 75%. My understanding to this point is offshore suppliers of parts will need to look at building facilities locally. That means Canada, the U.S. and Mexico. If that means we need to hustle in this window of opportunity, that’s what we will be doing. We’ve set the table with that $5 billion in savings. Think about this as well: There were only two to three trade agreements a few years ago from Canada, and now we have 49 around the world. In Ontario, you have free trade with 49 countries, and frankly our businesses are not taking advantage of it. That’s part of the message I bring to the business community. Companies should be moving to Ontario just for the opportunity to have free trade around the world.
The new agreement with India's National Association of Software and Services Companies [NASSCOM] holds great promise and, apparently, early results in terms of project investment from NASSCOM member companies. Share your perspective on this MOU’s potential, and how it dovetails with the province’s recent successes in attracting technology firm offices and R&D.
Minister Fedeli: We’re absolutely thrilled. The MOU with NASSCOM represents 95% of industry revenue in India, so this has opened up opportunity for tech-based FDI. Think about India being on track to become the largest sourcing destination in the world, and here we are the second largest IT cluster in North America. So that’s a fascinating opportunity. India has 1.3 billion people. We do $400 billion in trade with the U.S. We only do $400 million a year in business with India. That’s a million a day. That’s peanuts.
We really see India as a blank canvas. Our number one export there is aerospace, and that’s not a lot of aircraft and parts. The number two export is scrap metal. We really do have a blank slate. VVDN Technologies announced while I was there in India a new facility in KW [Kitchener-Waterloo] that will hire 200 engineers. Now they have a presence in KW, and we’re continuing to work on the ground now. We had months of engagement with them, back and forth between our India office and our head office in Toronto.
Two years in, what sort of concrete impacts has the Canada-Europe Trade Agreement [CETA] spurred in Ontario, in terms of job creation, business development and facility investment?
Minister Fedeli: We now have guaranteed preferential access to the world's second largest market, with GDP of $17 trillion. This makes Ontario globally competitive. But that’s only one of the 49 deals that are there. Now 98% of the EU is tariff- and duty-free. But there’s more to do. That's why our trade missions are so important, to take companies from Ontario around the world. We brought 12 companies to India, and had over 100 meetings for those companies.
What does Brexit mean for Ontario in terms of location decision-making by multinational firms?
Minister Fedeli: I spent time in the UK last May and June to get a better sense. Most people, whether in the UK or Europe, see Ontario as an island of stability. So no matter what happens worldwide, turmoil or not, they look to Ontario as this beacon. We will continue to pay close attention to the UK-EU trade negotiations between now and December 31st this year. It's an important transition. We do about $13 billion in the UK, so they're an important trading partner for us. A lot of it is in minerals. I’ll be in the UK in July for the biannual Farnborough Air Show. I was in that business in the 1990s, and traveled to Farnborough for many years. Ontario always has had a strong presence there.
How are your trade missions fostering other new opportunities for inward FDI?
Minister Fedeli: [Korean biotech venture firm] DAYLI Partners and our Toronto Innovation Acceleration Partners formed a $20 million venture fund in South Korea. That was a very important deal we were able to secure when we were there. We met with KEPCO there, and they announced they would open an office in Port Elgin providing engineering and procurement support for Bruce Nuclear Generating Station. And the Korean Importers Association, with 8,500 members, had never had an MOU with Ontario. They do hundreds of billions of dollars of importing each year. This is going to strengthen that relationship now. That’s a very important result out of that trip.
In Japan, we visited Toyota. They had announced the NX line of Lexus will be manufactured in Ontario [in Cambridge]. J.D. Power & Associates announced that plant as a platinum winner of the best auto manufacturing plant on the planet. We simply wanted to say, "Thank you."
Seneca College did good business in India. In the Indian state of Karnataka we did a very good deal, and we’re working on finalizing that now.
These are all face-to-face meetings. There's nothing like breaking bread together, looking each other in the eye, and understanding what it will take to do the deal. In April, we're leading a mission of mining and equipment firms to Ecuador and Peru. And we hope to announce the rest of the schedule in the near future. I get pretty passionate about economic development. We’re really working at making our office a sales office. This is the Ministry of Economic Development, Job Creation and Trade, and we’re really laser focused on those three missions.