Microsoft reminds us that Canada is still a branch-plant economy

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This week, federal Innovation Minister Navdeep Bains launched the government's innovation strategy, declaring "we need to position Canada as a world leader in turning ideas into solutions, science into technologies, skills into jobs, startup companies into global successes."

Today, however, his boss, Prime Minister Justin Trudeau, is set to endorse an initiative that positions Canada as a world-class sucker in the innovation race.

Mr. Trudeau will be at Friday's opening of a Microsoft Corp. "Excellence Centre" in Vancouver. On its surface, it seems like good news: Microsoft is more than doubling its development staff in Vancouver to 750 people (it's already up to 568 now) and investing $90-million annually. The centre also hosts an internship program for 50 university students. Microsoft, which produces some Xbox games in the city, is "expanding the range of development work that we do in Vancouver," Microsoft president and chief legal officer Brad Smith said in an interview. "We really see Vancouver emerging as a new technology hub."

Inside Microsoft, however, some staffers have been known to cheekily refer to the Vancouver operation as "Ellis Island," after the historic U.S. immigration entry station. What Microsoft really wants is to import far more foreign workers to its home base in Washington State than it can under the United States' incredibly restrictive immigration rules. So it uses Vancouver as a staging post.

Foreign workers temporarily migrate to Canada and work for Microsoft here long enough to qualify for an intracompany transfer to the United States, a far less restrictive immigration process. That doesn't apply to everyone at the Vancouver centre – most of the roughly 425 "core" employees are Canadian. But another 140 or so "rotational" workers are foreign nationals who will be moved after 18 months, presumably to the United States.

Microsoft has been brazen about using Vancouver as a U.S. immigration back door. Then-chief executive Steve Ballmer said in 2007, when the company returned to Vancouver: "We opened a lab because we were having trouble getting visas for the best and the brightest." Deputy general counsel Karen Jones told Bloomberg in 2014 that the restrictive U.S. rules "clearly did not meet our needs," leaving the company about 750 foreign hires short of its desired U.S. intake. "We have to look to other places." Expanding to Vancouver wasn't "purely for immigration purposes," she said, "but immigration is a factor." Mr. Smith acknowledged "the more open immigration system of Canada does play a vital role in our ability to invest in a big way in the future of this kind of centre in B.C."

More surprising is that our government thinks it's smart for Canada to become a way station for U.S.-bound global talent (Microsoft isn't the only U.S. company to do this) and has made it even easier for Microsoft to build Ellis Island Northwest.

In April, 2015, the federal Immigration Department, at the B.C. government's request, exempted the Microsoft centre from undergoing onerous "labour market impact assessments" (LMIA) when seeking approval for inbound foreign employees, shaving months off the immigration process. Such exemptions are allowed under federal-provincial immigration deals for major projects that result in big investments and don't displace local workers, among other criteria. Mr. Smith acknowledged the exemption was an "important" consideration in Microsoft's decision where to locate the centre.

This would be easier to stomach if Microsoft was importing talent to remain in Canada or if the company placed leadership of key products or projects here (other than existing game studios, the new engineers will report to businesses managed elsewhere, such as Skype).

It would be more acceptable if the exemption was available to all tech companies. Canada is awash in fast-growing tech firms eager to import top talent from around the world. But they have to wait six to 12 months as a result of the prolonged immigration process, which submits fast-growing tech firms to the same drawn-out LMIA process as abusers of the temporary foreign-worker program. That is ridiculously long given that they are in a global race for highly coveted engineering and executive talent. Microsoft, a U.S. company hiring foreign workers to ultimately work in the United States, gets to skip all that.

This exemption places the needs of a foreign multinational above Canadian companies, which ultimately puts Canada at an economic disadvantage. "We need to correct these failed policies that unfairly advantage foreign multinationals and instead focus on growing our domestic scale-ups," said Benjamin Bergen, executive director of the Council of Canadian Innovators, which represents Canada's top emerging tech companies. "At the very least, Canadian tech companies should enjoy the same benefits and access to talent as foreign branch plants do here in Canada."

An exemption for Microsoft is dubious policy, as is championing investments by foreign tech companies here that would likely melt away if the U.S. government simply freed up more visas for foreign workers. It makes us look like a branch-plant economy. So do the PM's attempts to appear innovative by courting foreign tech giants Google, Ubisoft and Facebook, while ignoring Canada's emerging homegrown tech companies. Don't think he hasn't been invited to visit them, too.