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Ontario and Quebec’s Diverging Approaches to Innovation and Trade

With Ontario and Quebec’s 2019 budgets released, Global Advantage has been busy analyzing them for innovation and trade-related policies and programs. What strategies are these governments using to improve innovation and trade in their respective provinces?

Ontario’s budget has a broad theme of increasing innovation through improving the province’s business environment. The government’s innovation plan revolves around lowering corporate taxes and increasing innovation incentives, reducing red tape and regulations, and lowering energy costs.

The Ford government introduced the Ontario Job Creation Investment Incentive, which is projected to lead to over $4 billion in corporate tax relief over 6 years. This incentive includes an immediate 100% write-off for manufacturing, processing and clean energy machinery and equipment, and an accelerated write-off for most other assets. The government expects this to add $7-10 billion in new business investment. The government is currently reviewing R&D support from the Ontario Innovation Tax Credit and the Ontario Research and Development Tax Credit. Lastly, in the coming months, the government will consult with businesses to develop a plan that ensures Ontario entrepreneurs have improved access to the province’s R&D support.

The government aims to help businesses innovate by reducing energy input costs via opposing carbon pricing and implementing various hydro cost lowering policies. This includes increased funding of almost $4 billion for electricity price relief over 6 years. Reductions in industry-wide business regulations are intended to grow business and innovation.

The Ontario government has developed industry-specific innovation strategies. The budget introduced the 21st Century Digital Strategy, which aims to save Ontarians’ time by digitizing government services. The plan aims to make Service Ontario’s top 10 transactions (which include renewing driver’s licenses, health cards and vehicle permits) renewable online. The government is exploring procurement options for Ontario’s entrepreneurs to help government digitize. The government plans on developing an easily accessible Ontario data strategy.

The province also launched Driving Prosperity, a $40 M commitment over 3 years to strengthening innovation and competitiveness in the auto sector. Driving Prosperity aims to strengthen Ontario’s position in auto-related advanced manufacturing and mobility technologies. The plan includes an Automotive Modernization Program to foster innovation in parts assembly, enhancement for Ontario’s Autonomous Vehicle Innovation Network, and the promotion of leadership in new technologies such as hydrogen fuel cells.

Regarding trade, the budget stresses that the federal government should do more to counter US tariffs and CUSMA concessions. It called for the removal of tariffs and CUSMA concessions regarding steel and aluminum, biologic drugs, and dairy products. The budget called for the building of pipelines and breakdown of interprovincial trade barriers to increase interprovincial trade.

Whereas the Ontario government’s innovation approach is more focused on providing incentives to drive business innovation and trade, Quebec’s government takes a more active approach through government spending in targeted innovative sectors.

Quebec’s government announced $15 million for the “Technoclimat” program, which offers funding for the development of technological innovation in the areas of energy efficiency, renewables, bioenergy, and GHG emission reduction.

Quebec’s budget has a “Stimulating Innovation to Create the Jobs of Tomorrow” component that provides nearly $709 million by 2023-24 to boost innovation. This funding is divided between artificial intelligence (AI) ($329 million) and other innovative areas ($380 million).

For AI, the government has committed $12.5 million towards AI training for students, $38 million toward attracting AI researchers, $65 million towards encouraging business to use AI, $34.5 towards increasing Quebec’s computational power (by improving AI-related infrastructure), $79.3 million towards supporting technologies that support AI (technologies such as electronic design, photonic solutions and semiconductors) and $100 million towards supporting AI research.

The $380 million towards other innovative areas includes $50 million towards forest industry innovation, $7.5 million in genomics research, and $2.1 million in industrial bioprocess research by 2023-24. $320 million will be dedicated to upgrading infrastructure in Montreal, Quebec City, Gatineau and other regions to develop strategic sites for innovative businesses.

Regarding trade, the 2019-20 budget will enhance Investissement Quebec’s Exportation program, which employs specialists in foreign market development, and finances studies and promotional tools for Quebec exporters. The budget allocates $35 million over 5 years to diversify and consolidate export markets through this program.

Innovation and trade are key areas that are essential to economic development and competitiveness. While Ontario’s pro-business incentive-focused approach differs from Quebec’s funding towards key industries approach, Canada’s two largest economies both share the goal of leading innovation and trade in Canada.