Drones, AI and ‘progressive’ regulations: How the federal government tried to sell Amazon on investing in Canada

An Amazon Prime Air delivery drone. Amazon

In an effort to attract Amazon’s second global headquarters, the federal government assembled a team of officials dedicated to encouraging the company to invest in Canada, offering incentives and attempting to cater to Amazon’s interests in drones and AI.

Briefing notes prepared for Global Affairs Canada, obtained by The Logic through an access-to-information request, reveal the government’s efforts to attract more foreign direct investment from the retail giant, stressing “progressive” regulatory environments in Canada and highlighting a range of industries in which it hoped Amazon would invest apart from its decision on the location of its second global headquarters (HQ2).

The documents also hint at how the company could be planning to further expand its presence in the country.

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Talking Point

Amid Amazon’s search for its second global headquarters, Ottawa convened a team of officials from across government tasked with encouraging the company to expand its business in Canada. The team pitched the company on opportunities including drone testing in Alberta and Quebec, developing connected cars and expanding its entertainment business in the country.

The briefing notes describe a series of meetings held in 2016 and 2017 as “Amazon was entering a period of significant growth, and was open to making continued investments in Canada,” according to a summary from a July 2016 meeting between Amazon CEO Jeff Bezos and Prime Minister Justin Trudeau. “[Bezos] sought the PM’s views on additional investment opportunities.”

The government convened the Amazon FDI Team ahead of the company’s search for its HQ2 location. The team—comprised of government officials from Global Affairs; Innovation, Science and Economic Development; Export Development Canada; the Privy Council Office; and the Consulate General of Canada in Seattle—coached government officials on how to pitch Amazon representatives on increasing its foreign direct investment (FDI) in the country, in areas including artificial intelligence, connected cars and drone technology. 

“While it is difficult at this stage to assess the likelihood of a Canadian city winning the bid for Amazon’s HQ2, the RFP [request for proposal] process provided the opportunity to brand Canadian cities as destinations of choice for this and future Amazon expansions, including new distribution and innovation centers,” one briefing note reads.

Stefano Maron, a spokesperson for Global Affairs, confirmed to The Logic that the government has other teams dedicated to attracting investment from specific companies, but would not specify which firms. 

Though it chose a site in Virginia for HQ2, Amazon has expanded rapidly in Canada in recent years. It has built or has approval to build 11 fulfillment centres located across the country. In 2016, Amazon Web Services (AWS), its cloud business division, opened its first Canadian data centres in Montreal. And, in April 2018, it announced plans to build a 416,000-square-foot office in Vancouver, where 3,000 workers will help build the company’s e-commerce, cloud computing and machine learning capabilities.

The briefing notes reveal a number of business interests Amazon itself had raised with government officials. 

Senior Amazon executives, for example, expressed interest in drone testing, citing “‘progressive regulations’” in Alberta and Quebec for beyond-visual-line-of-sight drone testing in those provinces, allowing people to operate drones without being able to see the device.

Amazon began testing drones in a secret site in rural B.C. in 2015, ahead of the company being granted regulatory approval to test the technology in the U.S. 

The briefing documents also show that Amazon had indicated particular interest in Toronto, Vancouver and Ottawa “in relation to artificial intelligence (AI) in the area of machine learning and voice recognition,” as well as “expanding their cloud computing presence in Montreal.

At the time, the company had recently invested in AI research at the University of Waterloo through its Alexa Fund Fellowship, and had announced plans for its new Vancouver office. The company has since announced a 113,000-square-foot office in Toronto, where it will hire 600 skilled workers to focus on machine learning, AI, cloud computing, digital advertising and software development. 

Amazon officials also cited Canada’s data protection agreements with other countries as a draw for doing business in the country. 

“Canada has several data protection agreements with third countries that trust their data is stored and protected under Canadian regulatory and cyber-security regimes,” reads a briefing note from an April 2017 meeting between 10 senior Amazon executives and the Canadian Parliamentary Standing Committee for Trade. During that meeting, the company also raised issues related to NAFTA, which the government was preparing to renegotiate at the time, including “tax/duty issues with cross-border e-commerce and digital products.” 

Amazon declined to answer any of the The Logic’s questions, including whether its business pursuits in Canada were influenced by Ottawa’s FDI team, whether it is investing in any of the “areas of interest” the government pitched it or whether it is pursuing the interests it broached with government officials. 

The government highlighted incentives that Amazon could leverage in Canada, including the Pan-Canadian Artificial Intelligence Strategy—a $125-million fund to attract and retain top AI talent; the Global Skills Strategy, a program designed to help companies in innovative sectors bring highly skilled foreign workers to Canada; and the Strategic Innovation Fund, which makes investments in innovative companies and works to attract FDI. The FDI Team also recommended the government reach out to municipalities and provinces “to see if/how they can accommodate Amazon’s areas of interest for potential expansion in Canada.” 

The federal government did not answer The Logic’s question of whether the company has used any of the incentive programs to attract talent or funding for its Canadian operations.

The team highlighted seven areas in which it hoped the company might see business opportunities. 

For example, it sought to interest Amazon in developing gaming content in Canada, noting the country has the world’s third-largest video gaming industry. “The company may not be aware of the industry incentives available in Canada,” the document reads. In an email to The Logic, Maron would not say to what incentives the documents referred. 

The team also noted efforts to attract work from the company’s entertainment business, Amazon Studios, referencing its original television show, “The Man in the High Castle,” which was filmed in Vancouver.

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Since then, Amazon has announced production on a forthcoming TV series, “Tales From the Loop,” to be filmed in Manitoba. The province’s film and TV tax credit was set to expire at the end of 2019. However, its government announced in January that the incentive program—which covers either 30 per cent of production costs or 45 per cent of labour costs—would become permanent, saying it has attracted projects and helped boost the economy. 

Another area of potential interest the FDI team identified was connected cars. It noted, however, that the sector wasn’t a focus for Amazon at the time, despite it having made several investments in Vancouver-based Mojio, a cloud-based connected-car-platform company. 

The briefing notes cite Quebec’s low energy costs as a reason the province would be “ideal for establishing and expanding data centres.” By the time the meetings took place, Amazon had already established data centres near Montreal. More recently, the company registered lobbyists in Quebec to pitch the provincial government on cloud computing products to store its data if there are calls for tenders, as La Presse Canadienne first reported in February.