Toronto Still in the Running for Amazon HQ2

By David George-Cosh Features Dow Jones Newswires

This city, the fourth biggest in North America by population, found itself Thursday to be the sole foreigner on Amazon's shortlist for the site of its second headquarters, joining the ranks of New York, Boston, Atlanta and others.

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While Toronto's pool of tech talent likely is a draw, say those behind the government's bid, the city faces hurdles given tax advantages in the U.S., uncertainty around U.S.-Canada trade, and the political implications of creating thousands of jobs outside the U.S.

The Toronto proposal doesn't include any tax incentives, instead highlighting the region's access to highly skilled talent with salaries nearly 40% less than those for similar positions in New York or Boston, and the country's friendly immigration policy. The proposal also notes how the country's health care system could save the tech giant about $600 million a year in private health care costs.

Steven Del Duca, Ontario's minister of economic development and growth, said Thursday that Ontario has maintained an attractive tax structure aimed at drawing international investment while offering a steady pipeline of low-cost engineering talent from universities around the province.

He said he expects the Toronto team to meet with Amazon executives in coming weeks to discuss any issues, possibly including infrastructure spending.

"We're going to look at all" of Amazon's concerns, Mr. Del Duca said.

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Amazon already has a significant presence in Canada with engineering teams in Vancouver and Toronto; a development center for Alexa, the company's voice-control system, in Ottawa; as well as distribution centers across the country.

As well, Toronto is home to several Canadian headquarters for U.S. tech giants including Microsoft Corp.; Google's parent company, Alphabet Inc.; and Facebook Inc. And it has agreed to work with Sidewalk Labs, Alphabet's urban design unit, on building a high-tech waterfront development. Canada has drawn record venture financing to its startup base with 3.6 billion Canadian dollars ($2.9 billion) invested in its startups in 2016, up from C$3.1 billion the previous year, according to data from Thomson Reuters.

Canadian Prime Minister Justin Trudeau made a pitch to Amazon CEO Jeff Bezos last year to consider Canadian cities for the home of a second headquarters.

Yet Mr. Del Duca and others acknowledge that Toronto's chances could be hampered by the Trump administration's sweeping overhaul of the U.S. tax code that now sets the corporate tax rate at 21%, while Toronto's proposal puts its rate at 26.5%.

In addition, Toronto's place on the shortlist comes at a tenuous time in U.S.-Canada relations. Canada is in the midst of talks with the U.S. and Mexico to renegotiate the North American Free Trade Agreement, and the negotiations have grown contentious.

"It was likely enough of a message by Amazon to put Toronto on the list. That Amazon could go outside the United States should help Amazon get more subsidies and tax breaks from U.S. federal, state and local governments," said Christopher Sands, director of the Center for Canadian Studies at Johns Hopkins University's Washington campus.

Toronto won out over nearly a dozen Canadian cities that submitted bids for Amazon's next headquarters, including Ottawa, the national capital; Hamilton and Vancouver.

--Paul Vieira contributed to this article.

Write to David George-Cosh at david.george-cosh@wsj.com

(END) Dow Jones Newswires

January 18, 2018 13:55 ET (18:55 GMT)