Courting Canada: Can Gov. Scott Lure Businesses South? 

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• Tim Newcomb

In February, Gov. Phil Scott met with Québec Premier Philippe Couillard in Québec City. In March, he sat down with Ontario's premier in Toronto. In April, he traveled to Montréal to attend an aerospace manufacturers trade show. In August, he mingled with other provincial premiers on Prince Edward Island. In October, he returned to Toronto for an economic forum.

Scott's frequent trips to Canada reflect a political agenda: He considers the country crucial to his chief goal — growing the economy. "I see it as fertile ground for us in terms of economic development," he emphasized during an interview last week.

The Berlin Republican is by no means the first Vermont governor to seek economic riches north of the border, but business leaders say his administration has been especially assiduous in courting Canadian companies.

"They're doing a hell of a good job," said Tom Torti, president of the Lake Champlain Regional Chamber of Commerce.

"I think he's getting results," agreed Frank Cioffi, president of the Greater Burlington Industrial Corporation.

Cioffi pointed to early signs that Canadian companies are responding: Three firms from north of the border have established a small presence in Vermont since Scott took office. It remains to be seen whether the governor's hobnobbing will bear bigger fruit, especially given the political uncertainty around the future of U.S. trade policy under President Donald Trump.

Vermont economist Tom Kavet describes the state's relationship with Canada as critical, noting that Vermont depends on Québec in particular for trade, tourism and power provided by Hydro-Québec. Kavet said it makes sense for governors to do whatever they can to strengthen that bond but warned that Vermont is a "cork in the ocean" when it comes to influencing international economic activity. Factors including the exchange rate and trade regulations have far more influence than Vermont officials.

Canadian tourists spent $119 million in Vermont in 2015, according to the Vermont Department of Tourism and Marketing, and the country is Vermont's largest trading partner by far. In 2016, the state exported $1.2 billion in goods — primarily electronics and computer parts — to Canada, according to the U.S. Census Bureau. Hong Kong, Vermont's second largest export market, bought $352 million in goods.

The state imported $3.6 billion in goods from Canada in 2016, according to Canadian government figures.

Canada's currency, the loonie, has been weak relative to the American dollar for several years now, which can depress Canadian tourism, investment and demand for Vermont products.

U.S. Department of Commerce statistics show that Canadian-owned companies employ approximately 2,200 Vermonters, and roughly 12,500 Vermont residents work in the foreign export business.

Québec is responsible for most of the economic activity, and, after his first trip to the province, Scott announced that he and Couillard had committed to "enhanced Vermont-Québec relations." In particular, they pledged to make it easier for students at colleges and trade schools to study on either side of the border, an initiative that has not yet been implemented.

The governor is making overtures in Ontario as well. He initially visited Toronto to discuss efforts to fast-track customs approval for air travelers between Burlington and the Canadian metropolis.

"I was surprised to learn it's actually the fourth largest city in North America," Scott said, describing Toronto as "somewhat forgotten by many" and a place with which he hopes to develop a stronger economic relationship.

Between his northern excursions, Scott has instructed his deputies to maintain close contact with Canadian officials and business leaders.

"This is, for Gov. Scott's administration, at the top of the priority list," said Secretary of Commerce and Community Development Michael Schirling, who makes a monthly phone call to Québec's minister of economy and technology. In the spring, the commerce agency will begin holding bimonthly information sessions for businesses on both sides of the border.

Torti said jokingly, "Every time I talk to Mike Schirling, [Canada] is all he talks about."

One of the best things the Scott administration has done, according to Torti, has been to establish regular meetings between agency staff and chamber officials. "We actually know what each other is doing, so we're not tripping over each other. You can't overestimate the value of that," he said.

Chris Carrigan, vice president of business development at the Vermont Chamber of Commerce, said he's thrilled with Scott's Canadian focus and described the governor as "more active, more willing to participate and be involved."

Carrigan said the governor has championed the chamber's efforts to develop partnerships among aerospace manufacturers in Canada, Vermont and Connecticut. Scott, he said, helped the cause by attending the Montréal trade show and meeting with company executives. "That's pretty powerful, to have the governor there," Carrigan said.

Back home in Vermont, Scott has participated in nearly two dozen meetings and phone calls with Canadian officials, businesses and other organizations, according to his communications director, Rebecca Kelley. In his conversations with Canadian businesses, Scott said he emphasizes the caliber of the state's workers, Vermont's quality of life and the accessibility of state officials.

He was quick to point to more concrete signs of success. "We've already seen three businesses that have or will soon open locations in Vermont as a result of the work we're doing," he said, adding that "they're gonna start small, but they have the potential to grow quickly."

Scott was referring to Pratiko, a medical device manufacturer; Laxson International, which produces GPS trackers; and Gilbert Technologies, a metals manufacturer.

During his February trip to Québec, Scott met with Jean-Marc Landry, director of research and development at Pratiko, which was looking to expand to the U.S. Landry had already been talking for several months with David Snedeker, executive director of the Northeastern Vermont Development Association, and Gail Stevenson, director of the Vermont-Québec Enterprise Initiative, a joint endeavor between the Lake Champlain Regional Chamber and the state commerce agency.

During an interview last week, Landry didn't remember any specifics from his conversation with Scott, but "it was impressive to have him there in Québec City, because it's not all the time that people with high qualifications like that will take the time to meet small businesses."

In September, Scott announced that the company was opening a branch in St. Johnsbury. Landry said it was the close proximity to Québec and a "beautiful facility" that ultimately convinced Pratiko to set up shop in the Northeast Kingdom.

In his announcement, Scott didn't mention that Landry is the only person working in the new office at the moment. The research director said the company plans to add a manufacturing facility in Vermont in 2018, which will create local jobs, although he couldn't say how many.

Scott met with Sylvain Pelchat, vice president of international affairs at Laxson, during a September trade show in Essex Junction. By that time, Laxson had already decided to establish an office in South Burlington. Pelchat said state officials, including deputy commissioner of economic development Brett Long, were instrumental in facilitating the move.

Founded in 2015, the company has just six employees, only one of whom is based in South Burlington. Pelchat said he hopes to increase the number of Vermont-based workers to six by the end of 2018.

Several months ago, northern Québec-based Gilbert Technologies decided to lease space in the same St. Johnsbury complex where Pratiko operates.

"The administration was involved in communicating with this company, letting them know we really wanted them in Vermont," Snedeker of the Northeastern Vermont Development Association said. "I think they're very engaged."

(Which isn't to say past governors weren't: Snedeker pointed out that governor Peter Shumlin put in a call to BHS Composites, helping persuade the Canadian company to move to the Northeast Kingdom in 2016.)

Gilbert is expected to employ a small number of workers at first.

The state's business recruiters say it's no accident that all three companies are small. "We're trying to focus on where our strengths are," said Long, the Department of Economic Development official, suggesting that the state has more to offer small companies. He noted that his department is scouting locations that could serve as an incubator space for Canadian companies that are considering U.S. locations.

As Vermont officials court Canadian companies, another conversation is taking place without them. The Trump administration is renegotiating the North American Free Trade Agreement, the treaty that governs trade among Mexico, Canada and the United States. The next round of negotiations begins in Montréal in January, and a new agreement is expected by March.

"Things aren't going smoothly," said Birgit Bozek, an expert on cross-border business between Canada and the U.S., who has been briefing Scott's administration on the talks.

One concern for Vermont is that a renegotiated deal could make it harder for employees who need to cross the border. NAFTA has eased the way for business executives, repair technicians and other workers who travel back and forth between the countries, Bozek explained. Absent that agreement, those workers would have to apply for visas through the U.S. or Canadian consulates, which might make Canadian companies think twice about establishing locations in Vermont.

Another possibility is that tariffs on parts and products passing between the two countries will increase. However, that might actually help Vermont attract businesses: If Canadian-made goods become subject to higher tariffs, companies may be more inclined to manufacture those products in the U.S. Both Long and Snedeker said they've gotten calls from Canadian companies exploring this option.

During his trips abroad, Scott said he has tried to reassure Canadian officials who are worried about NAFTA's fate.

"Part of what I've been trying to do is at least give them a sense of calm — that we understand and that we share their concerns," Scott said, although Vermont has no control over the negotiations' outcome.

"[NAFTA]is going to dwarf anything we can do at the state level," economist Kavet said. "It's really important to have the conversations, to have the relationships, to take advantage of everything we can, but are we really gonna move the needle much? Probably not."