The immigrant effect

Canada has long considered immigration as a valuable way to grow the domestic market and infuse the economy with skilled workers. But new research also suggests that immigrants are a strong factor in expanding markets overseas.

A recent paper, Immigrants as Innovators, published by the Conference Board of Canada, found a direct relationship between higher immigration and increased imports and exports from a particular country, a relationship that was independent of the wealth, geographic distance and language of the other country. A 1% increase in immigrants in Canada is associated with a 0.11 % increase in exports, which might not sound like much until you translate the figure into dollars.

“An additional 217 immigrants from Japan could translate into an increase in annual exports to Japan of more than $11 million, based on the average value of exports to Japan between 2004 and 2008,” states the 2010 report.

The report’s author Michelle Downie, senior research associate at the Conference Board, says immigrants have social and business networks, language skills and knowledge of their home culture that makes it easier for international relationships to form.

“Businesses can put too much of a premium on Canadian experience—English-language skills and how people fit into Canadian culture—without considering the assets of the international experience immigrants are bringing,” says Downie.

The report offers the example of Filipinos, whose immigration rates to Canada rose faster than any other nationality in the last decade.

“Between 1999 and 2008, the value of goods exported from Canada to the Philippines increased from $360 million in 1999 (in constant 2008 dollars) to nearly $560 million in 2008,” states the report. “The increase in the value of exports to the Philippines coincides with increases in permanent residents from that country.”

The Canadian numbers are echoed by a new study out of Spain. Between 1995 and 2008, immigrants increased from 1% of the Spanish population to 10%. At the same time, international trade also increased to 44% of Spanish GDP, up from 35%.

“Through business and social networks, expatriates increase the diffusion of information and reduce the cost of doing business with their ‘mother’ country,” write Giovanni Peri of the University of California, and Francisco Requena-Silvente of the University of Valencia, Spain. The presence of immigrants has increased the number of exporting Spanish firms, has promoted exports of sophisticated manufacturing goods and has increased exports with countries ‘culturally’ different from Spain.”

The Conference Board of Canada didn’t look at the effect of outward foreign direct investment (FDI) by Canadian companies, but using upon U.S. numbers, it concluded that immigration also has a positive effect on inbound FDI.

“When we compare countries that invest in Canada with those that do not, we find that the rates of immigration are much higher for the countries that do invest,” states the Conference Board report. “The bottom line is, wherever immigrants to Canada are coming from, they appear to increase trade with their home country, and they are associated with increased FDI into Canada from their home country.”