Nearshoring in Canada : the end of an era? From boom to bust for contact centers

October 18, 2012

 

United States presidential candidates agree on at least one thing: the need to repatriate the economic activity that has moved offshore in the past decade, to the detriment of American workers. Could this affect Canada, the quiet winner of the trend toward nearshoring and offshoring? Nearshoring to Canada enables US operators to reap many of the advantages of offshoring without the accompanying drawbacks, such as significant differences in language and time zones.

Canadian data now suggest that US nearshoring to Canada may be waning, at least for the more mobile service sectors. A case in point are contact centers, which provide a range of direct-marketing, customer and technical-support services related to the financial, technology, travel, insurance and health-care industries.

US investors had announced no fewer than 125 new investment projects relating to contact centers in Canada between 2000 and 2007 (i.e. 15 per year) for a total of 35,000 to 40,000 new jobs for Canadians. In fact, this is a low estimate since many such centers were set up within existing US affiliates in Canada and without public announcements. This movement is now in reverse, with many of these centers recently closed or with scaled down operations, with fewer than five new contact centers announced by US investors in Canada per year since 2008. The state of the US economy obviously plays a role, as well as the high Canadian dollar relative to the US dollar.

Whether these jobs are repatriated back to the US is another question, however; indeed, some may end up in even more advantageous and distant locations, such as the Philippines.

Are other US affiliates reconsidering their presence in Canada? And how effective can US policies be in accelerating their move back home? Given that the US is the largest foreign direct investor in Canada, these are good questions to ponder as US economic patriotism continues its apparent rise.