Canada’s tech scene has been getting a fair amount of attention lately, with its AI talent coming in for special focus. There’s even a high-powered group of AI researchers who have been dubbed the Canadian Mafia. Tech giants like Google, Apple and Facebook are all lining up to work with Canadian AI researchers and some observers are saying this could be the lever that moves Canada’s economy away from mining and resources across to tech.

The current Canadian Government, led by Justin Trudeau, came to power in 2015 on the promise of revitalising the country’s tech industry and putting innovation at the heart of its industry development policies. That promise seems to be coming to fruition.

“If AI develops like other technologies, most of these benefits will flow to the country that builds the first good ecosystem. This is a huge opportunity for Canada,” McKinsey partner John Kelleher and McKinsey engagement manager Laura McGee wrote recently in The Globe and Mail.

As well as pumping C$125 million into AI research and development, the Trudeau government has recently announced the $950 million Innovation Superclusters Initiative, which will seek to build and strengthen relationships “from large anchor firms to start-ups, from post-secondary institutions to research and government partners”.

Like so many governments around the world, including Australia’s, Canada has recognised that the tech industry is vital for a prosperous national economy in the 21st century, and that the benefits of an innovation-focused economy spill over to all areas of the economy, not just what we think of as strictly tech sectors.

The trick for countries like Canada and Australia is to work out how they navigate and position themselves in a world in which they are middleweight players, which is why trade deals like NAFTA and the TPP are such contentious issues for economists and business people alike. Trade deals still set the parameters and rules for the flow of labour, money and markets.

One Canadian who has recognised this is the former co-CEO of BlackBerry, Jim Balsillie, who set up the lobby group the Canadian Council of Innovators in 2015, not long after Trudeau’s Liberal Party was elected to govern.

Balsillie has applied his experience and knowledge from his years spent growing BlackBerry (formerly called Research In Motion, and the maker of the famous BlackBerry smartphone) to the task of shaping tech policy to work to the benefit of Canadian companies rather than the US giants.

His thinking is that a lot of the Trudeau government’s initiatives, while impressive as headlines, will only serve to entrench the power of US companies and rob Canadian companies of the chance to capitalise and scale their own inventions and intellectual property. Balsillie is blunt in his assessment of where Canada’s policymakers have failed.

“We have not updated our policy thinking since the 1980s. It’s the same discourse. This includes entrepreneurs, policymakers, the business community and educators. Getting money for ideas and managing restriction systems is a very precise, technical and surgical exercise,” he says.

He says this failure has left Canadian start-ups and entrepreneurs at the mercy of powerful Silicon Valley types: “When you tell your entrepreneurs that it’s a hands-off, free market out there, you’re sending them to a gunfight with a knife.”

Balsillie is not alone in his views that the Canadian government and its tech sector can do better than just become branch offices for the big multinational players. But with the scales so vastly tipped in favour of the big players, countries like Canada (Australia too) could continue to lose talent and valuable IP to Silicon Valley.

The Vice-President of voice-recognition company Maluuba, Mohamed Musbah, told Macleans the Canadian AI sector might relocate to Silicon Valley before it even gets a chance to really develop.

“Some of the smartest people in the AI space came out of [!canadian!] universities,” says Musbah. “But what’s happening is these bigger companies like Facebook and Google are essentially offering them a lot of money and resources to go to the US and work on the problems there … it’s happening in both industry and academia.”

Many of the problems Canada is confronting in both courting and repelling the advances of global tech powers are relevant to Australia as well. We’re also in there competing for scarce and precious brain power as well as investment capital to monetise our ideas. And like Canada, we need to get our policy settings right.