If Peter Hall’s prognostications are accurate, Canadian businesses that actively develop trade opportunities in emerging markets could continue to realize trade growth six times greater than those focused on traditional markets.
As a result, he says the percentage of Canada’s global trade associated with emerging markets could easily approach 35 per cent, or more, by 2020.
While Mr. Hall, the chief economist of Export Development Canada (EDC), notes that his outlook is “realistic, but hypothetical only,” his opinion is based on an extrapolation of hard trade data.
A shift in global and domestic trade fundamentals has been brewing since 2002, when Canadian exporters last benefited from Canada’s low, 65-cent, dollar. The Canadian dollar’s steady 8 to 9 per cent appreciation between 2003 and 2007 put in jeopardy Canadian exporters focused primarily on traditional markets.
“We saw our trade activity over that time grow very slowly, about 2.1 per cent per year, on average,” says Mr. Hall. “That’s disastrous for a trading nation.”
Fortunately, he says a survival mentality among many Canadian exporters inspired creativity. “Necessity is the mother of invention. For many Canadian companies, this crisis was the mother of transformation.”
That shift is reflected in trade numbers that show, for example, that Canada’s trade with the U.S. has fallen from 85 per cent of total exports to less than 75 per cent today. More importantly, while export activity in traditional markets has grown by 1.3 per cent annually since 2008, the growth of exports to emerging markets has advanced by a whopping 12.3 per cent annually.
“We are starting from a low base, but compound growth like that changes the trade shares radically,” says Mr. Hall. “If you take those growth segments and cast them forward, by the time you hit 2020 you are hitting close to 35 per cent.”
Mr. Hall believes that with concerted effort Canadian businesses could accelerate this growth by an additional 3 per cent annually.
“If you take 12.3 per cent and augment growth to, say, 15.5 per cent annually, it would take non-traditional trade to half of Canada’s global trade by 2025,” he says. “It’s not far-fetched. This could happen if we saw more Canadian companies adopt an export strategy and this movement really caught fire.”
He says awareness is key. “A large share of Canadian firms believe their opportunities in emerging markets are limited. If even a fraction of these companies venture into the broader world beyond their traditional markets, imagine the impact.”
While Mr. Hall says export opportunities in emerging markets span virtually all sectors – from high value-add industries including auto and aerospace to raw commodities and primary goods manufacturing – tapping new opportunities requires firms take certain action, including mitigating risks.
Beyond the services of Canada’s International Trade department and EDC, which offers a range of trade finance and insurance products, he says international trade associations can help. “Their business is to make business work between Canada and other parts of the world. They can also help connect you with non-competitors who have already done it and are willing to share the lessons they have learned.”
Building relationships and trust across borders is also essential.
“Having a product to sell is not enough. You have to go to these markets. Show your concern and that you are not fly-by-night.”
Where to explore? Start with the world’s five fastest growing economies, the BRIC nations – Brazil, Russia, India and China – as well as gateway markets such as Mexico, Indonesia, Vietnam, Turkey and the UAE, all of which are showing consistent, very strong growth, says Mr. Hall.
“If your wagon is hitched to an economy that is experiencing sustained growth, the law of numbers says your prospects for growth are better than in traditional markets.”
In faraway markets, Ontario machinery maker builds solid business
Since 1973, Corma Inc. has produced corrugated plastic pipe manufacturing machinery and equipment with a focus on international markets. Stefan Lupke, executive vice-president, says, “My father, a mechanical engineer from Germany, realized there was a niche market for corrugated pipes, but that the company couldn’t rely just on sales in Canada and in the northern U.S. From the beginning, his strategy was setting up international agency sales offices to promote our products.”
Participation in global trade shows and partnership with Export Development Canada and the Canadian International Development Agency have helped the company create awareness and build relationships. Headquartered in Toronto, Corma now has offices, sales agencies and service centres throughout North America and in Germany, Slovakia, China, Portugal, Turkey, India and Central America.