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age of instability

Canadian lighting firm Nanoleaf, led by chief executive officer Gimmy Chu, does 45 per cent of its business in Europe. To see further growth, Mr. Chu chose to open an office in Paris instead of London partly because of Britain's exit from the European Union and the British pound's uncertainty.Michelle Siu/The Globe and Mail

When it comes to expanding his company’s trade with Europe, for Gimmy Chu and Nanoleaf, there’s light at the end of the Channel Tunnel.

But for the Canadian high-tech lighting company, the light is mostly on the continent side of the Chunnel, not the British end.

“We just set up an office in Europe. The United Kingdom was one of the places we were considering, but we set up in Paris, and part of the reason was the uncertainty over what’s going to happen with Brexit,” says Mr. Chu, Nanoleaf’s chief executive officer.

Uncertainty over exactly how Britain and the European Union plan to say au revoir to their 45-year-old relationship is filtering into the business decisions of Canadian companies that do business on both sides of the 35-kilometre-wide water barrier.

It’s one of several uncertain situations that Canadian companies face in a season where countries have been negotiating, sometimes agreeing, sometimes disagreeing and sometimes threatening an all-out global trade war.

Nanoleaf, launched as a startup in 2012, now has 50 people in offices in Toronto, Shenzhen, China, and as Mr. Chiu notes, now Paris. The company makes “smart lighting” – energy efficient panels and bulbs that respond to touch, voice, remote control and music.

The company has already responded to the challenge launched by Prime Minister Justin Trudeau to diversify Canada’s trade and become less dependent on the United States. Nanoleaf sells about 45 per cent of its products in North America, 45 per cent in Europe, “and the rest everywhere else,” Mr. Chu says.

About 75 per cent of its North American shipments are to the United States and 25 per cent is within Canada.

Despite this robust North American business, “Europe is pretty important to us. It’s definitely one of our growth markets,” he says.

Brexit prompted Mr. Chu's Nanoleaf to adapt. 'We’re just trying to find a way to operate within the confines of how the world is changing.'Michelle Siu

Diversifying is a smart move for Canadian companies right now, says Brian Kingston, vice-president of policy, international and fiscal for the Business Council of Canada.

“If there’s anything that our experience in negotiating with the U.S. taught us [in talks that led to the new United States-Mexico-Canada Agreement], it’s that we have to be very careful about relying on just one market,” Mr. Kingston says.

In fact, Canadian companies should be in a better position than ever to trade with Europe, because of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) that was negotiated in 2014 and took effect last year, Mr. Kingston adds.

“It gives us preferential access to a major market with a lot of the products that Canada produces. All of the meaningful commercial access is there right now, so there’s no reason to delay,” he says.

Britain and Brexit remain problems, though, Mr. Chu says.

“I feel as though all of Europe is looking at the U.K. and saying, ‘What are you guys doing?’ The whole idea of Europe was for everyone to come together to be stronger,” he says. “The Europeans were already lenient, for example, letting Britain have its own currency, but Brexit was a slap in the face.”

To add to complications for businesses seeking to strengthen their positions in Europe, the Brexit negotiations aren’t exactly going smoothly.

British Prime Minister Theresa May said the divorce plans are “95-per-cent complete” – the Europeans say 90 per cent.

But there are major disagreements even within Ms. May’s own ruling Conservative party over key elements, such as how long Brexit is going to take to complete and whether there will be border guards reinstalled between Northern Ireland and the Republic of Ireland.

Ms. May and her government call these elements “sticking points,” but critics say that Britain has lost control of the agenda.

“It’s basically Groundhog Day every single day,” Rob Ford, a politics professor at the University of Manchester, told The Washington Post this week. “The Irish border? How do we solve it? Who knows? Everyone has a big row. Wake up the next day, like Bill Murray, you hear the same song.”

The pace of negotiations and the business climate it has created in Britain are partly why Mr. Chu and Nanoleaf opted to open a Paris office.

“We have our inventory in the Netherlands, so it’s easy to ship our product anywhere within Europe. If Britain goes its own way, it just creates another level of complexity for us,” he says.

The company would like to continue to do business and even expand in Britain, but as the negotiations drag on, the firm has been shifting any revenue that comes in British pounds into other currencies. Mr. Chu says he simply doesn’t have confidence in the pound’s strength.

He is glad that the USMCA was reached in North America. The new North American agreement doesn’t really change anything for his business here, other than adding certainty – which is missing in Europe.

He is nervous that a global tariff battle is still going on and concerned that it may escalate. Nanoleaf has been able to absorb some of the extra costs that tariffs have added to his products, shielding customers, but if additional tariffs that are being threatened come in, “we’ll need to have some conversations with customers,” Mr. Chu says.

More certainty and fewer barriers would do a lot to help his company continue the 100-per-cent year-over-year growth it has enjoyed for the past several years.

“We’re just trying to find a way to operate within the confines of how the world is changing,” Mr. Chu says.