Canadian companies need a shot of global ambition.
Although Canada has signed 14 trade deals covering 51 countries, our businesses are too slow to seize economic opportunities in foreign markets. It’s odd. Canada prides itself on being a multicultural country, but domestic companies are still uncomfortable venturing abroad.
This market myopia – coupled with our overdependence on the United States as a destination for our goods – is making Canada an underachiever in global trade. Simply dipping our toes in foreign markets is not enough. Export growth, which is often strengthened by direct investment abroad, is critical to Canada’s economic recovery from the COVID-19 crisis.
It’s essential that domestic companies make better use of free trade deals such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to reach new customers.
“It’s not enough just to have agreements,” said Mary Ng, Minister of Small Business, Export Promotion and International Trade, in an interview. “We must also help our businesses, and particularly our small and medium-sized businesses, get into these markets.”
She’s right. Only a minority of Canada’s 1.23 million businesses are involved in trade. The latest statistics predate the pandemic: There were 45,533 goods exporters and 163,498 goods importers in 2019.
While the COVID-19 crisis mucked up global supply chains and disrupted the flow of goods across borders, we can’t allow the pandemic to stop our businesses from trading, Ms. Ng said. That’s precisely why she is encouraging them to adopt a global mindset and pursue growth beyond our customary North American corridor.
Canada’s over-reliance on U.S. trade is perilous. Not only is Washington prone to bouts of protectionism (President Joe Biden’s Buy American policy being the latest irritant), but Canadian exporters are losing U.S. market share to Chinese and Mexican rivals.
For far too long, Canada has stuck to the devil it knows on trade and shortchanged its own economic growth in the process. So much for playing it safe.
“Over the last 20 years, exports have risen at just half the pace of the overall economy,” RBC Economics said in a recent report. “And despite trade agreements offering some of the best market access in the world, the U.S. remains the destination for three-quarters of Canada’s goods exports – about the same as 30 years ago.”
It doesn’t have to be this way. As Ms. Ng points out, Canada is the only country that has a free trade agreement with every other Group of Seven partner. Some of those countries are signatories of CETA, which has been provisionally in force since September, 2017.
CETA provides Canadian businesses with preferential access to the EU, our second-largest trading partner, by eliminating tariffs, improving labour mobility and creating opportunities in government procurement, among other benefits. Its provisions also cover sustainable development and the environment.
Still, Canadian businesses are not fully capitalizing on that trade deal. In 2019, the average utilization rate of the treaty for Canadian exports to the EU was just 53 per cent. Consequently, Ms. Ng is committed to raising CETA’s profile with businesses and helping them enter EU markets.
Last week’s virtual trade mission to France, for instance, was a step in the right direction. It focused on business opportunities in the green economy, including hydrogen technologies and sustainable mobility.
Some Canadian companies are already availing themselves of such opportunities. Ballard Power Systems Inc. , which participated in the trade mission, is providing hydrogen fuel cell engines to power tram buses in France.
There were 35 Canadian investment projects recorded in France in 2020, according to Business France, an agency of the country’s government. Surely we’re capable of much more in the coming years.
More than 300 entrepreneurs attended last week’s virtual trade mission, and Ottawa wants to ensure those introductions result in actual contracts or investments, Ms. Ng said.
Although it’s still early days, the federal government must also make certain Canadian businesses take full advantage of CPTPP. That free trade agreement is between Canada and 10 other Asia-Pacific countries: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
CPTPP is not fully in force, but seven countries, including Canada, have ratified the agreement since the end of 2018. Even so, Canadian merchandise exports to the ratified countries, excluding Mexico, increased by just 0.5 per cent in 2019 versus 2018.
“The trade agreements often primarily focus on tariffs and investment rules, both of which are very important elements for the business community. But the agreements often do not fully address various other trade frictions, like border procedures, paperwork requirements or assistance in ensuring timeliness in getting goods to markets,” said Dan Kelly, president and chief executive officer of the Canadian Federation of Independent Business.
“These are often the top concerns to small businesses as they struggle to navigate the maze of international commerce,” he added.
It’s encouraging that Ottawa is raising awareness about our free trade deals, but it’s clear that businesses need more support in overseas markets. Canada can’t afford to be a straggler in global trade. We must compete.
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