As more craft brewers come online in Canada, and Canadians continue to reduce their beer consumption, many local beer markets are becoming increasingly saturated. Interprovincial and US markets likewise have very competitive environments for high-quality craft beer.

For Canadian brewers to continue to grow, they will need to look to other markets. And there is one, bigger than any other, that is largely untapped by Canadian brewers: Chinese e-commerce.  

China beer market growing fast

Valued at nearly $18 trillion, the Chinese market is the second largest in the world. With 842 million Chinese people shopping online, China also has the largest e-commerce market globally, generating over 52% of the world’s transactions, more than North America’s and Europe’s combined. And this growth shows no signs of slowing down any time soon.  

“China’s e-commerce sales are expected to be 52% of the country’s more than $6 trillion in retail sales, making it the first country in the world ever to have more online sales than traditional retail sales”, says Calvin Xiao, founder of Catalystx, a Canadian international marketing management firm specializing in Canadian to Chinese e-commerce trade.  

So far in 2022, Chinese people have spent over $120 billion US on beer consumption and represent 12% of the world’s beer market.

China is also one of the few places in the world where the beer market is growing fairly rapidly at 5% annually, and the most likely place the Chinese consumer will make that purchase is online.  

“Chinese consumers are very tech-savvy, and 55% of Chinese alcohol consumers are ordering online,” says Xiao.  

Canadian craft beer a good match for evolving market

With the development of the Chinese economy and improving living standards, Chinese consumers’ purchasing habits are dramatically changing as younger generations search for products with a unique taste, high quality, and freshness. Canadian craft beer fits this profile perfectly.  

This younger generation is quickly becoming a primary purchasing group and represents more than 65% of beer purchases in China. And these young people are willing to pay for quality, uniqueness, and freshness – things Canadian craft beer has in droves.  

“A recent poll showed that more than 74% of Chinese consumers are willing to pay for craft beer at a higher price,” says Xiao.

More than 57% say they are willing to pay 25% more than the regular price and nearly 17% are willing to pay 50% more. That’s a phenomenal opportunity for Canadian craft brewers.

Canadian craft beer market is saturated, and beer exports to the US are decreasing

But no Canadian brewers are handing people in China a beer. Most recent Canadian beer exports went to the US market. But US demand in Canadian beer is decreasing and between 2015 and 2021, Canadian beer exports dropped 14.2%. 

The Canadian domestic beer market is also becoming more saturated. More than 85% of Canadian beers were sold and consumed locally. In the last five years, the number of local brewers increased by 115%. The business density (brewing facilities per 100,000) soared by 100%. But domestic beer consumption is decreasing. Beer sales fell 6.6%, and per capita consumption dropped 12.6% from 2015 to 2021.

So, the Chinese market is a growth opportunity for Canadian brewers, representing a significant source of market expansion and sustainability for the industry. 

Early adopters will gain a significant share of the Chinese market 

So, now is the time to consider exporting to China’s e-commerce market. Canada is known for some of the best barley in the world and has a growing reputation for great beer.

With Chinese beer drinkers turning away from cheap local brews toward premium products and imported beers, Canadian brewers can leverage this reputation and market their products for significant margin gains. Plus, cross-border e-commerce channels now provide Canadian brewers unprecedented access to markets across China. Brewers who gain entry early will take substantial portions of the market and make gains that late adopters will not. 

Time for Canadian craft brewers to become “export ready”

Unfortunately, most Canadian beer manufacturers – having focused largely on local markets – are a long way away from being export-ready.  

“Canadian beer exports aren’t well-developed and remain exclusively US-dependent,” says Xiao. In 2021, Canada had 1,876 beverage and tobacco product manufacturing, less than 15% of those manufacturers were export-ready establishments.

But, with the right support, Canadian brewers can dip their toes into international trade through Chinese e-commerce relatively easily.  

As the craft brewing industry in Canada has grown, so has the global recognition of Canadian beer. Canada has a reputation for some of the best barley in the world, clean air and fresh water, a friendly business environment and political stability. Plus, China is Canada’s second-largest export partner and the process for e-commerce trade in China has become highly effective and accessible.  

“The time for Canadian brewers to become export-ready and enter the Chinese e-commerce market is now,” says Xiao. Cross-border e-commerce transactions in China reached $261 billion in 2020. So, the process has become effective and efficient for international trade.

Canadian breweries that enter the Chinese e-commerce market today benefit from streamlined Chinese customs procedures, improvements in delivery methods, policies that allow direct-to-consumer cross-border transactions and exemptions of certain goods from registration, Chinese labelling, and testing requirements.  In short, cross-border e-commerce channels now provide unprecedented access to markets across China. 

Last year, the value of Canada’s beer exports was CA$129 million dollars, which counted for less than 9.8% of the beverage and tobacco manufacturing exports. Canadian craft brewers could grow these exports significantly. 

On one side, with the development of the Chinese economy and better living standards, Chinese beer drinkers are turning away from cheap local brews and seeking out foreign craft beers.

These beer drinkers are also willing to pay top dollar for quality, uniqueness, and freshness.

On the other side, the Canadian beer market is becoming increasingly saturated at home, and US exports are decreasing, so Canadian brewers should consider diversifying markets for profitable and sustainable growth.  

As the craft brewing industry in Canada has grown, so has the global recognition of Canadian craft beer. There has never been a better time for Canadian craft brewers to export their beer. A Chinese e-commerce market is a solid option for Canadian brewers. Not only is its e-commerce becoming the future  of mainstream commerce, but it is also the most effective, efficient, and economic foreign market-entry strategy for an SME.

To put it another way, Canadian brewers can sell products from abroad without establishing a presence in Greater China and the six Southeast Asian countries (the SEA region). That’s an innovative and accessible way to enter a new market. And these are not small markets! China’s E-Commerce alone is incredibly lucrative. 

The post Canadian Brewers are Missing Out on the World’s Most Lucrative Market   appeared first on Trade Ready.

2018 was quite an eventful year for the popular CanExport funding program. Earlier in the year, it was updated to re-align the amount of funding available per application and the eligibility criteria for target export markets. By the end of 2018, it was updated again to further expand applicant eligibility criteria and enable more businesses to qualify for export funding.

CanExport now accepts Canadian government funding applications from businesses with 1-500 FTE employees and $100k-$100M in annual revenues. Under the program’s expanded eligibility criteria, both large and small companies previously ineligible for funding can now be considered.

Previously, only Canadian businesses with 1-250 FTE employees and $200k-$50M in annual revenues were eligible for export funding. The expanded funding will help more firms across Canada develop international markets and diversify revenue streams.

CanExport Applicant Eligibility Criteria Updates

Since CanExport was established in 2016, it’s helped more than 1,000 businesses perform exploratory export market development projects. This has led to more than $375 million in new exports and helped businesses to gain market share across the world. In fact, 42% of CanExport recipients successfully generated export revenues in the market(s) they accessed funding to explore.

Due to this overwhelming success and increasing demand from Canadian businesses, the CanExport program was updated twice in 2018. The first update adjusted how much funding can be awarded per project, while also providing greater context on which export markets are eligible.

The current and most significant update to CanExport will lead to even more businesses accessing export marketing grants. Due to a CanExport funding top-up in Summer 2018 and additional funds provided through the Fall 2018 Economic Update, the program seeks a wider range of applicants than ever before.

CanExport now accepts applications from businesses with 1-500 full-time equivalent (FTE) employees and $100k-$100M in annual revenues.

The increase in CanExport’s funding pool will help more high-quality export projects receive funding. This includes projects submitted from smaller applicants ($100k-$200k in annual revenues) and larger applicants ($50M-$100M in revenues; 250-500 employees) that were previously ineligible. These companies that now qualify for funding should explore the program further and discover how much they can receive in export grants.

What is the CanExport Funding Program?

CanExport is an international market development grant that helps companies expand into countries where limited to no revenues have been collected in the previous 24 months. Funding is commonly used to participate in an international trade show, provide on-site translation services while at the trade show, translate marketing materials, and perform market research.

The CanExport program provides businesses up to 50% of eligible project expenses to a maximum $50,000 per application and up to $99,999 per year.

To qualify for the program, applicants are advised to propose a high-impact export marketing event that is likely to lead to increased international sales. Applicants must plan to further develop that market post-trade show and deliver post-project updates to demonstrate its effectiveness. Additional eligibility criteria apply; please see Mentor Works’ CanExport Eligibility blog for a more extensive look at the program’s applicant, project, and expenses eligibility factors.

How to Access Export Market Development Funding via CanExport

To get started with CanExport funding, business leaders should start by selecting an upcoming international trade show that they intend to participate in, build a budget for the event, and forecast the intended outcomes (leads, clients, revenue) that would make the project a success.

Once there is a well-established project plan, companies should develop and submit a comprehensive funding application that reviews the strengths and opportunities the project addresses, as well as a rationale for how much funding is required. These details are critically reviewed by the program and only strong projects with clear benefits will receive approval.

Applications can be submitted to CanExport throughout the year; companies are advised to apply well in advance of the international event to ensure the application is processed by Global Affairs Canada in advance of incurring eligible expenses. It typically takes six to eight weeks for application approval.

The post CanExport Grants: Expanded Eligibility Criteria for Businesses appeared first on Trade Ready.

Over the months of September and October in 2018, The Forum for International Trade Training (FITT) and Export Development Canada (EDC) partnered on a series of presentations delivered at Startup Canada’s Canadian Export Challenge.

Thousands of Canadian small and medium sized businesses attended the Canadian Export Challenge in six locations across Canada to pitch their products and services with the chance of winning $10,000 in cash and a variety of consulting services to help them expand into global markets.

It was a fascinating view into the world of ‘startup exporters’ and reinforced the power and value of knowledge development, especially across the spectrum of international trade.

The companies participating in the Canadian Export Challenge were all impressive businesses whose owners are exceptionally talented. Yet, while they are experts at doing what they do, there was a noticeable lack of knowledge regarding what it takes to succeed in bringing these same products and services to global markets.

What it takes to succeed in going global

I’d sum it up like this – companies need to focus on their core competencies, making the best products or delivering the best services possible. However, they also need to have at least a basic knowledge of the fundamentals of international trade. Just like anything in life, when you know the basics you can at least recognize, as the saying goes, “You know what you don’t know!”

FITT and EDC delivered a Trade Finance presentation to the Canadian Export Challenge that focused on how companies can protect themselves and their bottom line by minimizing risk and making sure they get paid.

We started out by addressing why companies decide to export in the first place. In my experience, probably 7 times out of 10, companies stumble into exporting. Their product gets seen by someone in another country, their website gets found, an email gets shared, someone attending a tradeshow sees the company and takes your info back home with them – there can be any number of reasons – but none of them were intentional. So now you have to ask yourself, “Am I really ready to export?”

Knowledge of international trade is key

Successful exporters are generally already in business and generating sales within their initial target markets (domestic or foreign); essentially, they’ve got it going on. Their products/services are unique, competitively priced, they have excess capacity, are willing to invest resources on market diversification activities and bring a level of competence that will serve them in cross-cultural business activities. That’s not to say a company can’t start exporting as its first priority; there just needs to be better planning up front in that case.

However, knowledge of international trade activities is key. Understanding market conditions, foreign exchange rates, global value chains, laws and regulations and trade finance options are just some of the areas of knowledge needed when companies go global.

It can seem daunting, but listen up – you aren’t the first person who has exported and there are plenty of people and organizations who can help you along the way. FITT is one of the first you need to know about. But more on that in a moment.

Going global requires preparation, planning, and arming yourself with all the right information. In our presentation to these startup exporters we emphasized the need to have sound business and financial plans that specifically address exporting. One valuable tool you can use is an export costing worksheet to help you determine pricing.

Preparing for any global venture is also going to demand that you pay attention to risk management, from physical risks like natural disasters, as well as legal, commercial, political and financial risk. Get prepared with all the risk analysis and mitigation strategies that your business needs – FITT and EDC both offer a wealth of knowledge, tools and resources.

We then moved into the crucial area of negotiating international contracts and making sure you cover your bases. Without question you are going to want to have a lawyer involved in this stage, but as a starting point have you built out your pricing, costing for logistics, considered how you will handle returns and what about using the right Incoterms® to help determine when ownership is transferred to your buyer? Don’t know what any of that means? Well guess who’s got you covered – FITT once again.

At every stop of the tour with the Canadian Export Challenge we spoke to companies that needed this kind of help. They aren’t international trade experts, and they don’t have to be, but they all want their companies to grow and diversify into new markets. (FYI – market diversification is a great risk mitigation strategy.)

The value of knowledge gained from experience wasn’t lost on these startups. They had solid takeaways from attending our presentation and continued to ask a lot of questions, recognizing that being better informed increases their abilities to succeed and take better advantage of the opportunities that will come their way.

As I always say, experience without knowledge is an expensive teacher.

What you need to know if you are going global

Whether you’re looking to start or grow your business, invest in professional development for your employees or build a stronger international business team, there’s no doubt that training, skills and know-how are the foundation. Are you interested in learning more about what it takes to be successful in global trade?

Maybe you’ve already decided that going global is what you see in the future for your business, but you may be grappling with whether you are trade-ready or how to start.

As the recognized leader in Canada for global business training FITT is already in your corner ready to help your company grow and expand into new markets. You aren’t the first exporter. But you can learn from the best.

Get the know-how you need to grow anywhere. Learn how to overcome the barriers to trade for your business or get insights on navigating the complexities of today’s trade environment.

EDC-FITT international trade training includes courses, workshops and resources that help professionals build their international business skills, and their careers.

The key areas of global business training include the Feasibility of International Trade (assessing your ability and readiness), International Market Entry Strategies, Global Value Chain (logistics and so much more), International Trade Finance, Products and Services for a Global Market (understanding how to take your products/services global) and International Sales and Marketing.

In case you missed it,  you can see more about Startup Canada’s Canadian Export Challenge here.

Interested in our presentation? Check out the video and learn about how companies can protect themselves and their bottom line by minimizing risk and making sure they get paid.

The post Lessons learned from Startup Canada’s Canadian Export Challenge – what new exporters need to know appeared first on Trade Ready.

Upgrades to CanExport and Export Market Access

This past year, both CanExport and EMA have received notable upgrades to improve the value they can bring to businesses.

Mid-2018 program updates for CanExport include vital changes to the limit of funding that businesses can access per application and expanding the export markets criteria for where projects can take place. Likewise, Export Market Access’ updates include an increase in potential funding per application, additional project/expense areas, and the merging of Early-Stage Exporters (ESE), a funding program for startups that offered grants for smaller exporters.

CanExport Funding: Program Updates in 2018

CanExport is a Canadian government funding program that supports export development projects. Through the program, Canadian businesses can offset costs associated with marketing activities in undeveloped or under-developed markets where opportunities for growth exist. The program allows Canadian businesses to obtain funding to obtain translation services, perform market research, participate in an international trade show, and adapt marketing materials for foreign audiences.

CanExport offers up to 50% of eligible project expenses to a maximum $50,000 per application. Companies can submit multiple applications to a maximum of $99,999 per government fiscal year.

Recent changes to the program include:

1. Adjusting the amount of funding provided per project; and
2. Expanding the eligibility of export markets considered for funding.

CanExport: Amount of Funding Provided

Previously, CanExport applicants could receive up to $99,999 per application. This was also the maximum a company could receive per year, and if necessary, companies could submit multiple applications to access this amount. A limited amount of companies reached this maximum, however, since it required project expenses of over $200,000 and most businesses used the program exclusively to offset trade show expenses.

After the program’s recent changes, CanExport will now support applicants with up to $50,000 per application. Companies can still apply multiple times per year to reach the annual maximum of $99,999 in grants for export market development.

CanExport: Eligibility Criteria of Export Markets

Prior to the 2018 enhancements, CanExport applicants were required to choose a target market where they had not exported or generated profits within the last 24 months. This restricted the possibility of expanding into high-growth-potential markets, which is why the rule has been revised to allow under-developed export markets to be included.

CanExport will now support projects focusing on markets where the applicant had less than $20,000 in annual sales, or derived less than 10% of their total international sales, in the last 24 months. Several target markets can be included in a single application, however, each application included for government funding consideration must be either a new or under-developed market as defined by the assigned criteria.

Export Market Access (EMA) Funding: Program Updates in 2018

The Export Market Access program is an Ontario government grant uniquely positioned to help companies enter or grow in global markets. Through the program, businesses can exhibit at trade shows, execute marketing campaigns for foreign audiences, upgrade e-commerce capabilities, secure temporary in-market office space, and perform market research.

Export Market Access offers up to 50% of eligible project expenses to a maximum $50,000 per application. Companies can apply twice per 12-month period.

Recent changes to the program:

1. Changing the amount of funding provided per project, per year, and per company;
2. Updating eligibility criteria support for early-stage businesses; and
3. Expanding and clarifying support for new eligible project activities.

Export Market Access: Amount of Funding Provided

The Export Market Access program has increased its maximum funding request per application to $50,000, up from its prior maximum amount of $30,000. Ontario companies can apply up to twice per year until they reach their lifetime maximum contribution of $250,000.

Export Market Access: Eligibility Criteria

Export Market Access and Early Stage Exporters have merged into one program to streamline the funding administration and application process. The updated EMA program now supports both early-stage businesses that can show established revenue models, as well as mature companies that are exploring international opportunities. Prior to the merging of the two programs, EMA had focused only on mature companies.

In addition, accessing EMA grants for export development now requires companies to be incorporated for a minimum two years, have 3-500 employees, and generate $300,000+ in annual revenue.

Export Market Access: Supported Project Activities

Revised EMA program guidelines have expanded to include additional eligible activities such as securing temporary in-market office space, conducting in-market research, and upgrading e-commerce capabilities.

Applicants can include up to three activities per application. This includes exhibiting at foreign trade shows where company representatives can develop new leads and gain brand exposure with a physical presence.

Apply for CanExport and Export Market Access International Expansion Grants

If your business is ready to develop new markets or expand existing ones, consider using the CanExport or Export Market Access (EMA) program. These government funding programs accelerate export projects by offsetting a portion of project expenses and allow companies to strengthen their market development plans.

The post Take advantage of expanded government funding to enter new global markets appeared first on Trade Ready.

One of the administration’s decisions, announced in early June 2017, is the United States’ withdrawal from the Paris Climate Agreement. At first glance, this decision appeared to be catastrophic. The many great strides that had been made by the previous administration to fight climate change seemed to be erased in one fell swoop of the pen.

Nevertheless, one of the most interesting reactions to this decision is the strengthened resolve of many corporations, as well as U.S. municipal and state jurisdictions, to stay the course, and in certain cases to set even more aggressive carbon reduction targets. In fact, it appears as though the resolve of multiple jurisdictions around the globe has intensified and the transition to a clean tech economy is well on its way.

Where there is change, there is also opportunity

Canada’s clean technology and services sector is now in a position to capitalize on the global shift toward a clean economy. With or without the Trump administration, this transition is happening. The global market for clean technologies is growing exponentially and Canadian exporters can position themselves as champions of clean technologies, taking a large share of this rapidly growing market.

It has been suggested that the opportunity for Canadian exporters may actually increase as the U.S. backs away from its carbon reduction commitments. Federal program support for American companies looking to export their clean tech solutions to global markets is likely to be significantly reduced. This will create more opportunities for Canadian exporters.

This opportunity is probably best summed up by Tom Rand, clean-technology venture capitalist and lead clean tech advisor at MaRS. In his closing remarks at the annual acclaimed Cleantech Forum held in San Francisco in January 2017, he concluded that:

If the U.S. wants to walk away from climate action, then Canada will be more than happy to eat its cleantech lunch.

This opportunity has not been lost on the Canadian government, which has identified clean technology as a priority sector for exporting around the globe. This priority sector includes products and services in renewable generation such as solar and wind, energy storage, and energy efficiency, to name a few. Export programs are available which provide support and assistance to Canadian enterprises offering these advanced technologies in overseas markets.

Turning green into gold with sustainability programs

With this transition to a green economy, there exists a second area of opportunity for Canadian enterprises in creating the business case for sustainability. Corporations are looking for ways to reduce their carbon footprint. In doing so, they are eliminating waste and increasing efficiency, which can lead to a global competitive advantage. Many corporations, large and small, have created the business case for sustainability and have seen profits increase.

As an example, Canadian Manufacturers and Exporters (CME) is administering the SMART Green program, which assists Ontario small and medium sized manufacturers with reducing their greenhouse gas (GHG) emissions. The program is funded by the Government of Ontario Green Investment Fund, which supports investments in clean technology and process improvements to improve energy efficiency and reduce GHG emissions. Programs of this sort aim to improve the competitiveness of manufacturers and, at the same time, contribute to GHG reduction targets.

With or without program support, corporations on both sides of the Canada-U.S. border are turning green to gold.

Many enterprises are greening their entire global supply chain and have made it a priority to take a sustainable approach to doing business. In order to be a global supplier, there must be a focus on sustainability and corporate social responsibility (CSR). Not only is it the right decision to protect the environment, it makes good business sense for companies looking to enter and succeed in global markets.

It’s time for Canadian exporters to build their competitive advantage

As many countries around the globe endeavour to shift away from fossil fuels and reduce their carbon footprint, this transition to a green economy promises to be challenging and rewarding.  Canadian exporters of innovative technologies are poised to take advantage of this building momentum at home and abroad.

With Canada’s largest and most accessible trading partner appearing disinterested in promoting jobs and investments in clean technologies at the federal level, this may be a tremendous opportunity for Canada to use this sector as an engine for growth. If embraced and done properly, this will become a big competitive advantage for Canadian exporters doing business around the world.

The post Growing momentum for clean tech will spur exports – here’s why appeared first on Trade Ready.

Exports are now being hailed as the primary way for Canadian companies to increase profits, develop strong brand reputations, grow their capacity for innovation, and decrease their risk.

Exports are also forecasted to be the primary catalyst for economic growth in Canada for 2016 and 2017.

Most people, if asked to list companies who export, will list major corporations thousands of employees and billions of dollars at their disposal to facilitate their entry into new markets.

These businesses, however, form only a small portion of Canadian commerce: 99% of businesses across Canada are small to medium-sized enterprises (SMEs).

What may be even more surprising is that Statistics Canada reveals there are well over a million businesses across Canada, and yet only about 40,000 of them are currently direct exporters.

What’s holding them back from taking this chance to export their products or services to a new country and grow their business?

With more limited resources and manpower, SMEs who want to go global sometimes face greater obstacles than major corporations.

So how can SMEs, who form the backbone of the Canadian economy, take advantage of the same international opportunities as their larger counterparts?

Introducing the CanExport Program

To offer financial assistance to overcome these obstacles and succeed in the global marketplace, Global Affairs Canada has introduced the CanExport program.

Providing up to $50 million over the next five years, the program is intended to help Canadian SMEs with revenues between $200,000 and $50 million and with between 1-250 full-time employees. The funding is designed to help with the eligible expenses related to developing a strategic plan to enter a new market.

These expenses include activities such as market research, travel to target markets to meet with potential clients and partners, participation in trade missions and trade shows, translation, legal fees, and adapting marketing tools for a new market.

The program will provide funding contributions ranging from $10,000 to $99,999.

Companies in any industry are eligible to apply, with the exception of the agriculture, food and beverage, fish and seafood and wine, beer and spirit sectors, as they are funded separately through Agriculture and Agri-Food Canada’s AgriMarketing Program.

A contribution will only cover expansion to one country at a time. However, funding will cover expansion into any market, as long as it constitutes a new export destination for the applicant, and that the project is aligned with applicable Canadian trade and economic sanctions in place.

Elise Racicot, the CanExport program manager for Global Affairs Canada, emphasizes that companies can reap major benefits from the program and that it can play a big part of an SME’s export strategy.

“SMEs should apply to CanExport, and more generally make sure to use the Trade Commissioner Service, to support their export development activities.”

This program, which is part of Canada’s trade strategy, enables small businesses in Canada to explore new opportunities, giving them a leg up in competitive and potentially lucrative new markets.

For more details on the program, please visit the Applicant Guide  or the Frequently Asked Questions page.

The post Here’s how Canadian SMEs can get funding to explore new export opportunities appeared first on Trade Ready.

When U.S. President Barack Obama welcomed Canadian Prime Minister Justin Trudeau to Washington with a much-publicized state dinner, the two expressed a warm, collaborative relationship.

After trading friendly jabs about hockey and the weather, the two got down to business and discussed, among several issues, how to streamline trade and border crossings between the two nations.

For many, this signalled a warming trend in trade relations between the Canada and the U.S., which had been cooling over contentious issues such as the rejected Keystone XL Pipeline project.

Canada is no longer the top market for American trade

As allies and neighbours along the world’s longest shared border, Canada and the United States have become inextricably linked over the course of a relationship that spans more than two centuries. Politically, culturally and economically, the two countries remain tied to one another.

For decades, Canada and the U.S. have enjoyed the largest trade relationship in the world. Two-way trade more than tripled in the years since the Canada-U.S. Free Trade Agreement was implemented in 1989.

NAFTA superseded the agreement in 1994, taking trade between the two nations to greater heights, amounting to an impressive $2.4 billion per day in 2014, and supporting almost 9 million U.S. jobs.

Unfortunately for Canada, trade with the U.S. seems to be on the decline. Trade between the two countries totaled an estimated $662.7 billion in 2015, down from US$760 billion in goods and services in 2014.

In November 2015, China surpassed Canada for the first time as the biggest trading partner to the U.S., bumping Canada down to second place.

And China isn’t the only country vying for first place and expanding trade with America. Mexico is steadily gaining ground in trade with their NAFTA neighbour, trading more with the U.S. than Canada did in September 2015.

Impact of blundering energy sector being felt

A major contributor to the recent drop in trade with the U.S. is the floundering energy sector. The U.S. is by far the biggest customer for Canada’s exports in natural gas, oil and hydropower.

In 2010, almost 100% of Canada’s energy exports went to the country’s southern neighbour, a huge chunk of total Canadian exports into the U.S.

This dynamic is in a transitional period due to America’s expansion in their own tight oil and shale gas production, and a forecasted decrease in oil and natural gas consumption in the coming years.

The decision to block the proposed Keystone XL pipeline may also prove to have negative effects on the two nations’ trade in oil going forward.

Still no resolution in the most contentious trade dispute

Another sticking point in Canada’s trade relationship with the U.S. has been the ongoing softwood lumber dispute.  The dispute is one of the lengthiest disagreements the two countries have faced in modern history.

About 80% of the global lumber industry is made up of trade in wood from conifers, or softwood. Disagreements over the softwood lumber trade between the two states began in the 1980s and have not since been satisfactorily resolved.

In the latest agreement, implemented in 2006, the U.S. agreed to drop anti-dumping tariffs as long as lumber prices remained at an acceptable level. This agreement was set to expire in 2012, but was then extended for another two years.

Neither country is happy with the outcome, and ongoing issues remain as the deal faces renewal.

Many Canadian industry representatives are calling for another extension of the 2006 deal, while those representing the industry in the U.S. are calling for major changes.

Negotiations between the two countries on this deal are likely to be slow and arduous due to the history of contention on the issue.

After meeting in Washington in early March, Prime Minister Trudeau and President Obama committed to explore all options in order to solve the trade dispute.

Chrystia Freeland, Canada’s International Trade Minister, said:

What we have committed to is to make significant, meaningful progress towards a deal — to have the structure, the key elements there 100 days from now.

U.S. softwood lumber production is on the rise, with more Canadian-owned sawmills located in the U.S. than in Canada due to lower labour costs, higher timber availability, and higher demand.

Low loonie is luring some U.S. business to Canada

The Canadian dollar began a dramatic plunge in January 2016 that brought the currency to its lowest level since 2003, bottoming out at 70 Canadian cents to the U.S. dollar.

The drop in value, though detrimental to consumers purchasing imported products, has also been touted as an opportunity for Canadian businesses doing business with the U.S., from commodities exporters to the tourist industry.

Canadians can benefit from the attractively low loonie by leveraging increased trade and foreign investment from the U.S., and thereby increase their export revenue.

Canadians can also expect more U.S. visitors during the upcoming tourism season, as the country provides a destination that is much more affordable while the loonie is low.

Trans Pacific Partnership agreement may be a non-issue

It’s no secret that the Obama administration is keen to pass and implement the TPP. Canada has gone as far as to sign on to the deal, but has committed to consulting with Canadians and considering all economic impacts before ratifying.

At their most recent meeting in Washington in March, Trudeau and Obama released the following joint statement on the agreement:

“The United States and Canada share the goal of enhancing shared prosperity, creating jobs, protecting workers and the environment, and promoting sustainable economic development.”

Recognizing that the Trans-Pacific Partnership, which links together countries that represent nearly 40 percent of global GDP, would advance these objectives, Canada and the United States are working to complete their respective domestic processes.

However, the Canadian government has been careful in proceeding and committing 100% to the deal due to a significant anti-TPP sentiment in the country.

If the TPP is not ratified before the end of Obama’s term in November, it’s hard to know what the future of the agreement would be, and how trade relations between the two countries would proceed, given that the U.S. presidential candidates are unanimously rejecting the deal.

Fortunately, many have speculated that the trade relationship would not change drastically with or without the signing of the TPP, as previous agreements, notably NAFTA, would still be in effect either way.

What do you think the future has in store for the US-Canada trade relationship?

The post Can improving U.S.-Canada relations save their weakening trade relationship? appeared first on Trade Ready.

Export Development Canada is about to embark on their annual “Let’s Talk Exports” tour, and you won’t want to miss it.

Peter Hall, EDC’s Chief Economist will talk about succeeding in the global marketplace amid volatile markets and falling commodity prices.

The tour is designed to benefit businesses involved in product export, financial institutions and various industry associations as well as those servicing the export community.

The idea behind ‘Let’s Talk Exports’ is to provide the Canadian export community with the most up-to-date trends in the global economy, and how they will affect exporting businesses of all sizes, in all sectors.

The main theme of this year’s tour is the volatility that struck global commodity and financial marketing in the beginning of 2016.

Some pressing questions that will be addressed include:

Are the wheels of the world economy getting loose?
Is this the natural point for another global recession, or is the cyclone contained?
And will there be an end to the commodity price plunge?
Is Canada’s winning streak at an end, or are there opportunities to pursue?

The cross-Canada tour will span 11 cities from April 26 – June 1, 2016.

Those unable to attend personally can join the tour virtually via an online webinar that will be held on June 2, 2016. Twitter users are encouraged to join tour by following #LetsTalkExports / @PeterGHallXIII.

This year’s ‘Let’s Talk Exports’ Tour features Peter G. Hall, Vice-President & Chief Economist at Export Development Canada. Peter has over 25 years of experience in economic analysis and forecasting.

He is responsible for overseeing EDC’s economic analysis, country risk assessment and corporate research groups.

During the tour Peter will provide his insight on the current global economy and its effects on Canada, along with forecasts for the Canadian dollar, commodity prices and growth in particular industries.

Will you be attending one of this years events? Let us know what you think and send us your event photos, comments.

The post EDC goes on ‘Let’s Talk Exports’ Tour appeared first on Trade Ready.

What if everything you tried didn’t get you past go?

A chance meeting with a group of potential exporters led to a spirited discussion on how to best enter export markets.

It quickly became apparent that management teams were flying blind, planning for markets that no longer existed, and seemed to forget that if you want to catch the fruit, you must first get under the tree.

Further discussion determined the fundamental problem: managers were not willing or able to apply the same strategies and operating methods that had made them successful at home to export markets.

This problem begs the questions:

• What has changed and why are so few of Canada’s SMEs exporting?
• Why do they try to manage offshore markets differently than home markets?
• Where are the best opportunities for growth – i.e. where is the aforementioned tree?

Canada’s export evolution

Canada’s exporters underwent two powerful shocks, plus a pronounced transition from goods to services, that combined to radically change how Canadian SMEs need to think and operate in global markets.

The “Haves” and “Have Nots”:

Enabled by globalization, Canadian exporters had separated into two distinct camps by 1995: those with global value chains (GVCs) that saw massive offshoring to foreign affiliates and focused on services and knowledge-intensive manufacturing, and those without GVCs that were limited to exporting goods from Canada.

Export sales by foreign affiliates now account for over 50% of Canada’s exports.

They are also growing more than twice as fast as export sales directly from Canada.

Money talks – Trade walks:

The second shock occurred from 2000-2009, when the high Canadian dollar forced an estimated 20,000 manufacturing firms to shut down, with a loss of about 500,000 jobs.

Local actors stepped in, in what had been Canadian export markets, quickly dominating their sectors, and becoming sophisticated competitors.

Manufacturing clusters employing millions of workers in automotive and aerospace manufacturing, ICT, agriculture and chemical industries sprung up, forming tightly integrated supply chains, insisting on local supply and service, and effectively excluding foreign-based exporters from Canada and elsewhere.

Leaving on a jet plane? Not without a work visa:

In 1995, Canada’s (and the world’s) trade was dominated by goods, but by 2008, services accounted for about 50% of Canada’s exports.

Unfortunately, exporting services means either moving people or establishing autonomous foreign affiliates and transferring IP.

Since 2004, companies wanting to export technical and professional services from Canada have faced increasing difficulty in obtaining the necessary visas (often impossible).

They also face competition from rapidly advancing local competitors who are invariably cheaper, and are frequently offshore divisions of other Canadian firms.

The transition from widgets to services:

Manufacturing has moved away from transactional finished goods towards value added (knowledge-intensive) products.

In addition, they are offering related services and maintaining a relationship with the customer for maintenance, upgrades, etc.

Those firms that established GVCs have prospered as they developed solid customer relationships, whereas Canada-based exporters have seen a general decline.\

Exactly where is the new frontier?

Current status:

Canada holds no compelling advantage in any value-added sector. However, many Canadian products and specialized technical and professional services are competitive and in demand.

Exporters have been successful, but most had to leave Canada and set up foreign affiliates to do so.

Canada is a world leader in integrative trade, with well over $800 billion in Canadian direct investment abroad (CDIA), and we would argue that Canada’s most successful exports are corporate divisions or even entire companies, not the products they produce.

This offshoring strategy has paid off, and since 2004 foreign affiliate sales in services have grown by approximately 86%, adding over 200,000 new jobs offshore.

Future expectations:

Over 2,500 examples of Canadian foreign affiliates in Mexico alone, clearly demonstrate that exporting goods from Canada is not a path to growth.

In fact, exporting goods from Canada declined by 7% over the same period as manufacturing growth from Canadian foreign affiliates grew by 20%, and these trends are projected to accelerate.

Market intelligence is critical, but also dangerous on its own without the cross cultural context that drives each market.

Realistically, the only way to obtain unfiltered market intelligence in context is to have a credible local presence in each export market, capable of establishing and maintaining relationships, and responding to change in real time.

The post Facing the new realities we can’t ignore in SME exports appeared first on Trade Ready.

The city of Vancouver is one of the most important trade areas in BC, and indeed across Canada, with Port Metro Vancouver standing as the largest and most diverse port in the country, and one of the busiest in North America.

Trade relationships between Canada and the Pacific Rim countries, as well as a general increase in Canadian exports, has pushed Vancouver into the spotlight as Canada’s capital of trade.

Wallace Chan, an international trade instructor at Ashton College in Vancouver, explains:

Since relationships between Canada and the Pacific Rim countries are rapidly developing, there should be an increase in demand for our seaports: definitely a good thing for Canada (and for Vancouver specifically).

“This will help us, as a city, diversify our business and industries and create more work opportunities for those involved in global trade.”

Vancouver’s importance as a contributing factor to the growth in Canada’s export industry should not be underestimated. As Wallace notes, the Canadian export market is currently in a transitional period.

“It seems like the combination of goods and services that are being transported from Canada to other countries is gradually changing. In the past, Canada used to rely mostly on exporting natural resources, like coal and timber, especially on the west coast. Now, however, we are talking more about made-in-Canada products and Canadian services.”

Check out more information about the importance of trade in Vancouver in the infographic below:

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