Canadians, members of one of the largest economies in the world, are largely aware of the benefits foreign trade can bring them. Over 70 years ago, Louis St. Laurent shared his opinion on this matter by stating that Canadians are dependent on foreign markets for products they make but don’t consume, and for the ones produced abroad that are essential to their well-being. Nevertheless, Canada’s exporting remains relatively low for an economy of its size – why? 

A lack of opportunity or confidence?

When we see the importance of international trade for other countries, we can rightfully ask why there is a lack of it in Canada. It’s not that Canadians are unable to see the opportunity, they are simply afraid of it.

A study from 2016 reports that two-thirds of Canadian SME’s feel like their businesses are not suitable for international expansion. The reasons? According to the survey, there are four main barriers to global development: knowledge, talent, resources, and risk exposure. SMEs reported they don’t have suitable (local) partners, and they lack in right local insights to consider expansion.

The obstacles of importing goods

Importing is crucial for a high number of Canadian small businesses; however, the whole process can be tedious and difficult to manage. Once they’ve determined what they want to import, Canadian businesses have to check whether there’s a demand for that product on the Canadian market and if it’s legal to use and sell. They also have to prepare paperwork for it: both in English and French, which is complicated enough.

Furthermore, there are complications in the logistics of imported products due to different taxes in each jurisdiction, product classification (where the same product is classified differently between jurisdictions), labeling, and safety requirements. All of this can be overwhelming, especially for new businesses.

Today’s Canadian SMEs trade in services

When we look at the data from 2017, we see there were 1.18 million employer businesses in Canada. The vast majority (97.9%) were small businesses, almost 2% were counted as medium-sized businesses, and only 0.2% were large businesses. More than half of them were concentrated in Ontario and Quebec. A vast majority of these businesses (78.4%) were in the service sector, while the goods-producing sector held second place.

The provinces that trade the most

Although Canadians are not great exporters, businesses involved in exporting can be found in every province. The province with the highest concentration of exporters per thousand establishments remains Ontario (48.4), while Manitoba (43.9) and Quebec (43.1) hold second and third place. Newfoundland and Labrador (17.2) are underdogs.

The contribution of Canadian SMEs

Canada’s export of goods increased to around $483.6 billion in 2017, which was a 6.19% increase from the previous year. SMEs contributed to 41.9% of 2017’s total export value. They managed to increase their export output from $186.2 to $202.5 billion. The most lucrative industrial sectors were responsible for more than 90% of the value of exported goods: manufacturing, wholesale trade, management of companies and enterprises, mining, and oil and gas extraction.

Top international business industries and breakdown of export value

When it comes to export, the biggest moneymakers in Canada are motor vehicles, aircraft, coal, and fertilizers. What’s more: Canada is the fourth-largest producer of oil in the world thanks to its tech-oriented industrial society, preferred by international markets. Canada is responsible for 5% of global oil production, and this trend will only grow – by the estimates of EIA International Energy Outlook 2019, Canada’s oil production could double by the end of 2050.

Canada’s hottest product in terms of export is cars: they are valued at almost $50 billion and have placed Canada in 10th place when it comes to auto-producing countries. Aircrafts, helicopters, and spacecrafts are ranked as the second most-exported products (more than 7 million), while natural resources, such as coal, are being ranked third ($6.7 million).

(Source)

The vast majority of Canadian exporting companies have less than 100 employees. However, that doesn’t stop them from producing a quarter of the total value of Canadian exports.

Main export destinations

Over a period of seven years (between 2010-17), the total value of exported goods increased to 4.3% per year, resulting in a profit of $484 billion. Canada’s main export destinations are the United States, China, the United Kingdom, Japan, Mexico, and South Korea.

Worth of goods imported by Canadian SMEs

In 2017 the import of goods made by Canadian SMEs increased by over 5% in comparison to 2016. What’s more, SMEs were responsible for almost 99% of all imports and nearly half of total Canadian imports by value. A vast majority of companies imported from Asian and European markets, decreasing their imports from North America.

SMEs and international trade: the final verdict

Even though they’re faced with many obstacles in international trade, Canadian SMEs are paving the way for future successful trading activities. One thing is for sure: there’s a lot of potential out there.

The post The state of Canadian SMEs involved in international trade appeared first on Trade Ready.

On August 22, 2019, the CanExport funding program undertook two significant updates that impacted how the program operated and the value it provided to Canadian exporters. The first and most notable update was to the program’s contribution amount, while the second focused on company eligibility. Previously, agriculture and agri-food companies were unable to apply; these types of applicants are now encouraged to submit funding applications.

Applicants are now able to access up to 75% of eligible expenses to a maximum $75,000. These had previously been set for 50%/$50,000.

All new applications will be considered for the new contribution rate and eligibility criteria, but any applications submitted prior to August 22 will be evaluated under the program’s old rules. Please note that companies can only have one active project funded by the program at a time; despite the program update, all previous successful applicants still need to wait until their supported project activities have completed and all project claims have been processed before they can apply again.

What are CanExport and AgriMarketing grants?

CanExport is a Canadian government grant that offsets the cost of export marketing projects, such as participation in trade shows or missions. Provided federally, businesses and organizations across Canada can apply for this funding to expand export marketing budgets and get more value out of export expansion projects.

AgriMarketing is a now-closed Canadian government funding program that provided funding for many of the same projects and activities supported through CanExport. The biggest difference between the two programs was that AgriMarketing only supported agricultural producers and agri-food processors whereas CanExport supported all other applicant types.

How did these export marketing grants change?

Changes rolled-out to both the CanExport and AgriMarketing funding programs had a direct impact on the way funds are administered:

1. Contribution Increase: CanExport and AgriMarketing grants have historically provided up to 50% of eligible project expenses to a maximum $50,000 per application. As of August 22, 2019, CanExport’s new funding contribution amount increased to 75% of eligible project expenses to a maximum $75,000 per application. This is a significant increase that greatly reduces a business’ export marketing costs.
2. Program Realignment: Now closed, AgriMarketing will no longer process new applications. All applicants, even agricultural producers and processors, are encouraged to use the CanExport program for all new applications. CanExport’s expanded eligibility criteria supports previously ineligible companies, so long as your marketing activities and target market are eligible for funding.

How can businesses apply for CanExport funding?

To apply for CanExport marketing grants, businesses must complete a comprehensive application that includes a detailed plan for expanding sales in global markets. Applicants need to show the value of the project (new leads or revenue), a detailed breakdown of project expenses, and explain why the new market is of strategic importance. Businesses must receive application approval prior to incurring funding-eligible expenses.

To discuss your upcoming project and discuss if it’s a good fit for Canadian export marketing grants, please contact Mentor Works.

The post CanExport funding increases to 75%/$75,000 and supports agri-business appeared first on Trade Ready.

This article was updated on April 16, 2019

For Canadian exporters in the know, many would agree that the Canadian Trade Commissioner Service (TCS) is one of Canada’s best-kept secrets.

It’s baffling that a trade network with such a proud 120+ year history doesn’t have higher brand recognition within the Canadian business community.  I am regularly reminded of this when meeting with SMEs throughout the Prairies.

However, once they fully understand the diverse ways the TCS can help them into foreign markets and the impact it can have on their businesses, these companies often become long-standing TCS clients.

Simply stated, the TCS helps connect Canadian companies with international business opportunities.  Here are five easy ways your business can get the TCS Advantage:

1. Connect with your TCS regional office first

There are five TCS regional offices across Canada, each with a team of trade commissioners covering specific sectors to best support companies in their region.  If your business has the capacity and commitment to do business abroad, the TCS wants to meet with you.

Consider the regional trade commissioner as your key account manager; they can serve as your first point-of-contact for all government-related programs and services.

Their biggest value-add, however, is helping you connect with our TCS network in over 160 international locations.  Regional offices regularly receive business leads from TCS colleagues abroad, and occasionally host incoming foreign buyer delegations.

We can’t connect you with these opportunities if we don’t know about you!

2. Have the TCS vet potential business contacts/leads

You have just received an unsolicited inquiry from an interested foreign supplier or sales agent.  You’re interested in the market potential, but how can you be sure if it’s a reputable business?  Ask the TCS, of course!

Think of the TCS as an extension of your sales/marketing team.  Your TCS regional office will refer you to the right trade commissioner abroad to help vet potential business contacts and leads.

Our trade commissioners abroad also provide local market context to help you decide if it’s the right market for your business.  They might also recommend alternative market entry strategies that you haven’t yet considered.

3. Reach out to your in-market trade commissioner when traveling for business

I’m always surprised to learn how frequently Canadian SMEs travel abroad for trade events or fact-finding missions.

Business travel budgets are tight, so why not maximize your investment and meet with a local trade commissioner during your trip?

Here’s a tip: wherever we have a Canadian Embassy/Consulate/High Commission, we likely have a trade section as well.

Those trade commissioners are working on your behalf to help you succeed in that market.  If you make the effort to visit a country, it shows you are serious about the market.

Usually, a trade commissioner will gladly make the time to meet with you, learn about your business, and understand why you’re there.

Such introductions help keep your company top-of-mind when business opportunities are uncovered by the same trade commissioner later on.  Again, your TCS regional office will gladly make these introductions for you.

With sufficient lead time, the TCS can even arrange additional meetings with local contacts you wouldn’t have thought of on your own!

4. Consider trade shows where the TCS is already involved

Industry trade shows are an obvious way to assess new market potential and develop local contacts.  However, attending events that have active TCS participation will increase your chances for success.

How so?  The TCS is already involved in numerous trade events worldwide and often organizes side-events.

Your business can take advantage of pre-planned networking receptions, export cafés, and B2B matchmaking activities.

As one example, the Prairies TCS regional office welcomes over 20 trade commissioners from abroad every year to the Global Petroleum Show in Calgary.

Many trade commissioners bring potential buyers, for which the regional office – together with government partner, Export Development Canada – arranges B2Bs for TCS clients.

In addition, our visiting trade commissioners are happy to meet with Canadian companies to explain the opportunities in their overseas markets.

5. Don’t underestimate the value of province-/industry-led trade missions

Some companies have told me that they regularly receive invitations to join trade missions organized by the province or sector association but decline because they don’t see their company as the right “fit.”

They should reconsider.

What most don’t realize is that the in-market TCS team usually coordinates most of the mission logistics and B2B programs for these Canadian businesses.  Wherever possible, meetings with local contacts are tailored to match the interests of each participant.

It makes sense to leverage Canada-branded trade promotion activities for your own business. For each trade mission, the TCS works behind-the-scenes planning exhibition space, identifying foreign buyers, scheduling B2B’s and so on.

Collaboration between Canadian provinces/industry associations and the TCS network abroad helps deliver trade missions to different markets and industry sectors.

Now the “secret” is out about how your Canadian business can take advantage of the TCS to succeed in global markets.

Reach out to your nearest regional office to learn more about how the Canadian Trade Commissioner Service (and its new funding program, CanExport) can support your expansion plans into new markets and business lines.

The post 5 easy ways Canadian exporters can get the TCS advantage appeared first on Trade Ready.

I’ve learned a lot of lessons from over a decade of observing the efforts of senior trade development professionals, combined with research that included trade mission/show follow-ups, interviews with SME exporters, and extensive conversations with foreign government trade development officials.

One of the most important is that all of these sources revealed a critical gap in export market entry.

Canada’s SME exporters still mainly rely on the traditional “push” export approach, which involves selecting a potential market, building and launching a market entry strategy, and attempting to penetrate a new market.

However, the vast majority of potential buyers, as well as Canada’s international competitors, transitioned many years ago to a “pull” procurement approach.

Buyers prefer to purchase from local suppliers who offer fast delivery, local invoicing, and produce service and warranty.

Exporters using the pull approach, rather than trying to force their way into an established and usually highly competitive market from afar, take a longer term view and become part of the local supply chain that allows them to instantly identify opportunities and pull any good or service from head office.

In contrast, the typical SME export approach is to focus on managing risk and guaranteeing ROI over the near term. This is most easily accomplished by a simple push approach that relies on selling goods into markets without a previous invitation or request, and doing so with the minimal risk or expense.

But with service exports or services integral to product exports like software, licensing, R&D, custom design and fabrication, etc. becoming an increasingly important part of international trade, companies lacking the ability to provide these services are falling behind. As more countries require a certain percentage of local or domestic involvement, many companies not already in those markets are immediately excluded. And if a buyer is looking for a supplier, they will often find several local options and limit their search to those options, rather than expanding their search further to international options.

I suggest that the focus on push exporting goods and systematically excluding other potential exporters not using the pull approach is the primary cause of why Canadian SMEs export less than SMEs in many of Canada’s primary trading partners.

By encouraging more businesses to set up local presences in international markets, new doors will open for them and their exports should increase as a result.

How pull procurement tilts the odds towards businesses with a local presence

The pull approach is nothing new and has been in common use by international competitors and large Canadian exporters for decades, but has largely been ignored by most SMEs.

The fundamental success factor in any pull application requires only that SME have an established presence in the target country that allows them to identify, quantify and access opportunities from inside that market.

They can then pull goods, services and value-added intellectual property in as required. This presence can take several forms, and is almost always much lower cost than trade missions or even trade shows.

So why does pull work so much better than push? Put simply, suppliers are easy to find in any given market: they advertise, have websites, are often members of highly effective international trade promotion groups, focus exclusively on getting product into the hands of buyers, and compared to buyers are relatively few in number.

In contrast, buyers are much greater in number, do not advertise, and the vast majority rarely, if ever, attend trade shows. But more importantly, procurement has changed and now often focuses on services or service-intensive goods that demand a local presence. In addition, the vast majority of buyers depend on local supply chains, either by preference or to comply with local regulation or procurement contracts, as mentioned above.

This puts buyers (pull) in control of the procurement relationship. With the entire world and often literally thousands of suppliers to choose from, the chance a buyer will find one specific seller is low.

How does this play out in real-world examples?

Our international market research in 15 countries has shown that most of Canada’s SME competitors have been using a “pull” approach since at least the mid-1990s. In many markets they have dominated and have effectively shut out push type export sales into these countries.

EDC has successfully used the pull approach on larger projects and foreign buyers for years, although despite their best efforts, this approach generally does not benefit the majority of SME firms as much as larger companies.

A clear example of the power of the buyer vs the supplier is a Latin American startup importer that easily identified and qualified providers and signed procurement and services agreements with over 30 suppliers in 14 countries (pull) in under 120 days. Over the next two years they grew to dominate their multi-million dollar national market, yet only one international exporter reached out to them (push) to carry their product.

Another recent example of the gap between push and pull exporters is a country actively trying to develop a new oil and gas services and support cluster, that offers excellent (potentially huge) opportunities and facilitated access to market for significant numbers of Canadian SME.

While these opportunities are obvious, easy to identify and quantify, and offer immediate revenue generation, over the past two years dozens of Canadian firms have visited this country on push type trade visits, but to date few, if any, have achieved meaningful success.

One reason is obvious: local content procurement regulations systematically eliminate push exporters, and direct procurement towards registered local pull type providers who must meet minimum local supply and service levels.

How can I take greater advantage of buyers using a pull approach?

Any effective approach must address the gap between SME needs to manage risk and provide a low cost, facilitated market entry, as well as recognize the constraints of the offshore buyers and their requirement to operate within their supply chain as pull importers.

Unfortunately, while simple and inexpensive, this is not as easy as it should be. Any SME can do it on their own, but very few will, so it usually comes down to developing a group (shared risk/cost) approach.

The most successful examples are where industry groups and associations, usually working with various levels of government engage private sector consultants who are subject matter experts in the various industries and have a strong understanding of the local and target country markets. These consultants can then package export investment opportunities and present them in a format that is easy to understand and promote.

The generic approach that has been observed to offer a success rate of well over 50% for each opportunity identified is to:

1. Assess the target sector. Identify strategic operational areas in services and value added supply chain where there is a demonstrated need that is expected to grow strongly for at least 5 years.
2. Identify the ideal profile of the target SME firms they would need to attract.
3. Review the local operating environment with respect to constraints that could restrict trade and develop effective solutions before these constraints become problems.
4. Develop a comprehensive business case on each opportunity with sufficient detail to allow an SME to make an informed decision.
5. Where possible, partner with the provincial and federal government trade promotion agencies and various industry associations to promote it to their members and constituents, as this can sharply reduce the cost of any due diligence.

The post Try this approach to improve the number of export opportunities available to your business appeared first on Trade Ready.

The Strategic Innovation Fund (SIF) is a new $1.26 billion Canadian government funding program supporting the improvement and advancement of groundbreaking products, processes, and services. The five-program (2017-2021) was created to fuel the growth of Canadian businesses and facilitate innovation in Canada.

SIF plays a critical role in driving Canada’s industrial and technology-driven sector growth. It focuses on accelerating innovative, business expansion projects, which benefits companies, and helps secure competitiveness in both regional and national economies.

Eligible Canadian exporters may be able to reduce project costs by up to 50% to a maximum $50 million in government funding.

How the Strategic Innovation Fund Supports Businesses

The Strategic Innovation Fund is a government funding program targeted towards Canadian industrial and technology-related companies. It offers financial contributions (either repayable or non-repayable) valued up to 50% of project costs to a maximum of $50,000,000. The purpose of this fund is to promote investment into the types of activities driving sustainable productivity and economic benefits. SIF has four streams of project funding support.

Stream 1: Research, Development, and Commercialization

Stream 1 offers funding for the research, development, and market commercialization of innovative technologies. All activities performed must focus on progressing the innovation’s development, which may have a current technology readiness level (TRL) of 1-9. Projects may include (but are not limited to):

• Researching and testing the market potential of an early concept or finding;
• Adapting research for commercial applications with the potential for market disruption;
• Improving processes (by using new technology) to reduce the environmental footprint of production; and
• Improving current products/processes by implementing new technologies aimed to enhance competitive capabilities.

Stream 2: Business Growth and Expansion

Stream 2 provides innovation funding for the expansion and material improvement of existing industrial or technological facilities. Activities should increase productivity and efficiencies, ultimately leading to higher competitiveness. At this stage, businesses should have well-developed products and processes and be performing activities within a TRL of 8-9. Projects may include (but are not limited to):

• Increasing production capacity to meet a demonstrated market demand; and
• Improving manufacturing efficiency through improvements to plant, equipment, or processes.

Stream 3: Investment Attraction and Retention

Stream 3 supports new investments in Canadian industrial or technological facilities. The main objective is to support large-scale investments that may have not otherwise been made in Canada. These investments will be used to support the continued development of Canada’s most innovative businesses. Companies must achieve a TRL of 2 or higher to apply; projects may include (but are not limited to):

• Establishing a new production facility, which did not previously exist in Canada;
• Receiving a research and development mandate which is being established for the first time, or was previously held outside Canada; and
• Obtaining a production mandate for products being produced for the first time, or those previously produced outside of Canada.

Stream 4: Collaborative Technology Development and Demonstration

Assisting in collaborative research, Stream 4 includes activities related to the discovery or demonstration of new knowledge. In partnership with academic institutions and non-profits, this stream provides funding for new technology-driven products, processes or services at a technology readiness level of 1-7. Projects may include (but are not limited to):

• Developing and demonstrating pre-commercial technologies; and
• Advancing new technologies into product-specific applications.

Do You Qualify for the Strategic Innovation Fund?

The Strategic Innovation Fund is inclusive towards a wide range of Canada’s industrial and technology sectors. While an assortment of businesses are eligible, funding is only awarded to firms demonstrating strong project performance metrics. All projects must clearly demonstrate how the funding will be used to generate sustainable benefits for a broad range of stakeholders.

Overall eligibility, in addition to whether funding is repayable or non-repayable, is determined by the program’s application review committee.

To be deemed eligible for the Strategic Innovation Fund, businesses must be:

• A small, medium, or large company;
• Incorporated; and
• Operating within Canada.

How to Apply for the Strategic Innovation Fund

There is a two-stage application process for the Strategic Innovation Fund requiring:

1. Statement of Interest: A high-level overview of projects. Here, applicants can describe the project and explain how it meets SIF’s objectives. Applicants are also asked to provide corporate information so basic corporate capability assessments can be completed.
2. Full Application: If advancing to step 2 is advisable, applicants will be contacted and invited to submit a detailed project application. This information is used to complete a due diligence and benefits assessment.

Given the size and complexity of Strategic Innovation Fund applications, Mentor Works recommends that interested parties use a government funding partner. This accelerates the process and helps ensure applications hit on all the factors government reviewers prioritize most heavily.

Please feel free to contact Mentor Works to learn more about SIF, and how to get started.

The post New government funding available to innovative Canadian businesses appeared first on Trade Ready.

Today, Carl Gravel is an experienced executive helping small businesses across Canada as a director at the Business Development Bank of Canada (BDC). Though he is now an integral member of one of Canada’s largest corporations, Carl has spent many years working hard to get to where he is today.

After earning his degree in finance and commerce, Carl’s career began in the finance industry.  By 2000, after spending several years of dedication, he earned the position of Structured Finance Manager with the National Bank of Canada where he began working with international clients for the first time. Doing so sparked a passion for international business which has guided his career path ever since.

“I started my international career when I was working on a special project many years ago. The project objective at the time was to support the Bank’s client in its work with China, and I fell in love with international business while working on it.”

“My first experiences going with clients to China in the early 2000’s certainly represent vibrant memories. Helping to negotiate deals between Canadian and Chinese entrepreneurs was very exciting.”

Since then, I’ve always enjoyed working with entrepreneurs and supporting them with their ambitions to become small multinationals!

In 2005, Carl’s passion led him to start his own private consulting company, PFL International. With a focus on helping Canadian SMEs enter or expand their businesses in Asian and European markets, he was able to build upon his experience and help many companies. He was also able to improve his global business skills, particularly those regarding intercultural communication and negotiation.

“If I could go back and give myself advice at the beginning of my career, I’d want to teach my younger self about the importance of dealing with different cultures and languages, as well as the time required to build trust.”

The excitement of supporting Canadian SMEs around the world

In 2007, Carl was offered a prestigious role with BDC as their National Director, Manufacturing, and has since continued to grow within the organization.

The organization’s main focus is to offer financing, capital and advisor services to Canadian SMEs, the perfect marriage of Carl’s financial background and passion for helping SMEs in global markets. After ten years there, he remains a firm advocate of their mission and enjoys every opportunity to help Canada’s business talent shine worldwide.

“Every time I work with an SME looking at expanding into international markets, it is exciting and interesting.”

We have so many good companies in Canada offering a lot of value. We need to better showcase them to the world!

In his initial role at BDC, he was responsible for developing the organization’s strategy to support manufacturers, including developing finance solutions to help them do more business in international markets.

In 2010 he was named National Director, Global Expansion (Financing and Consulting), and was put in charge of BDC’s Ontario and Quebec sales teams for their finance and consulting services.

He achieved his current position of Director of International Expansion in 2013. His focus is now on the consulting side of BDC leading their national team as they look to support increasing numbers of Canadian SMEs doing business globally.

Becoming part of a growing international business community

That same year, Carl also started taking FITTskills online courses, completing the entire program by 2016. He found taking the courses beneficial to his overall understanding of international trade, and is eager to recommend the courses to international business professionals.

I found the FITTskills courses to be comprehensive and very practical, especially for smaller businesses. It really gave me a structured thinking around the important aspects of international trade. I think anybody that is involved in international trade should follow the program.

Upon completing the courses and earning his FITT Diploma in International Trade, he applied for the elite Certified International Trade Professional (CITP®|FIBP®) designation and was proud to add it to his list of career accomplishments.

“I was looking for something practical, and it was a widely recognized certification across Canada. I felt very satisfied when I received it. I felt I became part of a solid international community.”

As he continues to help SMEs across Canada reach new heights in global markets, he says that what he’s gained from the FITTskills program and earning his designation will be an important part of meeting his goals.

“My role is to develop international solutions for SMEs and help them to understand the opportunities and challenges of international business, and I am sure all my gained global trade knowledge will be helpful in doing so.”

With Carl carrying on this important work, Canadian SMEs looking for help are in safe and capable hands and we’re looking forward to seeing him empower more businesses excel in global markets.

The post Carl Gravel, CITP|FIBP – Director of International Expansion appeared first on Trade Ready.

Free trade agreements (FTAs) such as the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the North American Free Trade Agreement (NAFTA) have been stealing the headlines for the past few months. For all the talk on these agreements, however, it can be hard to find SME-friendly information on how companies can benefit from them.

In fact, Canada has FTAs with 15 countries, and soon an additional 27 nations once CETA is in force.

Admittedly, an FTA is not the only consideration for choosing a market. You still have to make sure there is a need for your product or service, that you have a unique selling proposition, and that you can deliver your offering in a way that meets customer needs. That being said, an FTA can be an important factor in making a current or target export market more attractive.

So, what’s the deal with FTAs and how can your company benefit? Since each FTA is different, the answer depends on which one you’re talking about.

Furthermore, the answer is dependent on whether you’re selling goods, services, and/or looking to set up a physical presence in the country such as a branch office or production facility. Let’s look at FTA benefits for each of these three options, with examples from NAFTA and CETA in particular.

Selling goods to an FTA country

When it comes to selling physical products, the most common benefit of FTAs is also the most well-known: tariff reductions. However, depending on what you are selling and where it was produced, as a Canadian exporter you may not always benefit from reduced tariffs. Here’s how to find out whether (and how much) your company can benefit:

Determine the Harmonized System (HS) code of the product(s) you want to export. This guide by Statistics Canada is a good starting point. Confirm the correct code by speaking with a customs broker. Find one near you using the Canadian Society of Customs Brokers’ online member directory.

Check the tariff schedule of your target market. Each country’s tariff schedule lists customs duty rates by HS code, typically with one column for FTA partner-countries and another for non-FTA partner-countries. In some instances, the difference between FTA and non-FTA rates can be significant, whereas for other goods there could be no difference. The degree of tariff advantage you receive from an FTA therefore depends on your product. This is why FTA tariff rates may be a determining factor in entering a market in some cases but not in others.

1. For the U.S.: Refer to the S. Harmonized Tariff Schedule. Under Column 1, the Special column includes NAFTA rates, and the General column is for goods originating from non-FTA countries (Column 2 applies to North Korea and Cuba only).
2. For the EU: Current duty rates are listed in the EU’s online TARIC Also consult Find your EU Tariff Rate on Global Affairs Canada’s CETA site to see how your rates might change once the agreement is in force.
3. For other countries: Find the link to each country’s tariff schedule on this page.

Verify whether your goods meet the rules of origin of the specific FTA in order to qualify as a Canadian-origin product. These, too, are typically listed by HS code. Your goods can only qualify for preferential tariff treatment if they meet the rules of origin. For example, if you are shipping products from Canada to the U.S. and they are deemed to originate in Vietnam, they would not benefit from the NAFTA rate.

1. For the U.S. and Mexico: See the NAFTA overview within the broader Guide to Exporting to the United States published by the Trade Commissioner Service. Look up rules of origin by product in Annex 401 of NAFTA.
2. For the EU: See Annex 5 – Product-Specific Rules of Origin of the CETA agreement.

Prove that you meet the rules of origin using a Certificate of Origin. See CBSA: Certification of Origin under Free Trade Agreements to access the forms (there is no CETA template yet). The Canadian Chamber of Commerce certifies your Certificate of Origin.

Another possible benefit of FTAs for goods producers is more streamlined product standards and certification requirements. For example, CETA includes a protocol on conformity assessment, allowing some Canadian products to be tested and certified for the EU market from Canada.

Selling services to an FTA country

FTA benefits are even available to companies in sectors such as software, consulting, or tourism that don’t send physical goods across borders. Here are a few:

National treatment. Both NAFTA and CETA specify that service providers in most sectors will be treated as national (i.e. local) companies. This means that they would not face artificial barriers to providing their service in a partner country, such as being required to have a physical presence there. Having these types of provisions written into FTAs makes it easier for nations to hold each other accountable in cases where discriminatory practices may occur.

Easier labour mobility for cross-border travel and employment. For example, did you know that NAFTA provides for five special visa classifications? One of these is the B-1 classification for business visitors. You may not even realize it, but when Canadians travel to the U.S. or Mexico for trade shows or business meetings, we are granted a B-1 visa upon passing through customs with no advance paperwork required. Of course, showing up with relevant documents, such as a travel itinerary, is advisable – see the hyperlink above for advice.

Services will be central to the FTAs of the future. CETA in particular is highly progressive in its provisions for service exporters because the growing importance of the service sector to the Canadian and EU economies was recognized during negotiations. See the FTA’s chapter summaries to read about CETA’s wide-ranging coverage on topics such as telecommunications, electronic commerce, and mutual recognition of professional qualifications.

Direct investment in an FTA country

Companies that provide either goods or services are aware that even with advanced communication technologies and faster shipping times, being close to customers is still a key competitive advantage.

For key markets, you may consider setting up a physical office, whether it’s to respond to customer inquiries in their language and time zone, or whether it’s to produce locally in order to deliver within days as opposed to weeks. Here are some ways that not only FTAs, but also Foreign Investment Promotion and Protection Agreements (FIPAs) and Tax Treaties can make a difference:

National treatment. This is a similar concept to the one explained above: a company setting up an affiliate in an FTA or FIPA partner country is afforded the same treatment as if it were a domestically-owned company.

Avoiding double taxation. If you set up a subsidiary internationally, the revenues you make in that country may be taxed by the local government and your worldwide revenues may be taxed by the Canada Revenue Agency. This presents the possibility of having your subsidiary’s revenues taxed twice, both at home and abroad. FTAs, FIPAs, and Tax Treaties can all help to establish processes to ensure that these revenues are only taxed once.

Integrated supply chains. You may want to send employees or unfinished goods between your various international locations in order to provide better service, even out production capacity, or drive mutual learning between offices. In these cases, the benefits listed in the goods and services sections above can play a huge role in facilitating these movements so that your global operations can be as effective as possible.

FTAs are complex and each one is unique. This explains why it can be so hard to get a clear answer on how exactly your company can benefit when selling to, buying from, or investing in a partner country. Hopefully the points and hyperlinks above give you a clear starting point for understanding how to navigate – and benefit from – these agreements.

Want to know more? Read Getting the Most from Free Trade Agreements by EDC. Make sure to contact your local Trade Commissioner as well as consult relevant experts such as customs brokers, lawyers, accountants, or consultants.

Don’t hesitate to message me on LinkedIn if you have questions on how to further explore the benefits of a specific FTA for your company.

The post How can Canadian SMEs benefit from free trade agreements anyway? appeared first on Trade Ready.

CETA, a progressive trade deal between Canada and the 28 members of the European Union, passed its last hurdle on February 15 when it was signed by the EU legislature. The agreement covers almost all sectors of EU-Canada trade, eliminating 98% of trade tariffs and creating new opportunities for Canadian businesses looking for new markets.

“At its heart, CETA is a framework for trade that works for everyone,” said Prime Minister Justin Trudeau in a recent address to the EU Parliament.

So now that CETA is becoming a reality, what does that mean for Canadian businesses who are seeking new markets to trade with? To explore these new opportunities, we asked some Canadian trade experts to share their take on this new deal in this month’s #TradeElite Twitter chat. Here’s what they had to say.

Moderator: Craig Atkinson (@CraigAAtkinson) Director, International Trade and Development Consulting with Lexmerca, formerly with the ITC, based in Halifax, Nova Scotia and Geneva, Switzerland.

Panelists:

Siddha Param (@SiddhaParam) International Business Consultant for StrandRidge.com, based out of Winnipeg, Manitoba

Dr. Michele Vincenti, CITP (@alvana1) President & CEO of Alvana Business Consulting Inc. based out of Vancouver, BC

Audrey Ross (@TresAudrey) Logistics and Customs Specialist at Orchard International Inc. based out of Toronto

Doug Taylor, CITP (@globethoughts), Managing Director of Pacific Business Intelligence Ltd in BC

What barriers to the EU market have been lowered under CETA and how can Canadian SMEs seize related opportunities?

@craigaatkinson #TradeElite A1) The market opportunity is Euro 12 Billion and equal to 530 Million customers in Europe

— Michele Vincenti (@alvana1) March 9, 2017

A1: #TradeElite #CETA

– Improves labour mobility
– Better access for trade in services & public contracts
– Eliminates most tariffs https://t.co/XltTKYqRkC
— Mark Schroeter ?? (@TCS_Mark) March 9, 2017

A1. Labour Mobility is the big one. This agreement is the most extensive (after EU) on free mvt. High Trust. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

@FITTNews #TradeElite The implementation should happen in Canadian terms when the Stanley Cap starts May or June 95% of CETA

— Michele Vincenti (@alvana1) March 9, 2017

Will CETA make the EU market more accessible to SMEs who might have previously considered the region out of reach?

A2. Absolutely. It’s always easier / more encouraging to do biz w/ an FTA in play. Gives you a rulebook, support etc. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

@craigaatkinson It should but it requires that SME’s pursue the mkt and historically they haven’t. The mkt has always been accessible for them #tradeelite

— Doug Taylor (@globethoughts) March 9, 2017

First step is to explore the market, establish the demand. Don’t get bogged down in #FTA detail @globethoughts @craigaatkinson #TradeElite

— Adrian Mutton (@adrianmutton) March 9, 2017

A2: Yes, more accessible markets in EU for #Cdnbiz,
but more importantly…room for growth! #TradeElite https://t.co/Rf5Dhnx92g

— Mark Schroeter ?? (@TCS_Mark) March 9, 2017

A2. pre-internet it made sense to trade w/ neighbours only. Time zones, geography, etc. Post internet – it’s abt customers #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

Trade agreements are complicated. Where can Canadian SMEs find info/resources on how to take advantage of CETA?

A3: ?? exporters have this online toolkit from @TCS_SDC to explain #CETA opportunities in EU?? https://t.co/9cT7FtyIvp #TradeElite pic.twitter.com/2zXkmy2G3B

— Mark Schroeter ?? (@TCS_Mark) March 9, 2017

A3. Umm Craig – there aren’t any yet!!! We are all still reading it. Trade Lawyers & Customs Brokers have inside scoop. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

A3. Seriously though, if you are in the industry you can read do the gov’t site. If new, find a Customs Broker #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

@craigaatkinson #TradeElite https://t.co/7oc5tPbmWH A3) I suggest to join the events across Canada and contact Trade @TCS_SDC

— Michele Vincenti (@alvana1) March 9, 2017

#CETA a great opportunity for exporters. @TCS_SDC doing its part! For more on this see: https://t.co/XsKnaj91oR h/t @tresAudrey https://t.co/6eCrxAGlhY

— Ailish Campbell (@Ailish_Campbell) March 9, 2017

Which sectors do you think are most promising for Canadian SMEs that trade with biz and/or gov in the EU?

A4: Key sectors that will benefit most from #CETA

More info here: https://t.co/gmQ8Brm3jB #TradeElite @CanadaTrade @TCS_SDC pic.twitter.com/79hQzhUB7A

— Mark Schroeter ?? (@TCS_Mark) March 9, 2017

A4. In general, Cdn’s are so great at services & streamlining processes. Consumer goods, tech as well. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

A4. Is tough to be definitive as we are well matched – EU & Cda are innovative, high quality & fwd thinking! #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

Which EU-country markets present the most significant trade opportunities for Canadian SMEs?

@craigaatkinson #TradeElite A5) Belgium, Germany, The Netherlands are well positioned because already large current traders with Canada

— Michele Vincenti (@alvana1) March 9, 2017

A5. The smaller, more recent member states can benefit from investment in services & Cdn knowledge. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

A5. Former Soviet Union countries have more needs, than highly established Germany, France #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

@craigaatkinson #TradeElite A5) Belgium is investing heavily in Canada and good for #Quebec because French speakers to cross benefit

— Michele Vincenti (@alvana1) March 9, 2017

What are some examples of how Canadian SMEs from different regions/provinces might leverage CETA?

@craigaatkinson #TradeElite A6) #Quebec must leverage French language to Francophone EU countries. #BC Fishing and #Alberta Oil and Gas

— Michele Vincenti (@alvana1) March 9, 2017

A6. Provinces who help industries pivot from USA to EU quickly w/ investment $ will yield higher returns. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

Do you have any key advice that Canadian SMEs should consider before entering the EU market?

@craigaatkinson pick on a country your own size, research, identify real customers, commit to mkt and sales, commit time and resources #TradeElite

— Doug Taylor (@globethoughts) March 9, 2017

@globethoughts @craigaatkinson Excellent answer. Start with Canadian SME’s product or service USP #tradeelite @FITTNews

— Siddha Param (@siddhaparam) March 9, 2017

@craigaatkinson #TradeElite A7) Do your home work, talk to trade commissioner, attend events, talk to expert, follow @FITTNews

— Michele Vincenti (@alvana1) March 9, 2017

A7. Duties might be lower – but Taxes are Taxes. EU members charge HIGH Value Added Tax. 17% – 22%!!! #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

A7) Study about the country, understand opportunities and threats, visit with trade delegation @CanadaTrade

— Michele Vincenti (@alvana1) March 9, 2017

A7. Finding a Specialist, or understanding VAT is very important. Most Cdn accountants don’t understand it. You need #TradeElite!

— audrey ross (@tresAudrey) March 9, 2017

@craigaatkinson #TradeElite A7) Take advantage #Canexport You could get up to $99,999 to reimburse up to 50% of eligible expenses to promote

— Michele Vincenti (@alvana1) March 9, 2017

Lastly, do you have anything else to add regarding Canadian SME participation in the EU market?

#TradeElite @craigaatkinson A8) The glass is half FULL! Embrace opportunities!

— Michele Vincenti (@alvana1) March 9, 2017

A8. You can do it! Cda has a great reputation in EU. Together we can do great things. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

Two highly industrialized markets coming together means opportunities for high value products and services @FITTNews #TradeElite https://t.co/l8OwsYmNxm

— Siddha Param (@siddhaparam) March 9, 2017

Bonus Question!

From @TanyaSaldanha1: Do you think that the impact of Brexit on EU will have any indirect impact on #CETA? #TradeElite

— Craig A. Atkinson (@craigaatkinson) March 9, 2017

#TradeElite @craigaatkinson @TanyaSaldanha1 The Butterfly effect…yes everything is connected BUT look for the opportunities

— Michele Vincenti (@alvana1) March 9, 2017

No, I don’t. Britain isn’t leaving the customs union… which is good. Goods can still flow freely. #TradeElite

— audrey ross (@tresAudrey) March 9, 2017

Also, Canada will very quickly set up an FTA w/ UK post Brexit. I would put $ down it will be the 2nd FTA after exit. #TradeElite https://t.co/OG2BE3lns5

— audrey ross (@tresAudrey) March 9, 2017

Parting advice from our moderator:

After today’s #TradeElite Twitter chat, see the EU Government Procurement Guide for Canadian Businesses https://t.co/tfAexQgNjR #CETA

— Craig A. Atkinson (@craigaatkinson) March 9, 2017

Read the rest of the chat and follow future discussions by following the #TradeElite hashtag. Stay tuned for the next #TradeElite chat, coming up Thursday, April 13 at 2:30-3:30PM ET.

The post How can Canadian SMEs take advantage of CETA? appeared first on Trade Ready.

Governments and central banks around the world are taking unprecedented steps to stimulate national economies in ways that they hope will bring sustainable economic growth and prosperity. Private sector companies are working hard to re-assess their commercial strategies in order to come up with winning solutions, which would allow them to gain access to new markets and to manage risks related to their business expansion plans.

Beyond the broader macroeconomic picture, it is important to ask a more specific question as to how Canada’s small and medium-sized enterprises (SMEs) – those companies that represent over 98 percent of Canada’s enterprise base – are responding to these tumultuous times. Is the European market still a viable destination for Canadian SMEs, which are so critical to Canada’s economic success?

Gauging the European waters for Canadian SMEs

In the news, we hear a great deal about the ebb and flow of our industrial mega-players, such as Air Canada, Bombardier, Blackberry, CAE, Barrick Gold, and Suncor Energy, among others. But what about our small and medium-sized of companies?

Omar Allam, CEO and founder of Allam Advisory Group (a Canadian-based global business, strategy and commercial diplomacy consulting firm), has recently published opinion pieces in Profit Guide and The Globe and Mail on the subject. He points out that all companies interested in the European markets should accept that after Brexit and CETA-related uncertainties “things will never be the same”.

However, in an ever-transitioning European economic space, times have changed. Regardless of the final outcomes of Brexit and CETA, the European economies have been and will continue to be a market for Canadian SMEs to succeed beyond their own “safe conventional borders”.

Here’s why it still makes sense to look to Europe

Based on my research and consulting work in the Canadian SME community over the past 25 years, I see a lot to be positive about when it comes to Canadian SMEs’ ability to improve their standing in the European exporting arena. The key advantages which will allow Canadian small businesses to continue to reap the benefits of exporting to Europe are:

1. A trade environment that includes a weaker Canadian Dollar, a weaker Pound-Sterling, lower energy prices and the steady economic recovery of the Eurozone;
2. Strong demand from European customers for Canadian goods, products and services in certain areas, such as: seafood and agri-food, consumer products, technology and innovation, and professional services (as identified during the CETA negotiations);
3. Increasing level of Canadian SME managers with international experience who perceive internationalization as an opportunity;
4. Privileged access by Canadian SMEs to human resources of European extraction, generated by various waves of immigration;
5. Availability of various export incentives, financial services and training to help SMEs expand globally offered by public-sector institutions like Export Development Canada (EDC), the Business Development Bank of Canada (BDC) and Canada’s Trade Commissioner Service (TCS);
6. Availability of direct financial assistance to Canadian SMEs seeking to develop new export opportunities, such as the CanExport program;
7. Privileged access to the EU opportunities and partners via the Canadian Manufacturers and Exporters (CME) Enterprise Canadian Network website.

Opportunity is out there for companies willing to seize it

The real challenge of getting more Canadian SMEs to consider opportunities in the European markets lies in their tendency to be overcautious and to underestimate their own export potential. As analyzed by the Conference Board of Canada (Macmillan, 2008), too many Canadian business executives have the perception that their products or services may not be “exportable”.

In addition, they often perceive these markets as being too risky, as they do not feel they have the skill and resource capability to internationalize. They are not ready to expand their customer base because they wish to stay small and keep their operations “manageable”.

A panel of experts gathered in May 2015 at the Toronto Region Board of Trade to share thoughts on ideas on how to better engage Canadian companies – and particularly SMEs – into the exporting realm, brought some interesting perspectives. The panel included: David Rawlings, CEO, JPMorgan Chase Canada; Dianne Craig, President and CEO, Ford Canada; and Sam Sebastian, Managing Director, Google Canada.  The panel was assembled as the Board unveiled its new Trade Accelerator Program (TAP) GTA, which was designed to assist businesses looking to get into exporting.

It seems that the solution in many of these instances lies in getting more of the small to medium-sized enterprises to think about the real advantages of doing business in the European context, and go after the opportunities which these markets represent.

What Canadian SMEs have to offer is often far more important than even they themselves may believe. In addition, the market conditions should inspire Canadian SMEs who want to accelerate their growth.

I would then leave the SME business owners who have maybe been holding back on the idea of exporting to European markets with three key recommendations:

1. Immerse yourself in your target market

Solid in-market engagement is necessary to establish the relationships, trust and brand awareness critical to building a sustainable market presence. Meetings with prospective customers and connections with potential investors and partners come much faster when you are in close proximity to the people you want to meet.

2. Invest your efforts in product validation and exposure to local competitors

Acquire awareness of the local business culture and the competition to be faced. Use the time in-market to vet and validate your product – this experience will really build your confidence.

3. Take advantage of online, technological tools to enhance your company’s marketing efforts

It is no longer about taking out an advertisement in the Yellow Pages or the local newspaper – a plethora of opportunities has opened that was not there in the past and is now right at your fingertips.

The post Canadian SMEs can overcome CETA and Brexit uncertainty in Europe 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.