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.

To identify new markets and potential opportunities, or eliminate unsuitable markets, researchers should first examine macroeconomic data. Macroeconomics refers to research into the overall aspects of a country’s economy, including income, national output and the interrelationship between economic sectors.

The economic characteristics of an international market are conditions that organizations cannot control. If an organization cannot contend with these characteristics, or if the characteristics mean that a product or service is unlikely to be suitable for that country, then the market can be discounted as an opportunity or the organization can investigate methods of adapting to the market.

The macroeconomic features of a potential host country can be divided into several areas for research:

1. Gross national product (GNP)

The market value of all final goods and services produced by the nationals of a country in an annual time frame. GNP is often used as a measure of the size of a country’s economy, and incorporates income derived from overseas activity.

2. Gross domestic product (GDP)

The market value of all final goods and services produced in a country or region in an annual timeframe. GDP per capita is often used as a measure of the standard of living in a country.

3. Purchasing power parity (PPP)

Compares the purchasing power of different currencies in their domestic countries and is often used as an alternative to GDP figures for measuring the standard of living in a country. PPP is calculated using the amount of domestic currency needed to purchase a similar collection of goods in different countries.

4. Household disposable income

This is the average amount a household in a country has to spend after taxes and payment of essential items, such as housing costs and utilities.

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5. Market size

The market’s total number of buyers. The larger a country’s population, the larger the potential customer base.

6. Market potential

Describes how many people or businesses in a country could realistically be expected to purchase a product or service.

7. Market resources

The presence of natural resources in a country will have an impact on international business success. The presence of resources such as oil, soil, timber and minerals increases a country’s wealth and leads to increased development of infrastructure.

It is also important for exporters to consider the geography and climate of a potential market country, because both have an impact on the transportation of goods and dictate which products or services are likely to be purchased.

For organizations considering sourcing goods from an international market or setting up a production site in a foreign county, the presence of resources needed for production processes will be essential for success.

8. Market activity

In some cases, organizations will need to investigate the major economic industries present in a specific country. For example, an organization wishing to sell building machinery might need to check whether a potential market has its industry centered on agriculture rather than industry.

9. Infrastructure

A country’s infrastructure, such as the transportation network, the distribution of cities and major centers, and the extent of the national power supply, will have an impact on the distribution of goods or services and the costs involved with distribution.

In some cases, this information will also indicate a need to adapt a product or service (because the supply of electricity is intermittent, for example), or will indicate the unsuitability of exporting to that market.

Information about a country’s infrastructure will also give an idea of how effective business communications might be (for instance, the availability of telephone, Internet and mail services) and how easy it will be to travel to the country for meetings and to monitor business activities.

10. Urbanization

The amount of urbanization in a country is a measure of that country’s demand for certain goods and services and its income levels. In general, workers in urban areas are paid higher wages than workers in rural areas.

The post Start to identify new markets by looking at these 10 statistics appeared first on Trade Ready.

Yet, despite the critical importance of global trade, the details and statistics behind these constant activities are largely invisible to the average person.

In fact, most people probably have no clear picture of the real scope of global trade. Here are some incredible international trade statistics to help give perspective to this crucial industry.

1.  America exceeded a record breaking $5 trillion in total trade volume in 2013.

$5 trillion is an incredible amount of money, and this amount just goes to show how important the United States is to world trade.

The U. S. exports important staples such as wheat and corn, and it is also a mega consumer for the imports of the world. $2.27 trillion came from exports, and $2.73 trillion came from imports.

2013 was a great year for American world trade, especially considering that in post-recessionary 2009 the total trade volume for the country was 42 percent lower, at $3.54 trillion.

The 2013 total trade volume also completely dwarfed the 1985 total trade volume of just over 1 trillion.

Whether it is electronics from Asia, wine from France, or cars from Germany, the United States imports in extremely high volume, and thus provides a critical market for global trade.

2. 5-6 million containers are transiting the ocean at any given time.

The average shipping container is twenty feet long and is large enough to hold forty to fifty refrigerators, or four hundred flat screen TV’s.

So, to think that there are at least five to six million of them on the high seas at any given time is pretty astonishing. These containers carry trillions of dollars of goods over the oceans. That’s what it takes to keep up with the needs of society.

3. There are more than 100,000 ships at sea that carry out trade.

In order to carry the minimum of 5-6 million containers that are constantly traveling the oceans, an army of ships is needed. That is exactly what the world has.

In comparison, the 55 largest national navies in the world combined have a total of 3,000 ships, less than 1/30 of the number of cargo ships carrying goods around the world.

The largest of these ships can carry around 18,000 containers. They are so huge that they resemble several city blocks worth of buildings that have been made to float.

4. Maersk’s containers alone would stretch halfway around the world if they were put in a line.

You know that a shipping company is big when its containers can span half the circumference of the planet, or approximately 12,000 miles.

Just imagine how much clothing, iron ore, oil, solar panels, shoes, and building materials could fit in a line that stretched from Buenos Aires, Argentina to Shanghai, China!

5. About 90 percent of the things an average person in a developed country owns is involved with international trade in some way.

If you look at a man in Canada, America, Great Britain, etc., he may be wearing shoes that were made in China, a watch made in Switzerland, a shirt made in Indonesia, driving a car made in Japan, and fueling it with gasoline from Saudi Arabia.

So many of the things that people use in everyday life come from distant locations. People may purchase their goods locally, but oftentimes those goods have gone through quite a journey to get to that retail location. Thankfully for the billions of people who rely on global trade, the shipping industry keeps delivering these items where they are needed.

6.  There are 750,000 people who work as seafarers on ship crews involved with trade.

Journeys across oceans can take weeks for the large ships that carry goods. These ships all need crews to help navigate and run the ship while it moves from point A to point B.

So not only does the shipping industry move trillions of dollars of goods around the world every year, but it also employs three quarters of a million people. That is approximately the equivalent of the entire population of El Paso, Texas employed by shipping.

7. In 2013, there was close to $19 trillion of global merchandise exports.

$19 trillion is such a large amount of money that it is difficult to even think about. For perspective, the richest man in the world, Bill Gates, has a net worth of $80 billion.

So, the global merchandise exports of 2013 were roughly two hundred and thirty-five times the total wealth of the richest man on earth.

8. Over $220 billion of gold was exported in 2014.

The average price of gold in 2014 was $1,226.4. This means that in that year, over 17 million ounces of gold were exported. That’s a lot of gold!

Gold has always been a desirable commodity, so it is not surprising that it was exported in high volumes. This makes even more sense when considering the high price that gold was trading at in 2014.

9. Global exports have risen over 3000% since 1950.

In 1950, the total volume of global exports was roughly $61 billion. In 2013, it was nearly $19 trillion, or over three hundred times more than in 1950.

That is a tremendous amount of growth for roughly 65 years.

In fact, for the sake of perspective, just the total exports of crustaceans in 2013 (roughly $30 billion), would account for nearly half of the dollar amount of all of the global exports combined in 1950.

The main reasons for this growth are fewer global tariffs, better technology, product innovation, and increased foreign demand.

International trade is vital to sustaining the global economy, and life as we know it.  The world is more integrated than ever before, and it will most likely continue in that direction for a long time to come.

Do any of these international trade statistics surprise you? Do you think international trade will continue to grow at this rate?

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