Many Canadian companies tend to look south for their first international trade partners, but that may be short-sighted, considering there’s a whole world of opportunity out there that’s worth exploring. And it’s an opportunity that small and medium-sized enterprises (SMEs) are particularly well poised to capitalize on.
SMEs are incredibly important to the Canadian economy. According to Canada’s State of Trade 2019, an annual government report on the country’s commercial activities, SMEs accounted for 50 percent of Canada’s GDP between 2012 and 2014 and provided 89 percent of all private sector jobs in 2017. But, only one-tenth of the country’s SMEs engaged in international trade that year — and it was largely with the United States. That’s a problem. Not because the U.S. is a bad trade partner, but because other countries have the potential to be really great partners, especially for SMEs. Here’s why.
Diverse trade partners lead to long-term success
Under Prime Minister Justin Trudeau, diversifying trade relationships has been a top priority for Canada — and for good reason, considering a wide range of trade partners help mitigate risk. “When Canadian SMEs choose to export goods and services, they become more resilient in the face of unsystematic based economic downturn,” says Victoria Lennox, co-founder and president of Startup Canada.
It can also be very lucrative. In fact, there’s a correlation between exporting globally and securing long-term success. When a Canadian small business goes global from day one, whether by exporting a product or doing business across borders, their success rate increases, Lennox says. “Generally, Canadian SMEs have a 50-percent failure rate past year five,” she says. “But by creating new sales channels and entering different markets, business owners can find new customers and clients while creating stronger and more resilient businesses. Suddenly, small business owners are able to access global talent, foreign investment and new markets.”
Global trade has never been more achievable
Traditionally, SME exports have clustered in a few industries, notably manufacturing, wholesale trade and business services. But with easy access to online platforms, it’s easier — and cheaper — for SMEs to engage in retail trade. And increased connectivity means global customers have a level of access they didn’t previously, which may encourage sectors that have been less likely to consider trade — such as finance and insurance or information and cultural industries — to start.
There’s also more information out there for trade newbies. “Canadian SMEs now have more resources to learn, connect and make informed decisions before expanding into new markets,” Lennox says. “There’s an abundance of digital information (research, case studies, foreign market information, competition analysis) that empowers SMEs to have the luxury of learning about new markets long before they make the move.”
The world wants more Canada
There’s no disputing the power of the Canadian brand. Lennox says Canadian goods and services are attractive to investors and customers all around the world, something SMEs should leverage. “When companies like Roots expand overseas, their products are well received in countries like Taiwan where they have a large footprint,” she says. “Smaller businesses can benefit from the country’s strong reputation by emphasizing the fact that they’re Canadian.”
Of course, Canadian SMEs do need support if they’re going to successfully trade with other countries. Lennox says companies that take advantage of trade Commissioner Service programs expert 18 percent more goods and services than those that don’t, and they have the added benefit of advice from trade experts, which means they’re facing less risk.
“When Canadian companies think globally from the start and have the right systems to do so, they can achieve a greater ROI, attract talent and foreign investment and are more resilient,” she says. “They can also provide more job opportunities for Canadians and ultimately help grow the economy.”