When exporters set out to find new markets for their products and services, how should they decide where to go? Traveling to foreign lands in search of new export opportunities is risky and expensive, and considerable up-front research is needed first.
Selecting the big markets is easy — Brazil, Russia, India, China and Mexico clearly hold out considerable promise as export growth markets. Taking the analysis further, however, requires more digging, and for that exporters may use the web, various federal and provincial government resources, and the global network of Canadian trade commissioners, just to name a few.
In an attempt to add to this offering, EDC has developed a new tool called the Trade Opportunities Matrix, or TOM. TOM is an intelligent piece of software built on 10 years of data on Canadian trade with 69 foreign countries in 45 industries. With this foundation, TOM then adds EDC’s long-term economic forecasts, economic risk assessments, political risk ratings, exchange rate forecasts, existing Canadian investment in the target market, estimates of Canada’s comparative advantage in that sector and a number of other overlays. Each of these is weighted statistically, based on their ability to explain past trade developments.
In short, TOM incorporates much of what the economists, political risk analysts and other market experts know. TOM can then answer interesting questions. For example: TOM, what are the top-10 developing markets that Canadian companies should be interested in? Answer: China, Russia, Mexico, Poland, India, Saudi Arabia, Kuwait, Brazil, Czech Republic and Malaysia. TOM, what Canadian exports could succeed in the Japanese market? Answer: aerospace, paper, food, chemicals, wood products, metal and woodworking machinery, electrical and electronic products, energy, non-ferrous metals, plastics and other machinery and equipment.
TOM can also look for opportunities in foreign markets for a particular sector. For example, the top prospects for Canadian agricultural machinery, according to TOM, are the U.S., Malaysia, India, Japan, Russia, the U.K., Turkey, South Korea, Ireland and France. Similarly, TOM’s top markets for Canadian engineered wood products (doors, windows, cabinetry, hardwood floors, etc.) are the U.S., Japan, Germany, the U.K., Australia, France, Italy, Spain, China and Sweden.
TOM’s answers to such questions will change regularly, as its information base is updated. TOM also has limitations, one of which is that it can only answer questions about merchandise trade, for now. The data on international trade in services are much thinner than on trade in goods, so developing a more rigorous application for services remains a topic for future research.
The bottom line? There is growing recognition of the importance of international trade in fostering growth in Canadian prosperity. But breaking into new growth markets requires considerable research and investment — and EDC’s TOM can help Canadian companies prioritize their efforts.
November 17, 2005
The views expressed here are those of the author, and not necessarily of Export Development Canada.