While there are plenty of reasons for Canadian small and medium-sized enterprises (SMEs) to embark on global trade — increased revenue, huge growth potential, the opportunity to mitigate risk and take advantage of economies of scale, to name a few — simply exporting your goods and services doesn’t guarantee sure-fire success.
In October, the World Trade Organization downgraded its global trade projections for the coming year, saying that world merchandise trade volumes are now expected to rise by only 1.2 percent in 2019 — substantially slower than the 2.6 percent growth forecast in April. And the projected increase in 2020 is now 2.7 percent, down from the original three-percent projection. According to the WTO, economists are cautioning that downside risks remain high.
With so much fluctuation and uncertainty globally, it’s important for SMEs to understand the trade landscape, and to have a strategy for dealing with upcoming trends — here are three key ones to follow for 2020:
Uncertainty around trade agreements “The biggest trend I’m seeing is companies retrenching to markets that offer them certainties where some other markets are uncertain,” says Scott Ferris, a Certified International Trade Professional®. “The US-Japan trade agreement is going to be something Canada will have to watch closely, as well as the hopeful ratification of the CUSMA trade deal for North America. And, of course, Brexit is still up in the air.”
Ferris, who regularly consults for the Forum for International Trade Training, a not-for-profit organization that offers international business training, resources and professional certification to Canadian companies, says this uncertainty will prompt many SMEs to look for safe, reliable, and profitable markets to do business in. “There will always be the mavericks that fear nothing, but most small businesses will look to minimize risks as much as possible,” he says. “They will seek to reinforce the clients they already have, look to grow business with those clients and also look for ways they can update or diversify their products to keep them attractive, new and fresh for customers.”
The slow (but steady) growth of service exports
While exports of Canadian goods are expected to grow, according to a spring 2019 trade report from export credit agency Export Development Canada, services may be an area of opportunity for savvy SMEs. According to Canada’s State of Trade 2019, an annual government report on the country’s commercial activities, global commercial services trade expanded by 7.4 percent in 2018, with Canadian services exports growing for the ninth consecutive year. And what’s more, so did global commercial service imports. African nations grew the most (13 percent). Conversely, growth in North America was slow (just 3.2 percent, which was the second slowest regional growth rate), although the value of American services imports still hit US$536 billion.
Better educated competitors
“Current political situations and a changing trade landscape mean companies really have to be on their toes when it comes to knowing where and how to trade,” Ferris says. And that means using all the resources at your disposal. He’s seeing more and more SMEs that realized the value of support from the municipal, provincial and federal governments — and he’s confident it will pay off.
The key, Ferris says, is to do your research and know your markets. For example, taking the time to do a workshop on a subject you don’t know about could save your company a lot of headaches and money down the road. Ferris says one of the key principles of leadership is to attain professional competency and continually seek self-improvement. “Any SME wanting to do business on the global stage going into 2020 will have to be extremely knowledgeable and competent,” he says. “We are already seeing increasing growth in uptake of services through EDC, the Trade Commissioners Service and both provincial and federal trade missions.”
This article was originally published on Oct. 31, 2019