The news has been filled with comments about possible changes to the way Canada and the U.S. do business together, including “Buy America” policies and changes to the North American Free Trade Agreement (NAFTA). Although nothing has been settled, there are ways you can prepare for changes and continue to succeed in the market.
Here are some of the questions we’ve been hearing from exporters, and feedback to help put your mind at ease.
Challenge: From what I’ve been seeing in the news, we are going to be re-negotiating the North American Free Trade Agreement (NAFTA) or can expect new U.S. protectionist policies to hit us hard. As a small Canadian company with 95 percent of my sales to the U.S., I’m worried. What experience does Canada have in getting through past crises? And where can we go for help?
While every country around the world will feel the effects, the U.S. is Canada’s biggest customer, with some 75 percent of our total export of goods heading south of the border.
That’s why Canada has taken steps to protect and support our trade interests. Canada has federal, provincial and even municipal departments that help Canadian companies do business and increase sales abroad, including Global Affairs Canada which is leading our trade strategy with support from its Trade Commissioner Service, the Business Development Bank of Canada, and the Canadian American Business Council, just to name a few.
EDC has a lot of experience helping companies through tough times. Here are just a few examples:
- Added $750 million in insurance support for Canadian auto-part makers during the economic crisis (2008-2010).
- Expanded the coverage under our Export Guarantee Program (EGP) to make it easier for small Canadian companies to take on large international contracts (2016)
- Added more than $750 million in new financing support for the struggling oil and gas sector (2016)
As talks continue, we and our partners will continue to support and push for Canadian interests.
Challenge: I have a medium-sized company and am already using credit insurance to make sure I get paid when I ship to the U.S. Will I still be covered if things change?
The simple answer is yes. Credit insurance covers everything from being worried your customer won’t pay to your import and export permits being cancelled. Changes in trade are not new; new risks and opportunities pop up in many countries every year. We have our ear to the ground and are watching developments carefully.
Challenge: My U.S. customer depends on the Export-Import Bank of the United States (Ex-Im Bank) for financing to complete deals with my company. Will the EX-IM Bank continue under the new administration?
At the time of this posting, President Trump hasn’t said whether Ex-Im Bank will be impacted. For now it’s business as usual and we encourage you to get your customers to talk to their bank contacts to assess the situation.
If your customer is not able to get the financing they need, there are some options they can consider:
- For deals between U.S. and Canadian companies, we can provide financing to the U.S. customer.
- For U.S. companies with operations in Canada, we can look at providing financing for their global business, based on the size of their Canadian investment and exports.
Challenge: I have a small manufacturing company that exports to the U.S. and a few other countries. My profit margin is already slim, so I’m worried about staying competitive if faced with Buy American policies or new taxes. Any advice?
If the U.S. market is important to your company’s bottom line, you might want to explore a longer term strategy of setting up an American affiliate such as a branch office, manufacturing plant, or distribution centre to see if it is right for your company. While keeping your main business in Canada, this affiliate might be treated more like an American company, such as having a more favourable status when it comes to new policies.
But there are challenges so you need to do your homework. To learn more, you can download this free white paper, Beyond Exporting: Building or Buying International Operations.
Don’t forget to diversify.
You mentioned that you’re also selling to a few other countries; continue building on that. It’s always a good idea to have more than one egg in your export basket when it comes to sales.