Staying connected with the U.S. during COVID-19

The Canada-United States border—the longest undefended, always-open-for-business border—has been shut down since March 18 for all non-essential goods and services. 

Long-touted as the hallmark of two countries that enjoy a deeply rooted, mutually beneficial trade relationship, it’s just one indication that things are far from business as usual. Last year, bilateral trade-in-goods alone across our border topped $751 billion. This year, those numbers—like everything else—will be ravaged by COVID-19. 

Following the shockwave of unprecedented shutdowns, a sense of acceptance has settled in as the world realizes that: 

1. we’ve never really been here before; and
2. there’s a long journey ahead to get back to normal. 

What “normal” will look like in the future is open to interpretation. As Peter Hall, vice-president and chief economist at Export Development Canada (EDC), reflected during a recent webinar, “It's clear right from the start that COVID-19 has changed everything—for every economy and every industry in the world.” 

Hall was delivering EDC’s new Global Economic Outlook which, among other forecasts, stated a base-case outlook for a V-shaped recovery happening in the second half of this year. Undeniably upbeat, it’s a projection shared by the International Monetary Fund, the International Institute of Finance, and the Organisation for Economic Co-operation and Development. 

While there’s no COVID-19 crystal ball, the global economy will come out of this eventually because history demonstrates that it always has. And when that day comes, business will likely resume its pre-COVID-19 patterns: A scenario where roughly three-quarters of Canada’s exports flow to the United States. 

Given the priority position of the U.S. market to Canadian businesses, EDC opened two regional offices in 2019: 

• The first in Atlanta, Georgia, to serve Canadian companies selling to the Southeastern states of Georgia, Florida, Alabama, Mississippi, North Carolina, South Carolina and Tennessee.
• The second in Chicago, Illinois, to focus on the Great Lakes states of Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, Ohio and Wisconsin. 

Both regional offices are focused on building bilateral trade by linking Canadian companies with U.S. corporates through the Business Connections Program. Simply put, EDC has strategic financing facilities in place with major corporations throughout the United States, as well as around the globe. By providing financing support to international companies, EDC is better able to anticipate their procurement needs, and introduce them to the Canadian companies that can meet those supply chain requirements. 

In the U.S., these corporates are not only considerable in and of themselves, but for the gateway opportunities they provide to their global supply chains. There are several U.S. conglomerates with EDC financing, including:

• ConocoPhillips
• Continental Resources, Inc.
• Ford Motor Company
• Lidl US, LLC
• Noble Energy, Inc.
• Devon Energy

Similarly, each regional office is actively building and solidifying relationships with national and regional financial institutions, as well as other large U.S. buyers, with an eye to continually building capacity for the Connections Program.

Of course, one of the most important benefits of having in-market representatives is the local intelligence those eyes and ears on the ground can provide. As shelter-in-place orders are removed, business operations are slowly being phased back in, most at reduced or minimal levels or production or service. 

“We’ve seen aggressive digital innovation being taken by some businesses, just to maintain operations. This new wave of technology use signals lots of opportunity for Canadian exporters in every sector, going forward,” says Michael Gonsalves, senior regional manager for the Southeast region.

The tremendous volatility in oil markets, coupled with zero demand for energy, are burning the oil and gas sector—one of the most important in the region. “EDC has seen many companies access funds through their corporate revolving credit lines and continues to work with clients to address loans due to mature in the short term,” explained Gonsalves. “On a positive note, we’ve introduced U.S. energy companies to Canadian suppliers of thermal scans. So, when workers start to return to the job site, they can do so in a safe manner,” he added.

With North American operations for Mercedes-Benz, Porsche and Nissan headquartered in the region—as well as production facilities for BMW, Toyota, Volkswagen and Hyundai—the Southeast is home to a huge cluster of automotive original equipment manufacturer (OEM) manufacturing. The auto sector has been among the hardest hit by all of the shutdowns, which has, in turn, impacted Canadian suppliers, like Magna and Linamar. “But there’s a good news story starting to emerge,” Gonsalves explained. “As these U.S. facilities start to come online again, Canadian suppliers, like Magna, are sharing the important safety measures and procedures they learned while dealing in China during the initial COVID-19 outbreak.” 

Forty per cent of Canada-U.S. trade flows from the Great Lakes region. A global hub for advanced manufacturing, technology, research and development, it’s an economic powerhouse, with a gross regional product of $6 trillion. 

The auto sector is especially important to the region, and like the Southeast, it has been deeply affected by the stay-at-home orders that were instituted to help stop the spread of COVID-19. While automakers shifting their production lines to much-needed health-care masks and ventilators is a huge win, the lack of visibility on next steps is causing a great deal of uncertainty. “How and when production lines will resume regular operations is the question of the day,” notes Gayle Roenbaugh, senior regional manager for EDC’s Great Lakes region, headquartered in Chicago. “A close second is how will suppliers keep up with demand, with major auto plants set to re-open all at once.”

Large consumer and grocery retailers are shifting into overdrive just to keep up with the surge in demand through their online channels. But as Roenbaugh cautions, supply chain disruptions are a constant source of concern. Neither retailers nor suppliers are equipped to deal with sudden dramatic changes. “There’s no doubt that this particular sector will likely lead innovation in supply chain realignment. The sudden shift from physical to digital, coupled with reduced stock, may lead to new entrants and future innovation. On a positive note, this is a perfect opportunity for Canadians to jump in the mix,” Roenbaugh advises.

Despite being responsible for vastly different regions in the U.S., Roenbaugh and Gonsalves have been in lock-step in their conversations with key American stakeholders. During these difficult times, they’ve been in constant contact, and working overtime to reassure U.S. buyers that EDC is supporting the Canadian companies in their supply chains. 

The response has been very positive, Gonsalves noted. “You could see their wheels turning,” he says. “They understand that we’re backing Canadian companies when they need liquidity or financing for larger contracts. So, not only are we taking care of U.S. buyers on the financing side, we’re also supporting their supply chain when things get tough.”