When moderator Susan Delacourt recently asked a panel of trade experts on NAFTA for a “mood check”, the experts expressed cautious optimism.
“I’m hopeful, but there’s a twinge of fear that it may not be as good as we once hoped it would be,” said Corinne Pohlmann, Senior Vice-President of National Affairs and Partnerships at the Canadian Federation for Independent Business.
Carl Burlock, Export Development Canada’s Senior Vice-President and Global Head of Financing and International Growth Capital said he is always hopeful.
“This brings a lot of uncertainty,” Burlock said, “so companies that are trying to make investment decisions are finding it difficult. But I’m certainly hopeful.”
Leroy Lowe, faculty member in the International Business Program at the Nova Scotia Community College, said he’s “definitely” hopeful.
“I think the focus on the trade deficit betrays the underlying trade flows and the massive amount of trade happening between Canada, the U.S. and Mexico,” Lowe said. “There will be repercussions if you put up arbitrary tariffs. They have great immediate pain.” He added that the possible short-term payoff of an upsurge in domestic business performance isn’t sustainable in the longer term.
For her part, Andrea Stairs, Managing Director of eBay Canada, said she thinks there will be “bumps along this road,” but quoted a recent eBay optimism survey that found that SME optimism is high as it relates to exporting.
The panelists, experts on NAFTA, were part of the Forum For International Trade Training’s 25th anniversary conference, Your Future in Global Market. They were speaking as part of an iPoliticsLIVE session called “Global trade complexities, unscrambling opportunities.”
Small business needs a voice
Pohlmann’s message was that small businesses haven’t been a big enough part of the dialogue when it comes to trade policy.
When NAFTA came into force, she said, the focus was on how to make it easier for big businesses. Nevertheless, when her organization did a survey about trade this summer, even those who don’t trade said Canada needs to continue to engage in it. And many small businesses do indeed trade. She quoted government numbers by noting that “90 per cent of those that trade are small business owners, but only about 10 per cent of small businesses are actually engaged in trade.”
Her members are concerned about issues such as currency fluctuation, something governments can’t directly address, she acknowledged, but added advice on how to better manage such fluctuations would be helpful. There’s also room for more understanding of shipping, duties, taxes and rules and regulations that are addressed in trade agreements.
When it comes to the anxieties and uncertainties around NAFTA negotiation challenges, she said about a third of her members are looking at new markets, another third are feeling secure where they are and yet another third don’t know what to think and are, therefore, in a holding pattern.
An SME chapter in NAFTA?
Pohlmann said she was encouraged when all three governments agreed they’d like to see a chapter on small and medium sized business in a updated NAFTA.
“It’s largely symbolic and non-binding, [but] it is about finally recognizing this is an important community they need to address,” she said, and added that rules of origin are already complicated and must be clearer in a new NAFTA. “They continue to be a huge barrier.”
Finally, labour mobility is important to address, she said. “Services are becoming a much more important part of trade. This really is an area that needs a lot more clarity.”
eBay’s Andrea Stairs said she agreed with most everything Pohlmann said and added that her customers—those whose sales volumes are greater than $10,000—export at a rate of 99 per cent and when they export, they reach up to 19 markets a year. Traditional exporters, she said, reach 2.5 markets a year on average.
Among those who do export, exports make up half of their total sales on average. That, Stairs pointed out, means it’s easy to double the size of your domestic business simply by “tapping into exports.”
Shipping costs and customs limits should be considered
Among her concerns were getting the cost of shipments down, as well as modernizing tax law. Canada’s duties are high on e-commerce purchases. A Canadian is charged duty on international online purchases over $20. Americans, meanwhile, pay nothing unless the purchase costs more than $800. She quoted a C.D. Howe Institute report that concluded the federal government spends nearly $170 million to collect nearly $40 million in revenue through these duties.
“That’s completely inefficient to us,” she said.
For his part, Carl Burlock, of Export Development Canada (EDC) said trade is changing faster and in different ways than we saw, even as recently as four or five years ago.
“Trade is no longer about shipping goods from one country to another,” he said. “Even traditional exporters are being asked to ship from [the market where the demand is]. Global supply chains are also increasingly important. Major companies in supply chains are moving closer to their customers and they’re asking suppliers to go with them.”
There’s also the “opportunity brought on by technology,” through which companies can connect with customers internationally in different ways than 10 or 15 years ago.
He spoke about what Canada, and EDC, can do to encourage more SMEs to export.
Spreading the word about exporting — EDC
“We need targeted awareness campaigns to make sure they’re aware of the benefits of exporting,” he said. “We have representatives in 19 countries around the world. We’re putting our market knowledge together. We’re also helping them access information.”
EDC also introduces exporters to new opportunities by making “high-value connections” for them. Finally, EDC is providing its services faster, to keep up with the 24/7 world.
“We’re going digital,” Burlock said. “Credit insurance is now available online. Customers can get insurance immediately at the click of a button instead of over two to three days. These are some of the tools we’re using to get more small companies to get into export.”
Lowe said he’s developed training programs all over the world and can confirm that Canada’s training is truly world-class. His main concern about Canada’s trading ecosystem is the gap between what colleges are offering in terms of programs and what the economy is demanding. Businesses want trade professionals who are also proficient in social media, for example.
“This is a place where the colleges are playing catch-up,” he said.
Another area of concern is the trading world’s one-size-fits-all programs. “Small companies are spending precious resources going to markets that may not suit them,” he said. “Some of the agencies that are producing tailored programs are serving SMEs’ needs better.”
Asked how SMEs can access supply chains, Lowe suggested they hire someone who’s worked for a larger company and understands how they work.