Outside the comfort zone: Expanding beyond the U.S.

If you’re considering becoming an exporter, choosing the right target market is one of the biggest decisions you need to make. The obvious starting point is the United States (U.S.). In addition to being our closest neighbour and the owner of the world’s biggest economy, the U.S. is Canada’s largest trading partner by far.

We’re also part of the Canada-United States-Mexico Agreement (CUSMA), which makes it easier for Canadian companies to sell products and services to businesses and consumers in the U.S. and Mexico.   

Given the relative ease with which Canadian companies can enter the U.S. market, it’s not surprising that they continue to succeed there. What’s surprising is how many exporters are reluctant to look beyond the U.S. and diversify their exports to other potentially lucrative markets in the European Union (EU), Asia and beyond. By going all in on the U.S. market, these companies are literally missing out on a whole world of opportunity—and opening themselves up to significant risks.

That’s why diversifying your exports beyond the U.S. is so important. If economic and political factors beyond your control affect your ability to do business there, having other markets to sell to means other revenue streams to fall back on. Statistics back this up. For example, exporters who sell to multiple markets have 20% higher export volumes. As well, the 6% of Canadian exporters who sell to at least 10 different markets account for 51% of Canada’s total export value. 

Take Vortex Aquatic Structures International, a Montreal company that develops aquatic structures for resorts, amusement parks, campgrounds, hotels and condominiums. While the company initially achieved success in the Canadian and U.S. markets, it discovered there was significant demand for its products in other markets around the world. Vortex now exports to more than 45 countries.

If you’re just embarking on your exporting journey, or looking to expand beyond the U.S. market, there are key factors you need to consider to set your diversification strategy in motion.

When considering which markets to target beyond the U.S., it’s best to start small, only focusing on one or two new markets at a time. One way to narrow your list is to find out which markets may already have an interest in your products and services.

When you’ve got your short list, assessing the risks of doing business in these markets is a critical next step. This is where Export Development Canada (EDC) can really help. In Country Risk Quarterly, EDC risk experts provide in-depth trade profiles for more than 100 countries around the globe. EDC also provides a Global Export Forecast, which highlights the major opportunities and risks by sector for Canadian exporters, like you, for the next two years. 

Canadian exporters are extremely fortunate. Canada has several free trade agreements (FTAs) with more than 50 countries. These FTAs reduce or eliminate tariffs and help level the playing field for Canadian exporters selling to customers in Asia, the EU and North America.

The major agreements Canada has signed include CUSMA, the Comprehensive and Progressive Agreement for Trans-Pacific Partner (CPTPP),  and the Canada-European Union Comprehensive Economic and Trade Agreement (CETA).

When creating your diversification plan, it’s important to develop an understanding of the benefits these agreements provide as you look to export to individual countries. CPTPP, for example, creates new commercial opportunities for Canadian exporters with 10 new FTA partners: Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Under CETA, 100% of tariffs will be eliminated for Canadian fish and seafood products.

The Government of Canada is committed to helping Canadian companies diversify to new markets around the globe. Its Trade Diversification Strategy aims to increase overseas exports by 50% by 2025. As part of this strategy, the government is increasing funding for new programs to give Canadian businesses, like yours, the resources they need to successfully enter new markets. Contact the Trade Commissioner Service (TCS) for more information on programs designed to help you diversify your exports.  With more than 1,000 trade professionals in 161 cities around the world, the TCS can provide you with on-the-ground insight and advice to help expand your business.

No matter where you decide to sell your products, there’s a lot of upfront work you’ll need to do before you can begin the sales process. With language, cultural and regulatory differences to consider, it’s never too early to start adapting your products, messaging, and marketing materials to meet the needs of the markets you’re planning to enter because what works in Canada may not fly in India, Singapore or Germany.

Developing an understanding of international business etiquette should also be part of your planning to ensure you’re prepared to conduct business, according to the norms and conventions of your target market. These are different for each country. Take gift-giving, for example. In some countries, like Japan, gifts are often exchanged in a business context. In others, like the U.S., gift-giving is typically frowned upon.

When you enter any new market, there’s a lot to learn. With its networking and match-making services, EDC can provide you with the information you need and help you make strong connections with relevant businesses in your target markets.