Some people think of January as a dreary time of cold and snow, but here at EDC, it’s one of the most exciting months of the year. It’s TCI Time, and yes, for our team of economists and research analysts, it is incredibly interesting.
If you’re not familiar with the TCI, or Trade Confidence Index, it’s a survey we take each fall and spring to get into the minds of Canadian exporters. One thousand of them, in fact, representing all business sizes, sectors and regions of the country. We ask them a whole series of questions, boil down the results, then present the findings to you.
Everyone’s familiar with the consumer confidence index, not to mention a host of organizations that evaluate business confidence. But what about exporter confidence? In a country so dependent on trade, this is definitely a measure worth taking. Nobody else is talking about what Canadian exporters are thinking, so this makes our research findings all the more compelling.
Topline results
When we analyze the results, we’re interested in how they compare with our data from the previous study, as well as where the numbers fall in terms of the historical average. Keep in mind, our latest results were conducted in October and November 2018, after the CUSMA deal was signed.
1) Outlook remains solid, but weaker
Although not a big drop, there is less optimism in the air than in the first half of last year. It’s across the board, and unsurprisingly, it stems from a downturn in global economic expectations. Putting it in perspective, we’re bang on with the historical average.
2) Protectionism is affecting global strategies
One-third of exporters surveyed said they were concerned about rising protectionist policies and were adjusting their actions accordingly. Furthermore, one-third of exporters reported they were being negatively affected by U.S. steel and aluminum tariffs. And how did this group respond to these challenges? By raising prices, finding alternate markets and suppliers, and sourcing locally.
3) Market diversification continues to rise
We expected to see a slight decline in market diversification following the successful conclusion of CUSMA negotiations. But what we’re gratified to see is exporters continuing to push into new markets beyond the U.S., and investments outside Canada rising like never before.
Where are exporters and investments going?
With more than half of Canadian exporters planning to sell to new markets in the next two years, we wanted to know the top new market destinations. It should come as no surprise that four of the five countries that topped the list are ones with which we have free trade agreements in place.
- United Kingdom: 16%
- Germany: 13%
- China: 12%
- France: 10%
- Mexico: 10%
In terms of investing beyond our borders, close to one in five exporters are planning to invest outside of Canada in the next two years. Where’s their money going? The lion’s share of respondents are headed to the U.S. (64%) followed by equal shares (8% each) intended for the U.K., France, India and China.
Where you fit in
One of the reasons we think it’s important to share this information is so you can compare yourself against your peers. Are you more optimistic, less so, or are you on the same page as the thousand other businesses we surveyed? We’re hoping you can use these findings, along with other economic and trade-related data, to help inform your decision-making as the new year unfolds. Here’s what your fellow exporters had to say about their experiences in the last half of 2018 as well as their intentions for the next six months.
Top 4 Exporter Challenges: Foreign tariffs or trade barriers, obtaining financing, finding skilled talent, and shipping logistics
U.S. Sales: 42% reported an increase in U.S. orders
Hiring: 48% intend to hire or increase hiring; 35% experienced difficulties in accessing skilled labour
Investing: 31% intend to ramp up their overall investments; 44% with direct investments abroad intend to increase those investments
Foreign Affiliate Sales: 72% with foreign affiliate sales expect them to increase
Some advice to futureproof your business
EDC’s webinar unpacked the findings of the latest TCI survey. As with all EDC webinars, we had a lively, interactive Q&A session towards the end, when our audience got to ask their burning questions of the moment. It came as no surprise that many wanted our take on the likelihood of a recession, insights on Canadian competitiveness, and where our dollar is headed, not to mention when we think the U.S. steel and aluminum tariffs might be lifted. If you’re looking for in-depth analysis on those topics, let me point you in the direction of the Global Economic Outlook.
One audience member asked about the prospects of diversifying into South American markets. I found it interesting because oftentimes, when looking at emerging markets, Latin America gets overlooked in the push to Asia. If you think there might be some potential for you in Brazil, Argentina or other countries due south, know that EDC has a deep understanding of and interest in that region. In fact, our government is currently negotiating a Canada-Mercosur (Brazil, Argentina, Paraguay, Uruguay) Free Trade Agreement. Traditionally, we’ve seen a lot of activity in the mining sector there, but opportunities in agriculture and other sectors are on the rise as well. If you want to learn more about these and other high potential markets, check out our Country Risk Quarterly interactive tool.
These are just a few of the many resources available through our website. And remember, we have a dynamic lineup of webinars featuring industry thought leaders who offer strategic trade advice to Canadian companies.
The material point being, if you want to futureproof your business, you have to diversify. Are there risks? Absolutely. But the reality is, there are more risks involved in not diversifying than there are in exporting to multiple markets. There are ways of overcoming the challenges of going global. That’s the whole reason behind EDC. We’ll help you do it. Show us your will, and we’ll show you the way.
