Why do some companies choose to export, while others don’t? Of those that do, how many are well diversified across geographic markets? How many manage to successfully scale their operations? These questions aren’t just relevant for EDC Economics—they’re increasingly critical to Canada’s economic well-being, especially as trade with our top partner becomes more expensive.
First, the facts. Research shows that, worldwide, only the most efficient and innovative companies tend to export. These companies often leverage advanced technologies or superior processes, giving them a competitive edge and prompting them to explore new markets. As a result, only a small share of businesses actually sell their goods abroad.
In Canada, from 2020 to 2024, just 0.7% of all businesses exported goods internationally. For comparison, similar data from the United States and other advanced economies suggest Canada may have a lower share of exporting companies. What’s more, this percentage has declined over the past 15 years—from 0.9%—even as the total number of Canadian companies has grown. Between 2010 and 2022, the number of Canadian businesses rose by 3.2%, while the number of goods-exporting businesses grew by only 1.4%.
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Why Canada needs more exporters to drive growth
Why does this matter? As a small, open economy, Canada depends on trade for wealth creation. To grow our exports, we need more companies to start selling abroad. That means encouraging non-exporters to begin with markets that have low barriers to entry. As they succeed and leverage economies of scale, they can expand further, penetrating more distant markets and helping Canada grow its international footprint. At the same time, existing exporters can reach new markets with the right financing tools and reinvest profits in continued expansion.
Have Canada’s merchandise exporters managed to consolidate their learned efficiencies, increase productivity and diversify? When it comes to labour productivity, the answer is yes. Between 2005 and 2022, Canadian exporter labour productivity grew by 2.3%—more than double the 1% rate recorded for Canada’s overall business sector.
These gains stem not only from already productive companies choosing to export, but also from those exporters capitalizing on their productivity improvements and diversifying further.
How small exporters are expanding into global markets
About 65% of Canada’s exporting companies are considered small, yet they account for just 17% of total exports. Although this ratio hasn’t changed much over 25 years, there’s been progress. Today, 72% of small exporters sell to only one country—down substantially from 80% in the early 2000s. More small companies now export to three to five countries, and their share of small-segment exports has grown. This shows that smaller goods-exporting companies are increasingly venturing into more markets.
Medium exporters are scaling and diversifying
Medium-sized exporters have also shown real dynamism. These companies now make up roughly 8% of all exporting companies (up from 6% in the early 2000s) and account for 23% of Canada’s total exports (up from 15%). Their growth—in both number and export volume—speaks to their success in reaching new markets and scaling operations.
About 7% of these companies now sell to 20 or more markets (up from 4%), accounting for roughly 17% of medium-segment export volumes (up from 12%). Similarly, 8% export to six to nine countries, and their share of the segment’s exports is 18%, up significantly from 12% in the early 2000s. Clearly, a subsection of medium-sized companies has successfully expanded their global reach and grown sales.
Despite ongoing concerns about Canada’s diversification imperative, exporters have made meaningful progress in selling into new markets. It’s true that the most productive companies are the ones most likely to export. But once established in foreign markets—typically those closest to Canada—companies gain experience, access to capital, ideas and networks. These drive further efficiency gains and open the door to even more markets.
The bottom line: Exporter productivity fuels Canada’s economic cycle
The question of whether exporter productivity benefits from diversification—or vice versa—is a bit of a chicken-and-egg conundrum. But regardless of the direction of causality, the linkages are clear.
This raises the urgency of creating the right conditions for Canadian companies to become more cost efficient, including incentives for investment and innovation. It also requires lowering the costs to selling internationally for Canadian companies. But the more productive Canadian companies become, the more successfully they’ll diversify—setting off a virtuous cycle critical to Canada’s economic prosperity.
This week, a very special thanks to Meena Aier and Jean-François Côté. Additionally, thanks to Statistics Canada for continued collaboration on exporter characteristics and trends data.
As always, at EDC Economics, we value your feedback. If you have ideas for topics that you’d like us to explore, please email us at economics@edc.ca and we’ll do our best to cover them.
This commentary is presented for informational purposes only. It’s not intended to be a comprehensive or detailed statement on any subject and no representations or warranties, express or implied, are made as to its accuracy, timeliness or completeness. Nothing in this commentary is intended to provide financial, legal, accounting or tax advice nor should it be relied upon. EDC nor the author is liable whatsoever for any loss or damage caused by, or resulting from, any use of or any inaccuracies, errors or omissions in the information provided.