Going global: Canadian Businesses see new opportunities in trade this year
Toronto - Despite a changing global economic landscape, Canadian businesses remain confident in their international trade strategies, with half (50%) planning to boost levels of international trade over the next year.
While most Canadian businesses are confident, many are still concerned about the potential impact of changes in world trade. More than eight in 10 (82%) surveyed understand their organization would lose its competitive advantage if barriers to international trade increased, and three quarters (76%) agree those barriers would dramatically affect their organization's performance.
With global trade continuing to be a valuable source of revenue for businesses the world over, American Express commissioned a study in partnership with market research agency Vitreous World, to understand more about the dynamics of international trade though an analysis of opportunities across six major trading markets.
"We know how crucial international trade is to business growth, but also how difficult it can be – from identifying markets to target, to logistics such as making and receiving payments," says Paul Roman, Vice President and General Manager of Global Commercial Payments, American Express Canada. "We commissioned this research to better understand the attitudes of Canadian businesses towards international trade in the current economic and political landscape."
Despite concerns, Canadian companies remain confident
At a time when the state of global economic activity and trade agreements are seemingly in flux, the research revealed almost nine in 10 (89%) of the Canadian financial decision makers surveyed still agree international trade is important to the success of their organization.
While many Canadian businesses expressed concern about the potential impact of changes in world trade, their level of confidence remains strong. The survey showed the vast majority (88%) of Canadian businesses currently trading internationally are confident in their global trade strategies.
Displaying a high degree of optimism, 85 per cent believe opportunities for international trade are increasing and more than half (51%) say their organization will be trading in more markets over the next 12 months. Furthermore, of those who said at least half of their organization's current revenue is attributed to trade, 59 per cent believe it will increase even more within the year.
Europe home to unexplored trade opportunities
Based on key trade drivers, the Centre for Economics and Business Research (Cebr) partnered with American Express to identify the top markets with the most untapped trade potential for Canadian businesses. According to the analysis, the U.S. topped the list of growth markets for Canadian companies, which is not surprising considering the country's geographic proximity, size and close cultural links.
"Canada's trade flows are strongly influenced by its position as a commodity exporter. The U.S.'s role as a major commodity importer, combined with the size of its economy and existing trade flows with Canada cements its position as a major growth market for Canada," comments Cristian Niculescu-Marcu, Managing Economist at Cebr.
"The recent wave of protectionism threatens to curtail the trade partnership between the US and Canada," said Niculescu-Marcu. "The strong US presence is also supported by the existing absolute trade flows with Canada, as facilitated by the North American Free Trade Agreement. As a result, the difficult process of renegotiating NAFTA risks denting this relationship in the near future."
However, the analysis revealed significant growth opportunities for trade in Europe, with France and Luxemburg coming second and third in the list of countries with untapped potential. By comparison, the survey showed only 10 per cent of Canadian businesses are currently trading with Europe, perhaps indicating a need to pay greater attention to other international markets with high growth potential.
New technologies improve payment challenges
Given the uncertain future of international trade agreements, 78 per cent of businesses surveyed agree that it's becoming increasingly complex for Canadian companies to navigate global trade.
According to the survey, Canadian businesses cite exchange rate volatility (36%), economic changes and fluctuations (31%), and tariffs (24%) as the three biggest challenges facing their organizations' current trade activity.
While just under three quarters (71%) of businesses surveyed say making payments to and being paid by overseas partners is complex, almost all (92%) agree new digital technologies are making trading easier.
The Centre for Economics and Business Research (Cebr) identified the top markets with the most untapped trade potential for Canadian businesses, based on key trade drivers.
Modelling involved exploring current trading relationships that had the potential to be optimised further and combining that with potential trade patterns based on economic prescriptive drivers such as: business environment, corruption and transparency, culture and institutions, demography, economic performance, talent, trade barriers, regional trade agreements and current trade flows.
The top 20 for Canada are:
8. United Kingdom