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What We Can Do About Canada's Trade Problems

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Canada's trade problems are getting worse and we need to do something about it
It seems you can't go a few weeks without hearing more bad news about Canada's international trade performance.

The latest comes from the Governor of the Bank of Canada, who earlier this month told the Commons finance committee that Canada's exports are 40 billion dollars lower than what they should be. There are now 9,000 fewer firms exporting than at the start of the recession.

Businesses are reluctant to expand abroad, especially to emerging and frontier markets where the bulk of future growth opportunities lie. According to UNCTAD, only one-and-a-half per cent of Canada's foreign investment stock is in Asia or Africa--by far the lowest share among the G7.
Once the epitome of a trading nation, it's clear that we're quickly falling behind our peers.

So how do we get our companies back in the game?

Trade and investment agreements -- like the ones recently signed with Europe and South Korea -- will certainly help. But this won't be enough.

We need to revamp and bolster trade promotion programs and ensure that Canada's diplomatic presence is leveraged to support our businesses on the ground.

What does this mean in practice? Our new report, Turning it Around: Restoring Canada's Trade Success, has a few suggestions.

Integrate trade services and connect them to business

The top priority should be to make the most of what we already have. There are dozens of departments and agencies at the federal and provincial level offering valuable training, business development, financing and marketing support for international expansion. But these efforts are poorly coordinated, and the system is very difficult to navigate, particularly for SMEs.

Service providers need to be better at working together and sharing information on their domestic clients and foreign leads. An MOU between Export Development Canada and Business Development Canada, for instance, has led to a rapid rise in the number of two-way referrals.
The federal government should also develop an online portal where businesses can easily access market data and customized services.

Put the business in Canada's global brand

International polls repeatedly show that Canada's global reputation is virtually unmatched. But we need to do a better job of extending this brand into the business realm.

Stronger business representation on state visits would help bridge the awareness gap. CEOs are often approached just days before a trip.

The Prime Minister should appoint a special Trade Ambassador from the private sector that would work closely with the provinces and the heads of major Canadian companies to organize high-level delegations to priority markets under the national banner.

Strengthen the frontlines

The Trade Commissioner Service is at the heart of Canada's economic diplomacy and they need to have the resources and skill set to get the job done right.

Despite rising service requests, budgets and staffing are at the same level as they were in 2007, and are set to stay flat for the foreseeable future. As a share of GDP, the United Kingdom now spends twice as much as Canada on its trade diplomats.

Connecting trade, aid and diplomacy

The involvement of Canadian business in international development projects is well below potential.

Canada needs to make more use of direct programming with target countries (nearly 80 per cent of official aid went to foreign agencies in 2013, often on a sole-sourced basis). And more should be done to connect Canadian expertise to multilateral development banks and international humanitarian institutions.

The government should also expand the tools it has to stimulate Canadian investment in developing countries. For decades, Canada has been the only G7 country not to have a national development finance institution that can offer concessional loans, equity, risk guarantees and grants for technical assistance and feasibility studies.

The serious decline in Canada's trade performance deserves immediate attention. The recently announced Global Markets Action Plan points in the right direction, but we need to go beyond signing trade agreements and shuffling resources. The time has come for bold action to make sure our companies have access to cutting-edge tools and the muscle behind them to succeed abroad.

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