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Recent research conducted by Livingston shows that only 31 per cent of Canadian small businesses believe that they can gain something out of existing free trade agreements (FTA) regulation that apply to importing and exporting goods. With the recent signing of the Comprehensive Economic Trade Agreement (CETA) between Canada and the EU, Canadian businesses might not jump on-board the band wagon as fast as expected.
For Ottawa, CETA is being pushed to Canadian businesses as a solution to the growing protectionist sentiments left behind by Brexit and the recent American election; but even though the agreement is backed by years of negotiations and diplomatic efforts, Canadian small business still tend to take a more conservative approach to globalization. Dipping their toes into new markets is for many, a justifiably superfluous enterprise. FTAs are considered a nice-to-have rather than the actual pushing force behind the decision to go global.
FTAs Won’t Have an Affect on Everyone
As part of Livingston’s research, 46 per cent of Canadian small businesses also indicated that FTAs wouldn’t actually have a noticeable affect on them – meaning only really less than a quarter of Canadian businesses believe in actual benefits brought on by free trade agreements. In fact, 6 out of 10 expect no affect while 10 per cent actually anticipate a negative impact. A tiny fraction, one-third of respondents in the research, indicated that FTAs truly influenced their decision to go conduct business in another country.
Considering that the taxes and tariffs that come with international dealing is often cited as a barrier by Canadian small businesses – the fact that FTAs often eliminate these precise points would make it alluring – but that the pick-up simply isn’t there, is baffling.
But there is anticipated growth in the use of FTAs by Canadian small businesses; they might just be answering the call after all, but maybe not as strategically as they could be. While FTAs are commonly perceived as tools to get access to new markets and opportunities, small businesses in Canada will largely use the agreements to curb costs by importing ( 31 per cent) cheaper inventory instead of exporting (17 per cent).
Importing allows Canadian businesses to integrate international markets by finding their place in global supply chains, thus lowering the cost of production and assembly of products destined for other markets. When looking into the how Americas use FTAs, the gap between low-cost imports versus accessing new markets is much less pronounced. In comparison to Canadians, Americans use the agreements to curb import costs at 25 per cent and 19 per cent to develop exporting opportunities.
Much Convincing to Be Done
When looking into the research it is clear that there is a lot of work to be done in order to convince Canada’s small business community of the added value of going global. It is important for business owners to understand that, although they may not want grow internationally, they should at the very least consider the options with the looming protectionist sentiment roaring down south.
The small business community in Canada counts itself lucky to have a large toolbox of resources available to help and support its international aspirations. Export Development Canada, the Business Development Bank of Canada and numerous private-sector providers are available to offer advice and guidance to help entrepreneurs navigate through the complexities of trade development in conjuncture with FTAs.
Hopefully, with the arrival of CETA and other international trade deals, Canadian small businesses will develop a taste for global trade, making the usage of FTAs more prominent in their own planning and justifying the need to securing trade deals in a global marketplace.
Are you currently importing or looking to import into Canada?